FAQ

1. What is a fee-based advisor?
2. How do you charge for your services?
3. What services do you offer?
4. How many people are on staff at your firm?
5. What are your credentials?
6. What business organizations are you a member of?
7. What can I expect from a complimentary consultation?
8. How often do you meet with clients?
9. What special services do you offer to clients?
10. Have you received any awards or accolades?
11. What platform do you use for your managed portfolios?
12. How would you summarize your investment philosophy? What are your specialties?
13. Do you do advising on trusts and estate plans?
14. What is your philosophy on Long Term Care insurance?
15. Do you have any experience in Medicaid planning?
16. Do you work with attorneys or CPAs in your firm?
17. What kind of clients does your firm advise?

1. What is a fee-based advisor?

A fee-based advisor is a financial professional who receives compensation for their services in two primary ways: The first is by charging an hourly fee for services rendered, similar to an attorney or a CPA. Dominick Paoloni, lead advisor at IPS, charges $150 per hour. The second method involves assessing an active money management fee to oversee investment portfolios—directing the holdings in a client's account. Advisors typically charge anywhere from 1-2% of assets under management a year for this service. IPS charges .25% a quarter, or 1% per year. This fee is automatically drafted from our clients' accounts for their convenience.

2. How do you charge for your services?

We charge for our services in one of three ways: by the hour ($150), by a percentage of assets under active management (1% per year), or for specific services rendered, such as investment evaluation reports. Clients under active management do not pay an hourly fee to meet with us, nor to receive ancillary advice on other financially related topics.

We take pride in our accessibility and invite clients to call us with questions related to anything of financial concern. While we may not be experts on some of the topics they present, we are pleased to draw on our experience to provide general feedback, or to refer an expert who can further assist them.

3. What services do you offer?

We offer expert money management and portfolio design for individuals, families, businesses and charitable trusts; provide advising and underwriting on life insurance and long term care insurance; discuss Medicaid planning; offer analysis and recommendations on trust and estate plans; and recommend annuity products. For a more in-depth explanation of our services and specialties, please click here.

4. How many people are on staff at your firm?

We have three full-time staff members, as well as two receptionists. We also have a rich network of advisors who work with IPS on a consulting basis.

5. What are your credentials?

We are a registered firm with the Colorado Division of Securities. Dominick Paoloni, the firm's advisor, has received his Series 6, 7, and 63 and 24. Dominick is also a licensed insurance advisor in the state of Colorado for Life and Health. Additionally, Dominick completed an extensive specialized planning program and received a Certificate in Elder Planning (CEP). He is a Registered Investment Advisor in the State of Colorado.

6. What business organizations are you a member of?

We are the only approved money manager on the Tom Martino Troubleshooter.com Referral List, are active members in the Denver Metro Chamber of Commerce, and are longtime award-winning members of the Denver-Boulder Better Business Bureau. We are also listed on the Blue List of businesses by AM 760 and are one of only five advisors appointed in Colorado by the National Football League Players Association (NFLPA).

7. What can I expect from a complimentary consultation?

Our complimentary consultations allow people to get to know us. Visiting our office, they gain a sense of our values, our work style, and our investment philosophy. Most people seek out specific advice about their investments during these sessions, which we strongly encourage.

We generally achieve the following objectives during an initial consultation:

• Analysis of investments
• Review of life insurance policies; assessment to determine if they can be refinanced to lower premiums or to increase benefits at no cost
• Evaluation of trusts for probate avoidance
• Analysis of tax liabilities & strategies
• Generation of questions to present to current advisor
• Review of concrete strengths and weaknesses of current plan

8. How often do you meet with clients?

We're in contact with clients on a regular basis by phone, personal consultation and written correspondence. We conduct at least one annual review with clients and generally meet with them anywhere from two to six times a year, depending on their preferences. We also correspond with clients through quarterly newsletters, ancillary market updates, and quarterly Preferred Client Luncheons.

Our goal is to be accessible at all times to our clients. We work diligently to provide meeting opportunities and communication materials to keep the IPS family current.

9. What special services do you offer to clients?

We host quarterly Preferred Client Luncheons, offer advising and referrals on financial matters not related to IPS, and serve as a trusted sounding board for our clients' general financial concerns. We believe in educating clients about how we manage their accounts and why we make the recommendations we do.

We are also extremely focused on helping clients who traditionally have not been the financial decision maker in their families understand their holdings and account structures.

To that end, we are also willing to meet with grown children to create a deeper network of communication for clients who are thrust into the new role of financial decision maker at the death of their spouse. This is, perhaps, some of our most meaningful and rewarding work.

10. Have you received any awards or accolades?

We have garnered national attention for our portfolio designs by institutional representatives of Goldman Sachs and Deutsche Bank. We have won the Gold Star award for the last several years from the Denver-Boulder BBB. We were asked to host a weekly talk show by AM 760 in Denver, and have over 430 clients, many of whom have been with us for over ten years.

11. What platform do you use for your managed portfolios?

We use Charles Schwab Institutional as the platform for our clients' accounts. We chose Schwab over other discount brokerage firms like T.D. Waterhouse or Brown & Company because of its excellent customer service, its discounts on funds and transactions to clients, its capital and net worth, its longevity, its international recognition, and its "bricks and mortar" prevalence in the U.S. and abroad.

These characteristics offer our clients safety, convenience, and value. Schwab also acts as a gateway to the entire universe of mutual funds available on the market on a true no-load basis—we mandate this deep level of access because of our rigorous protocol for determining "Best In Class" funds for client portfolios. We do not use any Charles Schwab proprietary funds in our portfolios.

12. How would you summarize your investment philosophy? What are your specialties?

We believe conservative, informed investing builds wealth over time. We don't want to hit "home runs" for our clients. Instead, we want to generate a consistent rate of return over many years to generate prosperity. Rule 72 states that money compounded at 10% a year doubles every seven years. Our "base hits" can preserve principal while growing assets at a prudent and acceptable rate. We also don't believe in guessing about the latest hot tip or using our clients' life savings to chase unsustainable returns, only to watch their accounts crash when markets inevitably come down.

Instead, we practice the science of portfolio engineering. We choose only "Best In Class," no-load mutual funds (managed by individuals who are performing in the top half of 1% of all managers on the market), and then mathematically calculate the optimal allocation of our chosen funds. We're seeking a blend that gives us the least amount of risk for the best potential return. The result is portfolios that are extremely predictable, very risk-averse, and stable enough to weather diverse market cycles.

This means clients can sleep at night, regardless of what the markets are doing. Dr. Bob Litterman, institutional manager for Goldman Sachs, relates that this practice—long entrenched at the institutional level to protect billion-dollar portfolios—is both the secret and the future of good money management. We are proud to offer this cutting-edge technology to our clients.

13. Do you do advising on trusts and estate plans?

We have built fantastic relationships over the years with attorneys who demonstrate excellence, integrity, and expertise in trust and estate planning. We are pleased to refer our clients to our associates and place our reputation in their hands. We have yet to be disappointed.

14. What is your philosophy on Long Term Care insurance?

First, we believe that some plan is better than no plan when addressing catastrophic illness coverage. We understand that many investors do not purchase Long Term Care (LTC) insurance policies because they can be cost prohibitive. Unfortunately, it is our opinion that this trend is a result of an industry driven by commissions—some LTC salespeople won't sell plans sufficient for consumers because the premiums and subsequent commissions are too low.

Nevertheless, for a client up to their early 70s and in good health, we have found affordable plans from industry leaders like John Hancock and Physicians Mutual Life (Consumer Reports rated both companies in the top 3 of all providers in 2004). Because nursing home costs are now averaging more than $70,000 a year according to Forbes Magazine, even partial insurance coverage can help allay estate spend down. We have also been extremely impressed with alternative tools presented by insurance companies over the last few years designed for a growing senior market.

For example, many companies now offer traditional life insurance products that leverage benefits for long term care. These policies feature a traditional death benefit that can be immediately used for nursing home costs—if the investor should never need this coverage, their heirs will inherit the death benefit tax-free. Many investors like this alternative because, unlike traditional LTC policies that expire at death if the benefits are never used, this product gives a benefit for premiums paid. Today there are also annuities that will leverage your contract value by three times for use in Long Term Care. Both options allow seniors to gain coverage outside traditional LTC policies.

Ultimately we enjoy helping clients find a solution that's both affordable and sensible for their needs—there's no reason an estate should be whittled away because of nursing home costs unless families don't plan.

15. Do you have any experience in Medicaid planning?

We have cursory experience in Medicaid planning. While we cannot offer legal advice, we can offer general experience and guidance regarding investments and account labeling to help families prepare for Medicaid applications involving nursing homes.

16. Do you work with attorneys or CPAs in your firm?

We have a wide network of both CPAs and attorneys whom we have worked with over the years that provide reliable, affordable services for our clients.

17. What kind of clients does your firm advise?

We advise individuals, families, business owners, and charitable organizations. Our consulting involves risk management, tax reduction, estate planning, insurance planning, budgeting and more. Because we are active members of the financial community in Denver, if we can't find an acceptable solution for a client, we have a pool of experts we can refer them to.

Questions You Need From Your Current Financial Portfolio:

These technical questions will identify your portfolio's diversification, risk-to-return ratio, loss potential and more. Every investor should know the answers to these questions for their accounts.

1. What is the Correlation Coefficient factor of your total portfolio?
2. What is the Sharpe ratio of your total portfolio?
3. What is the Standard Deviation of your total portfolio?
4. What is the total portfolio mean of your portfolio?
5. What is the total portfolio Beta?
6. What is the total portfolio Alpha?
7. What is the overall maturity rate and quality of the bonds in your portfolio?

Suggested Guidelines:

1. The Correlation Coefficient, or R2 factor, mathematically demonstrates how diversified a portfolio is. This number should be at 50 or below.
2. The Sharpe ratio reflects how much return you're making for each unit of risk you're taking. The higher the Sharpe ratio, the more efficient the portfolio is. You want to get twice as much return for every unit of risk you're taking—your Sharpe figure should be at least 2 or more.
3. Standard Deviation measures how much volatility is in the overall portfolio. A low standard deviation means low volatility and therefore, more predictability. We recommend it be low—somewhere between 3 and 7.
4. Mean is the overall return of the portfolio over a given period of time. You want a high mean and a low standard deviation. A good rule of thumb is to have a mean at least twice your standard deviation.
5. Beta measures a fund's volatility relative to an index, such as the S&P 500. A Beta above 1.0 means the fund is more volatile than the index. A number below 1.0 means it's less volatile.
6. Alpha reflects the value a manager adds to the portfolio over and above the benchmark he or she competes against. The higher the Alpha, the more impact the manager is having on the performance and success of the fund he or she directs.