Investment Policy Statement

• An Investment Advisor Representative (IAR) aims to understand a client’s situation using fact-finding tools, communication, and judgment.
• A suitable portfolio is designed based on investment constraints, return objectives, and risk tolerance.
• Primary tools for analysis include the Client Profile Questionnaire, New Account Form, and client interviews.

Client Profile Questionnaire Details

• The client profile questionnaire includes questions about the client's:
  • Age
  • Investable assets
  • Income compared to expenses
  • Liquidity needs from the portfolio
  • Knowledge and comfort with investing
  • Return objectives regarding inflation
  • Investment risk tolerance / Riskalyze Score

Investment Policy Statement Purpose

• An Investment Policy Statement (IPS) is a client-specific document with the purpose to:
  • Define reasonable expectations and responsibilities for all parties
  • Establish investment decision-making principles aligned with client's objectives and constraints
  • Outline the portfolio management philosophy and process
  • Establish long-term discipline against strategy shifts inconsistent with client's objectives
  • Encourage communication between the client and IAR

Amendments

• The IPS is reviewed periodically and may be amended to reflect changes to financial situation and philosophy.

Roles and Responsibilities

• Regal Investment Advisors, LLC. (the Firm) provides discretionary portfolio management to clients through IARs.
• The Firm utilizes various tools, products, and resources including:
  • Mutual Funds
  • Individual stocks and bonds
  • Exchange traded funds, and notes
  • FDIC insured Market Rate Certificates of Deposit
  • Alternative investments
  • Unit investment trusts
  • Independent third-party money managers
  • Derivative Securities
• IARs are critical for selecting suitable portfolio models based on understanding client situations, reviewing investment process/results, and making portfolio adjustments.
• Investment Managers may be selected by the IAR to manage portions of a client’s portfolio for security diversification, and can be more cost effective.
• The IAR selects, monitors, reviews, and changes the Investment Manager based on specified factors.
• The Custodian is responsible for portfolio valuation, income transaction settlement, statements and fee distribution.
• Clients provide all requested information and inform the IAR of changes to financial situation/objectives.

Investment Principles & Portfolio Management Processes

• IARs provide an independent, disciplined portfolio management process, discouraging short-term shifts.
• IARs research and identify investments based on client needs, using software products to review investment options.
• The Investment Committee may adjust asset allocations based on market conditions/opportunities, especially in "Tactical" models and market volatility.
• Diversification involves using various asset classes to maximize risk-adjusted portfolio returns.
• Continuous market research is needed to maintain proper diversification through a comprehensive investment management framework.
• IARs take time to understand client needs, goals, and priorities, to formulate risk and return objectives to develop an appropriate investment strategy.
• Capital market expectations, risk, return, and correlation assumptions inform the asset allocation using long-term historical data.
• Strategic Asset Allocation: Client objectives and constraints determine which portfolio design is selected, allocations may change over time.
• Active Rebalancing incorporates factors to determine trading decisions, monitoring portfolio deviation from strategic asset allocation and rebalancing if needed.

Factors for Portfolio Allocation

• Portfolio allocation is monitored to ensure it stays within appropriate ranges.

• Deviations occur due to:

  • Performance and Account Activity
  • Client Profile Changes
  • Model Updates with capital market expectations

Exchange Traded Funds (ETFs)

• The ETF market requires monitoring of the ETF evaluation process to ensure the ETFs are best in class for the portfolio models.
• Premium/Discount to NAV of ETFs represent a basket of securities that have prices that tend to revert back to the NAV over time.
• Shares are purchased when the ETF is trading at a discount and sold when trading at a premium to net asset value.

Investment Policy Statement Review

• The IAR reviews and updates the IPS as needed (at least annually) to reflect changes to the client’s risk tolerance, objectives, or financial and life circumstances.
• The IARs primary objective is to construct and manage the portfolio to achieve the client’s investment objectives while adhering to the stated constraints.
• Evaluation is based on how well the client’s portfolio results reflect the objectives and constraints provided.
• Investment returns are a significant part of the evaluation process.

Portfolio Benchmarking

• Risk tolerance benchmarks:
  • Conservative: 40% S&P 500 Total Return/ 60% Barclays US Aggregate Bond
  • Moderate: 70% S&P 500 Total Return/ 30% Barclays US Aggregate Bond
  • Moderate Aggressive: 80% S&P 500 Total Return/ 20% Barclays US Aggregate Bond
  • Aggressive: 90% S&P 500 Total Return/ 10% Barclays US Aggregate Bond

Investment Restrictions

• The IAR uses the IPS and other information (risk tolerance, investment objectives), to design/select and manage the portfolio.
• The portfolio may include various investment types, approved by the Firm and Investment Committee.
• Clients must make the IAR aware of investment choice restrictions in writing; otherwise, there are no restrictions on the account.
• If Investment Restrictions are applicable, the Client and IAR are required to provide the Firm with a separate Letter of Instruction. Jon McCardle, IAR.