The MagnusonClouseHersch Group at Morgan Stanley. Helping Our Clients Achieve Their Vision of Success

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1 The MagnusonClouseHersch Group at Morgan Stanley Helping Our Clients Achieve Their Vision of Success

2 Left to right: Alissa Hersch, Erin Nold, Kevin Clouse, Maryana Petrov, Gary Magnuson As a seasoned Financial Planning team, we aim to take the pain out of planning for the future by helping to coordinate your financial life to match your goals, allowing more time to do what you enjoy. 601 Union Street Suite 5200, Seattle, WA / main / toll-free / fax 2 Morgan Stanley

3 The MagnusonClouseHersch Group at Morgan Stanley What may feel like unchartered territory is a road we have navigated numerous times. Since 1982, affluent individuals and families have sought our assistance in addressing seemingly overwhelming wealth planning issues. We help our clients achieve their vision of success: Clarifying Complex Issues Evaluating Innovative Solutions Integrating Business, Family and Personal Wealth Planning Strategies We have vast experience in the issues that affect successful entrepreneurs, businesspeople, and retirees. As part of our comprehensive wealth planning, we often coordinate a team of professionals involved in implementing strategies to assist in meeting our clients goals. The MAGNUSONCLOUSEHERSCH Group 3

4 Wealth Management Process We collaborate with your existing team of professional advisors throughout the course of our relationship. If you need assistance with identifying relevant outside advisors we will assist you in this process. You will also have access to a worldwide team of experienced professionals at Morgan Stanley, each with a high level of knowledge and skill in key wealth planning areas. Wealth Management and Investment Plan Meeting Comprehensive Wealth Planning Presentation of our wealth management recommendations. Discovery Meeting Discussion of your financial objectives, goals and aspirations, current financial status, and other aspects of your life that will play a part in your financial plan. Diagnosis of your current situation and our recommendations for proceeding. 4 Morgan Stanley

5 Wealth Planning Review Mutual Commitment Meeting Joint approval to implement the proposed wealth management plan. 45-Day Follow-Up Meeting A meeting to organize accounts, finalize any documentation and bring you up to date on the status of your plan and accounts. Regular Planning Meeting A meeting to review the progress and implementation of your wealth management plan. Estate Planning Attorney Accountant Your Wealth Planning Network A full review of your accounts and our continuing evaluation of the entire range of your financial and lifestyle needs. We will address any current questions and concerns, and possible lifestyle changes that may affect your wealth management plan. Risk Advisor Philanthropic Advisor Health Advisor The MAGNUSONCLOUSEHERSCH Group 5

6 Wealth Management Philosophy Wealth Advisory Services The MagnusonClouseHersch Group provides comprehensive wealth management strategies to affluent individuals and families, customized to help meet their personal financial planning needs. We assist in simplifying and solving complex financial matters related to life s transitions. Our discussions about wealth management are focused on four key areas that we believe will result in a comprehensive outlook toward your future: Lifestyle Not only your current one, but also the lifestyle to which you aspire. We ll address your cash flow and future spending obligations, retirement planning, education funding, wealth transfer to heirs and philanthropic initiatives. As part of the planning process, we will assess the potential of reaching or exceeding your goals. Risk Recognizing whether you have too much, or not enough, risk is another core element of your plan. In addition to portfolio risks, discussions can also include wills, trusts, health care, insurance and identity theft. Asset Based on your financial status today, we will help you craft an investment program designed to reach your goals, whether it s to fund retirement, leave a legacy for heirs, provide for education expenses or simply improve your lifestyle. Liability The right side of your financial balance sheet is just as important as the left side. Borrowing, done wisely, can help you realize possibilities of which you may not have been aware. We will show you appropriate strategies that can fund your needs without liquidating assets, sacrificing income or paying gift taxes. Through the process of asking questions, defining priorities, and clarifying goals and values, we strive to give our clients increased comfort and clarity of direction toward the achievement of their financial and lifestyle goals. 6 Morgan Stanley

7 We help to build a foundation for your financial independence through wealth planning. The MAGNUSONCLOUSEHERSCH Group 7

8 Wealth Management Capabilities Lifestyle Management Risk Management Goal Analysis Needs, wants, wishes Evaluation of alternatives Probability analysis Monitoring progress Budgeting and Cash Flow Budget evaluation Cash flow management Saving strategies Education Planning 529 Plans UGMA/UTMA Educational trusts Retirement Income Coordination of income resources IRA/401(k)/403(b) Social Security and Pension Analysis Benefit commencement decision Family Governance and Dynamics Help protect the wealth plan Family mission statement Family council Special Circumstances Marriage/divorce Disability/illness Nontraditional families Job change and job loss Dependents with special needs Legacy Planning, Gifting and Uses of Trusts Annual gifting Lifetime gift exemption revocable and irrevocable trusts Testamentary trusts Grantor trusts Charitable Planning Charitable trusts Direct bequests Donor-advised funds Private foundations Wills and Legal Documents Health care POA Durable POA Living will Estate Distribution and Dissolution Health Care Health care spending accounts Medicare Long-term care Capital Needs and Disability Analysis Life insurance Disability insurance Property Casualty and Special Insurance Umbrella liability Directors and officers Trusts Spendthrift provisions Domestic asset Protection trusts Exempt Assets and Entities Usage LLCs FLPs 8 Morgan Stanley

9 Asset Management Liability Management Asset Allocation Risk tolerance Strategic and tactical Active and passive Rebalancing Longevity, inflationary risk Investing with Impact Investment Selection Portfolio construction Manager selection Discretionary vs. nondiscretionary Performance reviews Annuities Economics and Business Cycles Fiscal policy Monetary policy Economic indicators Business cycles Inflation, deflation, stagflation Tax-Efficient Investing taxable vs. tax-free Tax-loss harvesting Mortgages HELOCs Debt Analysis Secured vs. unsecured Buy vs. lease/rent Securities-Based Lending Letters of credit Margin Liquidity Access Line Tailored Lending High net worth Personal lending Business lending The MAGNUSONCLOUSEHERSCH Group 9

10 Client Bill of Rights The MagnusonClouseHersch Group at Morgan Stanley Here are the Client Relationship services that you can expect from our team: Regular contact throughout the year to keep you apprised on the progress toward your goals Comprehensive meetings to review and update your financial plan; complete with meeting agenda, follow-up action items and timely deliverables Messages and s returned in a timely manner Prompt and courteous response to questions Innovative solutions to help solve complex problems utilizing firm specialists Here are the Financial Planning services that you can expect from our team: Understanding what is important to you and how you define success Collaboration with your other advisors (CPA, attorney, etc.) to help ensure that your planning strategies are in sync Retirement income distribution plan Insurance planning strategies Estate planning strategies Education planning Charitable planning Intergenerational planning and financial literacy education for children and grandchildren Lending and cash Management solutions Executive compensation and stock option planning Ongoing financial advice through life changes such as marriage, birth, disability, death or divorce Here are the Investment Management services that you can expect from our team: Based on your financial plan and in alignment with your goals we make buy-and-sell decisions in your portfolio in the Portfolio Management program Tax-conscious investment management to help minimize the taxes you have to pay Proprietary investment management process, backed by our firm s extensive research capabilities Use of interactive media to review progress of your investment plan, benchmarked to your financial goals Quarterly performance reports available on MS Online and on demand Second-opinion investment advice to friends, family and business colleagues 10 Morgan Stanley

11 Portfolio Management Program We create portfolios customized to our clients unique needs and goals, and seek to provide competitive returns through diversified portfolios that stand the test of time. As stewards of our clients financial security, we strive to provide sophisticated, objective, fee-based advice utilizing our value-based investment strategies. Our goal is to manage day-to-day emotions and stay focused on our clients long-term goals. Focusing on Individuals, Not Just Markets Each client portfolio is individually designed and managed based on the plan that we ve created to help meet your specific needs, whether you are saving for your child s education, planning for retirement or preserving your estate. Ongoing communication helps us ensure that your portfolio is well-positioned for your specific circumstance as your life requires it. It s Not Just Your Money, It s Your Future By utilizing discretion over your investments, we are able to maintain the focus and discipline necessary to guide you and your portfolio through the most challenging markets. After all, this isn t just about your money or an immediate fix to a short term problem; it s a commitment to your future. You ll find that our experience, training and investment philosophy provide significant guidance both for managing your portfolio and for helping you understand investment risks while keeping your long-term goals in view. Our fee-based structure means that we share the same goal: your long-term financial success. The Portfolio Management Advantage As members of the Portfolio Management program at Morgan Stanley, we are part of a select group of advisors given the autonomy to independently manage our clients assets based on training, experience and commitment to service. Professional management Customized strategies Allocation Diversification Comprehensive communication and performance reporting Patience Discipline Unified fee Global resources, local perspective *Portfolio Management is an advisory program in which the client s Financial Advisory invests the client s assets on a discretionary basis in a wide range of securities. The MAGNUSONCLOUSEHERSCH Group 11

12 Case Study: High net worth couple wanting to retire in the next 12 months no prior planning Net Worth: $15 Million We were referred to a family that had accumulated significant liquid and nonliquid investments, had multiple financial advisors and had never formulated a comprehensive wealth plan. In our discovery meeting, we uncovered that the husband wanted to retire within 12 months and their biggest concern was how they would replace his lost income. Because of their busy lifestyles, they never had a formal investment plan and most of their liquid investments were in cash or fixed income. By utilizing our planning software, we demonstrated the need to reallocate their investments to a more balanced portfolio in order to reach their long-term funding goals. We were able to show them how they could simplify the number of accounts and financial firms they have, thus reducing the overwhelming amount of paperwork. They now have an efficient investment plan integrated within their overall wealth plan, which decreases the complexities of their estate administration. They had consistently updated their estate planning documents, but we recommended a second opinion review with our Wealth Management Director to ensure that this part of their wealth plan still accurately reflected their wishes and estate planning needs. In conjunction with the estate plan review, we worked with our insurance specialist to review the various life insurance policies they had accumulated. We restructured their insurance plan by taking the accumulated cash value from the current policies, and we increased the death benefit while reducing the annual premiums paid. We also recommended that, instead of individual owners, an irrevocable life insurance trust should be the owner of all the policies. Long-term care insurance was an important consideration and we were able to get them new policies, paid for with the savings from their old life insurance premiums. They had no debt on their primary home or rental real estate, but for shortterm liquidity needs, we recommended, and put in place, a securities-backed line of credit against their investment assets. This will be used for future investment property purchases or as bridge financing to help their children with a first home purchase. Another goal was to travel extensively overseas, and we discussed the benefits of our GlobalCurrency platform and enrolled them in the Morgan Stanley Platinum Card from American Express. After working through a lengthy checklist of planning items, we were able to put together a comprehensive wealth plan that helped to simplify their lives by allowing the husband to retire as planned. We now send a monthly paycheck to their bank account to supplement the investment property income they receive. Our clients understand that they can live the lifestyle they choose. They now have a plan in place to protect their assets at death and to pass along their wealth to future generations. Case Study: Millennial with an inheritance Net Worth: $7 Million We were referred to the nephew of one of our clients upon the passing of his mother. He was 21 years old at the time, still figuring out college as well as what he wanted his future to look like. His mother had been philanthropically inclined and he knew he wanted to continue this legacy in her honor. Additionally, he wanted to focus his time and resources in areas where he found inspiration and, at the same time, use his newfound wealth to invest responsibly. He met with us multiple times in the first year. We worked through his cash management needs by establishing a cash account and helped him set up online bill pay that he could easily access using the Morgan Stanley mobile app. At 21, he hadn t been burdened with bills, such as the electricity, utility, mortgage, etc., and felt a huge relief when he was able to manage all of his bills in one place and access them quickly and easily from his cellphone or tablet. Together, we spent time to further educate him about Environmental, Social & Governance (ESG) issues within our Investing with Impact platform and identifying the values that were most important to him. From there, we worked with our Investing with Impact team to help create a portfolio that aligned with his beliefs. When it was time to sell his childhood home, we helped him through the sale, then through the purchase of his first home. We helped counsel him to find the right house, spent time working through his budget to determine an appropriate mortgage payment that he could handle, and reviewed the various mortgage options that were available to him. We coordinated meetings with a CPA, attorney and insurance specialist, which made him feel confident that he had a team of professionals aligned with his goals. Our greatest accomplishment was helping him establish a solid foundation so that he would have the confidence to go out and explore his passions. 12 Morgan Stanley

13 Case Study: Young couple in the technology industry Net Worth: $3 Million A couple with a growing family approached us. They had recently moved into a new home and a second baby was on the way. Over the years, they had accumulated a lot of cash at various banks and were not fully aware of what they had saved. They wanted to better organize their financial life before their lifestyle became even more hectic. With the confusion of having cash at multiple banks, old 401(k) plans scattered at various institutions, and the accumulation of company stock, they had lost track of their assets and didn t know if they had enough assets to necessitate working with a financial planning team. We started our first meeting focusing on their family, their goals both immediate and long term gathered their various statements (investment, stock plan, savings, checking, mortgage, insurance, tax returns, etc.), and through our personalized planning process, we helped create a comprehensive picture of their total net worth. Through this process, we were able to simplify their financial picture and bring a new level of clarity and confidence by: Identifying and bringing together their individual and joint goals Simplifying their financial picture by consolidating their many accounts at numerous institutions, which brought clarity around their liquid and nonliquid assets Establishing a plan for their company stock so that they were diversified while minding their tax situation. We now work closely with their stock plan team to implement a 10b5-1 trading plan and to reallocate as their stock vests Creating a monthly savings plan for their children to attend their alma mater as well as a plan for their future retirement Reviewing and recommending updates to their life insurance and liability coverage (As high earners, they were insufficiently insured against liability lawsuits.). Reviewing their debt situation and establishing a line of credit backed by their investment securities enabling them to proceed with a long-awaited, home improvement project Today, they feel confident in the plan we created and appreciate that they are able to focus on their family in the brief free time they have away from their careers. As their life and goals change, we update their plan accordingly to determine how the changes will affect their long-term picture. The case study presented is for illustrative purposes only. Past performance is no guarantee of future results. These strategies do not guarantee a profit or protect against loss and may not be suitable for all investors. The MAGNUSONCLOUSEHERSCH Group 13

14 Meet the Professionals Gary F. Magnuson Portfolio Management Director Senior Vice President Financial Advisor Gary Magnuson has a passion for researching investment opportunities and creating specialized portfolio strategies for our clients. He has been with Morgan Stanley and its predecessors since Gary is a Trustee Emeritus at Linfield College, currently acting as Vice Chair of the Investment Committee, and is also a longstanding member of the Plymouth Church Investment Committee in Seattle. Gary and his wife, Sharon, reside on Queen Anne Hill in Seattle. In his free time, he enjoys working on projects around their home, gardening, listening to music and reading. Both he and Sharon enjoy traveling to new places, skiing and hiking. gary.f.magnuson@morganstanley.com NMLS # Kevin M. Clouse, CFP Portfolio Management Director Vice President Family Wealth Advisor Financial Advisor Kevin Clouse began his career at Morgan Stanley and its predecessors in He enjoys working through complex planning issues with our clients. Kevin is a CERTIFIED FINANCIAL PLANNER and is responsible for implementing comprehensive wealth planning strategies based on our clients needs and goals. By maintaining close relationships with our clients, he is able to stay attuned to their wishes and help them achieve their own vision of success through the financial blueprint they develop together. Kevin lives with his wife, Kristin, and daughters, Audrey and Lillian, in Kirkland. As a native of Coeur d Alene, he tries to find time for fly fishing and hiking in the Northwest s great outdoors. kevin.m.clouse@morganstanley.com NMLS # Alissa B. Hersch Vice President Family Wealth Advisor Financial Planning Specialist Financial Advisor Alissa Hersch takes special care in developing a big-picture view of our clients overall goals. With extensive knowledge and experience in retirement, education and family wealth planning, she focuses primarily on applying strategic planning strategies within the context of our clients broader goals. Alissa has been with Morgan Stanley and its predecessors since 2005, and she appreciates the deep-knit relationships that she creates with each of our clients; she finds that it s not only necessary for planning but also personally rewarding. As a member of the Washington Women s Foundation, Alissa has gained extensive knowledge about Washington s local nonprofits and enjoys learning about their needs, both locally and abroad. Alissa is a Seattle native and former Junior Olympic downhill ski racer. She is still an avid skier, enjoys cheering on the Seattle Sounders and has a passion for travel. With her husband, Matt, and daughter, Blakely, she enjoys the Pacific Northwest while road biking, hiking and golfing. alissa.hersch@morganstanley.com NMLS # Morgan Stanley

15 Maryana R. Petrov Portfolio Associate Maryana Petrov finds satisfaction interacting with our clients by providing them with unique and undivided attention. She has a breadth of operational and client service experience that makes her a valuable member of our team. She joined Morgan Stanley in 2006 and, in that time, has assisted the firm in operations, office administration, technology rollouts and customer service. Together with her husband, Dmitry, and daughters, Sophia and Isabel, Maryana enjoys spending time cooking as a family and listening to music. She is fluent in three languages: English, Russian and Ukrainian. maryana.r.petrov@morganstanley.com Erin Nold Client Service Associate Erin Nold handles our clients funds transfer needs and works with Maryana to assist our clients with their administrative needs. Her attention to detail, organization and diligence in taking care of clients are exceptional. Erin is a native of the Pacific Northwest, one of the rare people who were born and raised in the Seattle area. She joined Morgan Stanley in 2015 and has over 15 years experience in the financial services industry, where she is known for providing excellent client service. When not in the office, Erin enjoys spending time with her family and friends, hiking, biking and traveling. Additionally, she finds joy when she is involved with causes that improve the lives of others in the community; specifically, she leads the Toys for Tots Holiday Drive each year. erin.nold@morganstanley.com The MAGNUSONCLOUSEHERSCH Group 15

16 Morgan Stanley Smith Barney LLC ( Morgan Stanley ), its affiliates and Morgan Stanley Financial Advisors or Private Wealth Advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters. Morgan Stanley Smith Barney LLC does not accept appointments nor will it act as a trustee but it will provide access to trust services through an appropriate third-party corporate trustee. Life insurance, disability income insurance and long-term care insurance are offered through Morgan Stanley Smith Barney LLC s licensed insurance agency affiliates. The investments listed may not be suitable for all investors. Morgan Stanley Smith Barney LLC recommends that investors independently evaluate particular investments, and encourages investors to seek the advice of a financial advisor. 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Portfolio Loan Account ( PLA ) is a securities based loan/line of credit product offered by Morgan Stanley Bank, N.A. Express CreditLine ( ECL ) is a securities based loan/line of credit product offered by Morgan Stanley Smith Barney LLC. Borrowing against securities may not be suitable for everyone. You should be aware that securities-based loans involve a high degree of risk and that market conditions can magnify any potential for loss. Most importantly, you need to understand that: (1) Sufficient collateral must be maintained to support your loan(s) and to take future advances; (2) You may have to deposit additional cash or eligible securities on short notice; (3) Some or all of your securities may be sold without prior notice in order to maintain account equity at required maintenance levels. You will not be entitled to choose the securities that will be sold. 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Tailored Lending is a loan/line of credit product offered by Morgan Stanley Private Bank, National Association. Residential mortgage loans/home equity lines of credit are offered by Morgan Stanley Private Bank, National Association, an Equal Housing Lender Nationwide Mortgage Licensing System Unique Identifier # With the exception of the pledged-asset feature, an investment relationship with Morgan Stanley Smith Barney LLC does not have to be established or maintained to obtain a residential mortgage loan/home equity lines of credit. With the exception of a margin loan, the proceeds from the loan products referenced may not be used to purchase, trade, or carry margin stock (or securities, with respect to Express CreditLine); repay margin debt that was used to purchase, trade or carry margin stock (or securities, with respect to Express CreditLine); and cannot be deposited into a Morgan Stanley Smith Barney LLC or other brokerage account. The proceeds from a residential mortgage loan/home equity lines of credit also may not be used to make payments on any amounts owed under the note, loan agreement or loan security agreement. Morgan Stanley Private Bank, National Association, and Morgan Stanley Bank, N.A. are affiliates of Morgan Stanley Smith Barney LLC, and are each a Member FDIC that is primarily regulated by the Office of the Comptroller of the Currency. The information contained herein should not be construed as a commitment to lend. Morgan Stanley Smith Barney LLC offers insurance products in conjunction with its licensed insurance agency affiliates. This material is intended only for clients and prospective clients of the Portfolio Management program. It has been prepared solely for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument, or to participate in any trading strategy. The individuals mentioned as the Portfolio Management Team are Financial Advisors with Morgan Stanley participating in the Morgan Stanley Portfolio Management program. The Portfolio Management program is an investment advisory program in which the client s Financial Advisor invests the client s assets on a discretionary basis in a range of securities. The Portfolio Management program is described in the applicable Morgan Stanley ADV Part 2, available at or from your Financial Advisor. Past performance of any security is not a guarantee of future performance. There is no guarantee that this investment strategy will work under all market conditions. Since life insurance and long term care insurance are medically underwritten, you should not cancel your current policy until your new policy is in force. A change to your current policy may incur charges, fees and costs. A new policy will require a medical exam. Surrender charges may be imposed and the period of time for which the surrender charges apply may increase with a new policy. You should consult with your own tax advisors regarding your potential tax liability on surrenders. Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC ( Morgan Stanley ), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not fiduciaries (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise agreed to in writing by Morgan Stanley. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account. Investment, insurance and annuity products offered through Morgan Stanley Smith Barney LLC are: NOT FDIC INSURED MAY LOSE VALUE NOT BANK GUARANTEED NOT A BANK DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY 2017 Morgan Stanley Smith Barney LLC. Member SIPC. CRC CS /17