Sterling – Extreme Makeover

..the right investment decision

Why Was Sterling Created ?• Enable you to provide boutique professional managed

direct investment portfolios to clients but without the administration or ongoing advice burden

• Enable you to use the same approach as that used by leading private client firms and family offices - you can compete against every other adviser and maintain your relevance to the client relationship

• FoFA and the “new world” of advice

• Potential for lower cost to client without compromising margins to Futuro or the adviser

Recap on Sterling• An Investment Management business created to deliver

investment solutions for the “new world”

• Launched Managed Account Service in mid 2010 and a Super Solution in late 2010

• A range of Investment Options made available across the asset classes

• Fee structure in line with wrap

• Online functionality and reporting through a Sterling branded website

Original Sterling Investment OptionsAsset Class Options Original Mandated Manager

Australian Equity Core Dalton Nicol Reid

Australian Equity Growth Bennelong

Australian Equity Smaller Companies Paterson’s Asset Management

Diversified Yield RIMsec

Property Securities Dalton Nicol Reid

International Sterling

Alternative Asset Sterling

Risk Targeted Sterling

Transition Sterling

Cash IAS

• Cost – demand for an end to end reduction in cost

• Transparency – requirement to be able to know what is going on within their portfolio

• After tax outcome – for both income and capital

• Ownership – greater sense of ownership created by direct investments

Sterling Responds to Retail Client Requirements

Where Are We At ?

$55m in Sterling as at 15 October

One practice with significant FUM, should be more !

Why ?

Feedback From AdvisersExisting Managed Fund Portfolios available on wrap not catered for

I don’t understand what a managed account is ? Or how to use it for my clients

Don’t use direct investments for my clients

No blended Investment Options has meant that advisers have had to manage asset allocation

Fees are higher than wraps

Does not provide the same outcome as DNR directly

I pick my own stocks

No different to a wrap

Where do I get some education ?

How do I go about transitioning clients ?

What Has Been Done ?

• Significant rework of Sterling in conjunction with IAS

• Extended range of Investment Options after significant effort in identifying, meeting and assessing suitable managers to manage the Diversified Options

• Replacement of some managers after identifying, meeting and assessing suitable managers

• Revised pricing - some of the Options are the sharpest in the market

What Has Been Done ?

• Revised pricing - some of the Investment Options are the sharpest in the market, particularly in the Managed Account Service

• Upgrade and replacement of Managed Account Service documents near complete

• Upgrade and replace Super documents

Revised Sterling Investment OptionsManaged Fund Investment Options Mandated Manager

Conservative Plus Sterling

Moderate Plus Sterling

Balanced Plus Sterling

Growth Plus Sterling

High Growth Plus Sterling

Diversified Portfolio Investment Options

Conservative Joseph Palmer and Sons

Conservative Pension Joseph Palmer and Sons

Balanced Joseph Palmer and Sons

Balanced Pension Joseph Palmer and Sons

Growth Joseph Palmer and Sons

Revised Sterling Investment OptionsAsset Class Options Mandated Manager

Australian Equity Core Dalton Nicol Reid

Australian Equity Growth Joseph Palmer and Sons

Australian Equity Smaller Companies Paterson’s Asset Management

Diversified Yield Realm Investment House

Property Securities Dalton Nicol Reid

International Sterling

Alternative Asset Sterling

Risk Targeted Sterling

Transition Joseph Palmer and Sons

Cash IAS

Key Mandated Manager Changes• Joseph Palmer and Sons to manage a range of Diversified

Portfolios

• AE Growth – Bennelong replaced by Joseph Palmer and Sons

• Diversified FI – RIMSEC replaced by Realm Investment House (Joseph Palmer and Sons interim)

• Sterling to manage an extended range of Investment Options, particularly focused on managed funds

Sterling Managed Account Pricing• Replacement of Administration Fee and Investment

Management Fee with one Portfolio Management Fee approach

• Note: Portfolio Management Fee includes all administration, mandated manager fees and Sterling fee but excludes any MERs

• MERs will vary according to the Funds used in themodel in which a client is invested

• Fees are plus 5% GST not 10% GST due to IAS GSTPrivate Ruling

Sterling Managed Account PricingManaged Fund Investment Options MDA Portfolio Management Fee (ex

GST and external MERs)Conservative Plus 0.55%

Moderate Plus 0.55%

Balanced Plus 0.55%

Growth Plus 0.55%

High Growth Plus 0.55%

Diversified Portfolio Investment Options

Conservative 0.80%

Conservative Pension 0.80%

Balanced 0.80%

Balanced Pension 0.80%

Growth 0.80%

Sterling Managed Account PricingAsset Class Options MDA Portfolio Management Fee (ex

GST and external MERs)Australian Equity Core 1.30%

Australian Equity Growth 0.80%

Australian Equity Smaller Companies 1.30%

Diversified Yield 1.05%

Property Securities 1.30%

International 0.55%

Alternative Asset 0.55%

Risk Targeted 0.25%

Transition 0.80%

Cash 0.25%

Sterling Managed Account Pricing• Comparison of the Sterling Balanced Portfolio against

managed funds on a wrap for a $250k client

• A saving of $1,000 – can you afford not to pass this onto your clients ? Or an opportunity to increase your own fee ?

Fee Wrap Sterling Managed Account

Administration (40bp)

$1,000

MER (80bp) $2,000

Portfolio Management Fee

$2,000

Total Fee $3,000 $2,000

Sterling Managed Account Pricing• For any listed securities, brokerage will vary depending on

manager

• Diversified Portfolios and AE Growth will incur 4bp brokerage – lowest in the market

• Transaction fee for any purchase or sales is $10

• So a $10,000 trade for the Diversified Portfolio or AE Growth will cost $14

Sterling Super Pricing• Management Fee covers Investment Administration, Super

Administration, Promoter, Distributor and Trustee Fee

• Investment Management Fee in line with the Managed Account but without the benefit of RITC discount

• MERs will vary according to the Funds used in themodel in which a client is invested

Sterling Super PricingManaged Fund

Investment OptionsManagement

FeeInvestment

Management FeeTotal

Management FeesConservative Plus 0.68% 0.30% 0.98%

Moderate Plus 0.68% 0.30% 0.98%

Balanced Plus 0.68% 0.30% 0.98%

Growth Plus 0.68% 0.30% 0.98%

High Growth Plus 0.68% 0.30% 0.98%

Diversified Portfolio Investment Options

Conservative 0.68% 0.55% 1.23%

Conservative Pension 0.68% 0.55% 1.23%

Balanced 0.68% 0.55% 1.23%

Balanced Pension 0.68% 0.55% 1.23%

Growth 0.68% 0.55% 1.23%

Sterling Super PricingAsset Class Options Management

FeeInvestment

Management Fee

Total Management

FeesAustralian Equity Core 0.68% 1.05% 1.73%

Australian Equity Growth 0.68% 0.55% 1.23%

Australian Equity Smaller Companies

0.68% 1.05% 1.73%

Diversified Yield 0.68% 0.80% 1.48%

Property Securities 0.68% 1.05% 1.73%

International 0.68% 0.30% 0.98%

Alternative Asset 0.68% 0.30% 0.98%

Risk Targeted 0.68% 0.30% 0.98%

Transition 0.68% 0.55% 1.23%

Cash 0.68% 0% 0.68%

Sterling Super Pricing• Comparison of the Sterling Super Balanced Portfolio against

current Super options for a $250k client

• A better outcome for the client

Fee Current Super Sterling Super

Management Fee $1,250 $1,700

Investment Management

$2,125 $1,375

Total Fee $3,375 $3,075

Sterling Super Pricing• For any listed securities, brokerage will vary depending on

manager

• Diversified Portfolios and AE Growth will incur 4bp brokerage – lowest in the market

• Transaction fee for any purchase or sales is $10

• So a $10,000 trade for the Diversified Portfolio or AE Growth will cost $14

Matching Your Business Model to Sterling

Adviser Value Proposition

Approach Sterling Approach

Strategic adviser Outsource asset allocation and investment selection

Diversified Portfolio or Managed Fund Portfolio

Investment adviser Control asset allocation but outsource investment selection

Asset class portfolio approach

Portfolio manager Control investment selection and investment selection

Asset class portfolio approach

Matching Your Business Model to Sterling

Existing Delivery Approach

Sterling Approach Outcome

Managed funds on wrap

Outsource asset allocation and investment selection

Potentially lower cost to clientTransparencySense of ownershipImproved practice efficiency

Equities on wrap Asset class portfolio approach or you as portfolio manager

Lower cost to clientImproved practice efficiencyImproved portfolio management outcomes

Matching Your Business Model to a Sterling

Existing Delivery Approach

Managed Account Business Model

Outcome

Off platform Asset class portfolio approach or you as portfolio manager

Improved practice efficiencyImproved portfolio management outcomes

Broker/ client manages Asset class portfolio approach or you as portfolio manager

Improved portfolio management outcomesRevenue benefit to youRetain control over client

Looking to Use Sterling as an Investment Solution for SMSFs

• Super administration integration – Class Super

• Flexible Portfolio design – pension version of Diversified Portfolios to maximum benefits to zero tax payers

• GST Private Ruling removes the requirement to register for GST

• Potential to reduce costs – RITC for investment management fees incurred and reduced audit costs through GS007

Adviser Assistance• Education – managed accounts, business models and

Sterling through Futuro Practice Development Managers and IAS Business Development Team

• Practice take on kit including Transition Guide , client flyers and adviser flyers

• Investment into Sterling requires advice to clients by the adviser – SoA template

• Transition from existing administration arrangement to Sterling - Adviser support from various sources (1800 and email) and IAS Transition team

Mandated Manager Interaction• Monthly webinars

• Regular Portfolio Updates – market commentary, portfolio commentary, specific investment updates for major contributors and detractors from the portfolio

• Adhoc Market Updates where required – specific issues in the market

• Portfolio implementation interaction – where an existing portfolio is migrated into Sterling

• Adhoc adviser requires – within reason

Feedback From AdvisersExisting Managed Fund Portfolios available on wrap not catered for

I don’t understand what a managed account is ? Or how to use it for my clients

Don’t use direct investments for my clients

No blended Investment Options has meant that advisers have had to manage asset allocation

Fees are higher than wraps

Does not provide the same outcome as DNR directly

I pick my own stocks

No different to a wrap

Where do I get some education ?

How do I go about transitioning clients ?

Summary• Sterling provides you with a real opportunity to change

your approach to client investments and the efficiency and profitability of your practice

• Sterling supports any practice business model

• Sterling is competitively priced across both the Managed Account and Super solutions

• Sterling enables you to deliver a different value proposition to your clients

Sterling has changed

Over to you !