Guidance for income investors facing a potentially shifting environment Rethinking your income strategy A special report from the Advisory Services Group Although they may disagree on the exact timing, market strategists generally share a consensus that higher interest rates are in our future. Income investors should realize that many of the strategies that have worked for them in the past are unlikely to be successful in a rising-rate environment. That s why they need to be aware of what appears to be down the road and begin developing strategies designed to help them achieve their financial goals.
It s time for a new approach to income investing The Investment Strategy Committee of Wells Fargo Advisors Advisory Services Group (ASG) which comprises the firm s top strategists shares the view that higher interest rates are ahead. The global monetary policies that are driving today s low rates will not continue indefinitely. We believe new policies will be implemented sooner rather than later that will lead to higher rates. Fixed-income investors should realize that rising rates may have significant negative effects on their investments values. That s because interest rates and bond prices move in opposite directions. In other words, as rates move up, bond prices fall. Compounding matters, to get income they need, many investors have been using a variety of strategies in their search for higher yields in today s low-interest-rate environment. These strategies have included purchasing investments that are likely to be among those most negatively impacted if rates do begin increasing, such as: u Fixed-income investments with longer maturities u Higher-yielding equities u Leveraged strategies Given what we foresee, we believe it s time to take a different approach to income investing. The following pages explain why we think that s necessary, what we believe investors need to do, and how Wells Fargo Advisors can help. 20% Falling rates have meant higher total returns 45% 40% 16% From 1954 through 1981, interest rates generally moved higher. Investors experienced an average annual total return of 3.05% during that period. Then the cycle turned interest rates have declined for the last 32 years with investors experiencing an average total return of 9.48% since 1982. 35% 30% Constant maturity yield 12% 8% 25% 20% 15% 10% Total return 5% 0% 4% -5% 10-year Treasury constant maturity yield (left) 10-year Treasury total return (right) -10% 0% -15% Dec-54 May-62 Oct-70 Mar-79 Aug-87 Jan-96 Jun-04 Nov-12 Past performance is not an indication of future results. Source: St. Louis Federal Reserve, Bloomberg and Wells Fargo Advisors
Interest rates appear ready to change course It is likely that we are approaching an inflection point in the longer-term fixed-income interest-rate trend. Judging by the last rising-rate period (see chart on previous page), it could mean that substantially lower fixed-income returns lie ahead. Below-average fixed-income returns are likely to be driven both by higher interest rates and a widening of credit spreads (the excess yield over the virtually risk-free Treasury rate). This environment may come as somewhat of a shock to the many investors who ve had a positive experience in the bond market either longer term and/or over the past several years, during which they enjoyed double-digit gains in many fixed-income investments. Unfortunately, the dynamics that drove this performance high starting interest rates during the 80s and wide credit spreads in recent years no longer exist, making a repeat performance impossible. Complicating matters further is the fact that a vast majority of investors have never gone through a sustained period of rising rates, such as that experienced during the 50s, 60s and 70s. The future of the Fed s current opened-ended bond purchase program is another factor to consider. Known as quantitative easing, these purchases are intended to increase the money supply to help keep interest rates low. The Fed has already begun to discuss tapering off its purchases; as a result, we have seen a price adjustment in the bond market well in front of an actual announcement. This has pushed interest rates higher as the bond market prepares for a reduction in the demand for fixed-income securities. We believe the Fed will go to great lengths to be transparent and reduce purchases in a way that should have a gradual impact on both the economy and fixed-income markets. A final concern is inflation, which the quantitative easing program could fuel and would significantly decrease the value of fixed-income investments. The Fed is likely to take great pains to keep its stimulative policies in place as long as necessary. We don t expect inflation to accelerate significantly in the current environment where many risk-averse consumers and businesses have been hoarding cash rather than spending it. However, if inflation becomes an issue, we believe the Fed will be willing to let it run above the Fed s long-term 2.0% target as long as the unemployment rate remains high. As a result, we think investment planning should start with the assumption that inflation is likely to average 3.0% over the next 10 to 15 years. Higher inflation would not only negatively impact long-maturity fixed-income investments but also take a toll on investors who are positioned too conservatively as returns would fail to outpace inflation, resulting in an erosion of their purchasing power (decreasing what investors can buy with their returns). Rethinking your income strategy 3
Risks of reaching for yield Let s take a look at some of the risks investors may be unaware of regarding two investments they ve commonly been purchasing in their reach for yield: long-maturity fixed-income investments and higher-yielding equities. Duration matters for long-maturity To appreciate the potential effect of increasing interest rates on long-maturity fixed-income investments, investors need to understand duration. Duration is a measure of the sensitivity of a bond s price to a change in interest rates. It approximates the percentage change in a bond s price that would result from an instantaneous 1% interest-rate shift. For example, the price of a bond with a duration of five years would be expected to fall 5% for every 1% increase in market interest rates. The longer (higher) the duration, the more an investment s price is likely to fluctuate as interest rates rise and fall. Duration is especially important when it comes to longer-term fixed-income investments because they tend to have longer durations, and as a result, the impact of a rising-interest-rate environment is likely to be more pronounced on these securities. This is because the longer your exposure to a set of fixed interest payments, the greater your risk. Therefore, those fixed-income securities with the longest maturities are the ones that will probably be most negatively impacted should interest rates increase. For example, in the table below, a 10-year note with a 2.50% yield has a duration of 8.80 years. If interest rates moved from 2.50% to 3.50% (a 1% increase), you would expect the note s price to drop from $1,000 (par) to $916. If you continued to hold that bond to maturity, you would still get the $1,000 face value at maturity, but you would earn a below-market interest rate during that time. As you can see, the potential impact on shorter-term investments (the two-year and five-year notes), which have shorter durations, is less. Conversely, the probable affect on the 30-year bond, which has a much longer duration, is significantly greater. Higher-yielding equities may underperform Over the last few years, there has been a decent inverse correlation between U.S. Treasuries and higher-yielding equities. In other words, when 10-year-Treasury yields have risen, higher-yielding prices have fallen. However, if interest rates begin to move higher, income investors could face a double-whammy: Bond prices will likely fall and higher-yielding equities could underperform. Duration tends to increase with term If interest rates increase, the impact on prices is likely to be greater on longer-term investments. Estimated value after interest-rate change Yield Duration Par value +1.0% 1 +2.0% 1 +3.0% 1 30-year bond 3.50% 18.48 $1,000 $836 $708 $606 10-year note 2.50% 8.80 $1,000 $916 $840 $772 Five-year note 1.40% 4.81 $1,000 $953 $909 $867 Two-year note 0.35% 1.99 $1,000 $980 $961 $942 Table is for illustrative purposes only. Does not represent any specific investment. 1 Assumes an instantaneous parallel shift of the interest-rate curve. Source: Wells Fargo Advisors 4
We believe this is likely to occur because higher-yielding securities valuations appear to be stretched after several years of strong performance. On a forward price/earnings (P/E 2 ) basis, the highest-yielding sectors (all defensive 3 ) are trading at levels near their 10-year highs. If interest rates rise, the premium valuation awarded those sectors could be reduced as investors seek out equities with faster-growing earnings (in cyclical sectors like Information Technology and Consumer Discretionary) to capitalize on a growing economy. In their quest for yield, some investors appear to be buying securities based primarily on the dividend yield without considering the underlying risks. Certain classes of securities, such as mortgage REITs, business development companies (BDCs), and some master limited partnerships (MLPs), may employ a number of techniques and have a tax-advantaged corporate structure to deliver higher yields. Investors need to be sure they are comfortable with how their operating income is produced, the amount of leverage these companies employ, the exposure to commodity prices, and the many other factors that generate high single-digit or even double-digit yields in this environment. 2 The P/E ratio is a measure of how much investors are paying for a dollar of earnings. In general, the higher the ratio, the more expensive a stock is considered to be. A high ratio may indicate investors anticipate increased earnings in the future. 3 Defensive stocks tend to be less affected by changes in the business cycle, unlike cyclical stocks, which tend to be more affected by cycle changes. How does your portfolio look? If you ve constructed your portfolio with a focus on yield, you may find it: Lacks diversification Having a proper asset allocation (investment mix) that balances the returns and risk in a portfolio and can help provide stability during events that radically change the landscape and create extreme distress in global markets. Lacks liquidity Having liquidity can be valuable not just for short-term needs but for investment opportunities as well. Exhibits higher volatility Income assets are likely to act similarly during times of raising rates, and owning them may lead to increased fluctuation in a portfolio s value during these periods. Lacks exposure to growth Income-only portfolios are likely to underperform during better economic environments. Is susceptible to inflation Inflation is one of the most corrosive, long-term factors affecting the ability to build long-term wealth. Rethinking your income strategy 5
Repositioning your portfolio Given the prospects for an increasing-interest-rate environment, we think it is now time to take action. We believe a better strategy than searching for yield is to diversify into an asset allocation strategy designed to help you work toward your long-term financial goals. Wells Fargo Advisors provides nine strategic asset allocation models (see page 9), including six that have generating income as either a primary or secondary goal. Working with your Financial Advisor, you can determine which model may be right to use as the foundation for properly allocating your portfolio. Our strategy teams also provide sector recommendations that vary with the economic climate and can help you navigate the economic and stock-market cycles. In addition, our strategists provide recommended lists and thematic portfolios that cover the spectrum of sectors and investment objectives (see page 8). When repositioning your portfolio, take care to avoid over-allocating to short-term fixed-income, cash, or cash-alternative investments, which can be detrimental to your portfolio s overall health. Many investors, made fearful by past stock-market experiences, appear willing to park their money in these assets. However, as the chart below shows, these investments (represented here by the threemonth Treasury bill) currently provide scant, if any, returns. And there appears to be little likelihood of short-term interest rates changing in the foreseeable future. Even given today s low inflation rates, these assets currently offer a negative real yield. In other words, the potential impact on an investor s purchasing power remains significant. In addition, we caution that this strategy is potentially more costly than evident at first glance. Therefore, unless you have near-term liquidity needs, we would not overweight short-term fixed-income, cash or cash alternatives in the current environment. Three-month Treasury-bill yields Short-term investments, like the three-month Treasury bill, currently offer very little in returns. 7% 6% 5% 4% 3% 2% 1% 0% April 2006 April 2007 April 2008 April 2009 April 2010 April 2011 April 2012 April 2013-1% Source: Bloomberg and Wells Fargo Advisors 6
Addressing retirees unique income needs Generating income is particularly important to those in retirement. If you re retired, we recommend you: Focus on the diversification of your income sources If your portfolio contains an over-allocation to fixedincome investments with longer maturities/durations that you ve purchased in recent years to enhance yield, you should think about reallocating your portfolio. Reassess your asset allocation model As your needs and financial goals change, it is important that your investments and risk tolerance change as well. A regular review of your asset allocation model is important to help ensure your investments are aligned with your financial goals. Avoid chasing or becoming overly preoccupied with yield Be careful to maintain a total-return (price appreciation plus dividend or interest income) perspective because, when investing over the course of a long retirement, you will need both income and growth to fund future needs and combat inflation. A total-return perspective can provide increased opportunities to take advantage of the broader market s periodic preoccupation with select market factors or characteristics, such as yield. By investing based on both yield and appreciation considerations, you may have greater opportunities to increase and further diversify your income sources. Maintain a close eye on your income needs and related liquidity The risk of incurring substantial principal loss during a rising-rate environment is compounded by the potential need to liquidate certain holdings during these periods. However, you may be able to substantially reduce your potential principal loss if you: Are careful to match and adapt your spending habits with your income flows Can avoid forced liquidations by having: Sufficient liquidity in cash reserves or other assets Available credit Rethinking your income strategy 7
Building your portfolio s income allocation Wells Fargo Advisors can help construct the income portion of your allocation. We offer lists of recommended investments that you and your Financial Advisor can discuss in light of your investment strategy. In addition, we offer professionally managed advisory programs that may help meet your income needs. Those income-oriented lists and advisory programs include: Recommended investment lists: Diversified Stock Income Plan (DSIP): DSIP, which consists of approximately 75 companies, has been in existence for about 20 years. It is a preselected, regularly reviewed list of stocks with attractive yields, chosen because of the companies likelihood of consistently raising their annual dividends. The typical DSIP company is a mid- or large-capitalization company with a long history of operating successfully in good or bad economies. We believe that companies on the list are suitable for a wide variety of investors. High-Yield Equity Income: This is a relatively new list. It includes companies that pay notably higher dividends than the broader market (as measured by the S&P 500) with expectations of reasonable long-term capitalappreciation potential and reasonable risk. Relative to DSIP and the broader market, the companies on the list are generally riskier with potentially higher debt levels and dividend-payout ratios. Select Closed-End Funds by Asset Class: This list s objective is to identify attractive closed-end funds that meet a number of minimum criteria, such as a low valuation, expected stability of distribution, good performance potential given its exposure, no excessive leverage (if there is any) and good liquidity. The list includes funds that invest in numerous asset classes. Closed-end funds may be suitable for investors who are able to tolerate at least moderate risk. Professionally managed advisory programs: FundSource and Diversified Managed Accounts (DMA) Optimal Blends: These strategies utilize our long-term (10 to 15 years) strategic allocations. While these allocations are adjusted based on the changes in our Investment Strategy Committee s risk/return assumptions for each asset class, a basic intent is to maintain broad diversification and think in terms of wider market, economic and fixed-income cycles. Optimal Blends with Alternative Investments: Alternative investments incorporate assets and strategies with lower correlations in price movement compared to more traditional broad asset classes. The FundSource Standard with Alternatives Series and the stand-alone Alternatives Strategies are managed solutions available for investors seeking alternative risk-management tools. FundSource Global Opportunities: For investors seeking more dynamic asset allocation solutions, the FundSource Global Opportunities series features more tactical asset allocations designed to respond to assessed changes in market opportunities and risk (including interest-rate risk) both within and across asset classes. Compass Fixed Income Strategies: This program offers several fixed-income portfolios that may help reduce interest-rate risk. It has a tax-exempt portfolio offering a laddered maturity portfolio of short- to intermediate-term municipal bonds. A tax-exempt intermediate portfolio is also available that invests primarily in municipal bonds. For investors in taxable bonds, the program offers an intermediate taxable portfolio of government and corporate bonds. Compass Current Equity Income Portfolio: This program addresses the needs of investors seeking sustainable dividends, moderate dividend growth potential, and a yield that is higher than the current broad market average. 8
Creating your overall strategy To make the process of developing your overall investment strategy easier, Wells Fargo Advisors has crafted nine strategic models for asset allocation (shown below) that cover a wide range of objectives from conservative income to long-term growth. Your Financial Advisor can work with you to choose an allocation specifically addressing your situation and goals. Strategic asset allocation models Growth Growth & income Income Conservative Moderate Long term Mid-cap 2% Small-cap 2% 2% International 4% International Large-cap 2% 5% Cash alternatives 3% Cash alternatives Small-cap 4% REIT 3% Mid-cap 2% Emerging-market debt 4% 18% Mid-cap 4% Large-cap 10% High-yield 4% 25% Short-term International 4% Short-term taxable fixed taxable fixed REIT 3% income Large-cap 12% income Long-term taxable 4% Emerging-market debt 9% 31% 45% Intermediate REIT 3% Intermediate High-yield 7% taxable fixed taxable fixed income Emerging-market debt 12% income Emerging-market 5% International 5% Small-cap 4% Mid-cap 4% Conservative income Large-cap 10% 28% Intermediate taxable REIT 3% Emerging-market debt 5% High-yield 4% International 2% 15% Long-term taxable Conservative growth and income Commodities 4% Emerging-market 9% International 9% Small-cap 8% Mid-cap 10% 28% Large-cap Conservative growth 2% Commodities 3% Cash alternatives 10% Short-term taxable 2% Cash alternatives 8% Short-term taxable 14% Intermediate taxable 4% Long-term taxable 2% High-yield 2% REIT International 4% Long-term taxable 7% Commodities 2% Emerging-market 7% International 6% Moderate income Moderate growth 3% Cash alternatives 5% Short-term taxable Small-cap 6% 19% Intermediate taxable Mid-cap 8% 7% Long-term taxable 19% Large-cap 3% International 6% High-yield 6% Emerging-market debt 3% REIT Moderate growth and income Cash alternatives 2% Commodities 4% Emerging-market 12% International 12% Small-cap 14% Mid-cap 14% 28% Large-cap High-yield 9% Cash alternatives 3% Commodities 2% Emerging-market 8% International 7% Small-cap 10% Mid-cap 12% 3% Short-term taxable Commodities 4% 5% Intermediate taxable 2% Long-term taxable Emerging-market 15% 2% High-yield 2% REIT Long-term income 24% Large-cap Long-term growth and income 17% International 16% Small-cap 28% Large-cap 16% Mid-cap Long-term growth 6% International 3% Cash alternatives 6% Short-term taxable 25% Intermediate taxable 10% Long-term taxable 6% International 10% Intermediate taxable 3% Long-term taxable 3% International 8% High-yield 7% Emerging-market debt 3% REIT 2% Cash alternatives 2% REIT Investment objectives Growth. Emphasis is on potential capital appreciation. Growth and income. Balance in emphasis between potential capital appreciation and income. Income. Emphasis on achieving current income. Risk tolerance Conservative. The least risk for a given investment objective. Moderate. A higher degree of risk for the potential to receive higher returns. Long-term. The highest risk within a given investment objective. Rethinking your income strategy 9
Your next step: Contact your Financial Advisor Bottom line: We believe over-concentration to any one security, asset class or strategy in this case, searching for yield can potentially lead to heightened losses and increased risk, denying you the best chance to achieve your financial goals. Therefore, we recommend you build a portfolio that includes a variety of asset classes that work well together during various economic environments and is designed to help you achieve your long-term goals. Your Financial Advisor at Wells Fargo Advisors can review your portfolio and provide additional information about strategies we offer to help reposition your portfolio, if necessary, including our: u Strategic asset allocation models u Recommended investment lists u Advisory programs Your Financial Advisor can also discuss Wells Fargo Advisors Envision investment planning process, which helps you identify and prioritize your most important investment objectives. It takes into consideration what you have saved and how much you plan to save in the future and uses sophisticated statistical modeling to create an asset allocation for you. If you don t have a Financial Advisor with Wells Fargo Advisors, go to wellsfargoadvisors.com and use our Connect With Us Today locator tool to get in touch with one. 10
Disclosures and definitions Some information contained in this report was prepared by or obtained from sources that Wells Fargo Advisors believes to be reliable. Any market prices are only indications of market values and are subject to change. Wells Fargo Advisors may not offer direct investments into the products mentioned in this report. Diversification and asset allocation do not guarantee a profit or protect against loss in declining markets. While stocks generally have a greater potential return than government bonds and Treasury securities, they involve a higher degree of risk. Government bonds and Treasury bills, unlike stocks, are guaranteed as to payment of principal and interest by the U.S. government if held to maturity. Although Treasuries are considered free from credit risk, they are subject to other types of risks. These risks include interest rate risk, which may cause the underlying value of the bond to fluctuate inversely to a change in interest rates. Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging markets. Investing in securities involves certain risks, such as market risk if sold prior to maturity and credit risk, especially if investing in high-yield bonds, which have lower ratings and are subject to greater volatility. All investments may be worth less than original cost upon redemption or maturity.. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline of the value of your investment. Technology and Internet-related stocks, especially of smaller, lessseasoned companies, tend to be more volatile than the overall market. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional or debt securities. The prices of various commodities may fluctuate based on numerous factors, including changes in supply and demand relationships, weather, and acts of nature, agricultural conditions, international trade conditions, fiscal monetary, and exchange control programs, domestic and foreign political and economic events and policies, and changes in interest rates or sectors affecting a particular industry or commodity. Products that invest in commodities may employ more complex strategies which may expose investors to additional risks, including futures roll yield risk. There are special risks associated with an investment in real estate, including credit risk, interest rate fluctuations and the impact of varied economic conditions. An investment in Master Limited Partnership (MLP) units involves certain risks which differ from an investment in the securities of a corporation. Holders of MLP units have limited control and voting rights on matters affecting the partnership. In addition, there are certain tax risks associated with an investment in MLP units and conflicts of interest exist between common unit holders and the general partner, including those arising from incentive distribution payments. The risks associated with an MLP are outlined in the prospectus. You should carefully consider these risk factors before investing. Also, an MLP shareholder, i.e., a limited partner unit holder, receives a K-1 instead of a 1099. Investors should contact their tax accountant for further tax implications before investing in MLPs. Wells Fargo Advisors is not a legal or tax advisor. Investing in a Business Development Company (BDC) involves economic, credit and liquidity risks in addition to the special risks associated with investing in a portfolio of small and developing or financially troubled businesses. Each BDC may have its own unique risks that are outlined in the prospectus. These securities are not suitable for all investors and should not be purchased on the basis of yield alone. Advisory products are not designed for excessively traded or inactive accounts and may not be suitable for all investors. You should carefully review the Wells Fargo Advisory Disclosure document associated with each program for a full description of the services, including fees and expenses, offered with each specific product. Alternative income includes international, high yield, emerging-market debt and real estate investment trusts. Current yield (frequently referred to as yield) is the annual income an investment provides divided by its current market price. For example, a bond selling at par ($1,000) paying $100 annually in interest would have a 10% yield. However, if the bond s market price fell to $900, its yield would increase to approximately 11%. Cyclical stocks are typically those of companies that sell discretionary items that consumers can afford to buy more of in a booming economy and will cut back on during a recession. In other words, when the economy is doing well, cyclical investments tend to perform well. The opposite, of course, is true when the economy is doing poorly. Defensive investments, on the other hand, tend to be less affected by economic cycle changes. Duration can be used to estimate the percentage change in a bond s value that will result from a 1% change in interest rates. For example, a duration of four means that a 1% change in prevailing rates in a one-year period should shift the bond s price in the opposite direction by 4%. The longer (higher) the duration, the more the bond s price will fluctuate as interest rates rise and fall. High yield is noninvestment-grade securities (rated Ba1 or lower by Moody s and/or BB+ or lower by S&P). These investments are considered to be speculative and are subject to a higher degree of risk. Intermediate-term includes instruments that mature in six to 12 years. Long-term includes instruments whose maturities are greater than 12 years. Money supply is, as the name suggests, the amount of money in the economy and consists primarily of currency in circulation and deposits in checking and savings accounts. In the United States, Federal Reserve policy is the most important deciding factor in determining the money supply. Quantitative easing is a Fed strategy for increasing the money supply (adding liquidity) to help keep interest rates low and stimulate economic activity. In general, it involves Fed purchases of bonds from banks, providing them with money to lend to businesses and consumers. Real estate investment trusts (REITs) trade on the major exchanges and invest in real estate directly, either through properties or mortgages. Short-term includes instruments that mature in one to six years. Rethinking your income strategy 11
Stay informed Our strategists will be following all the latest developments and trends to determine their potential impact on the U.S. and global economy, the markets, and political events overseas. There are a number of ways to access our advice and commentary to stay informed about how developments may affect you financially. Talk to your Financial Advisor He or she can provide research and advice from Wells Fargo Advisors as well as review your current investment strategy and goals and help ensure that you are aligned with your long-term goals and/or prepared to act if anything should change. Visit us on Facebook and LinkedIn On our Facebook and LinkedIn pages, you ll find news and helpful information that can help you manage your money and reflect what s going on around us. Like us on Facebook and connect with us on LinkedIn. Commentary and analysis posted daily Be sure to visit our website for the latest market commentary and economic reports. There you ll find our top economic, market and investment strategists insights on what s happening today and how you might prepare for what s ahead. You ll also find videos, investment tools and other resources to help you stay fully informed. Go to wellsfargoadvisors.com/research This publication is designed to provide accurate and authoritative information regarding the subject matter covered. It is made available with the understanding that Wells Fargo Advisors is not engaged in rendering legal, accounting or tax-preparation services. If tax or legal advice is required, the services of a competent professional should be sought. Wells Fargo Advisors view is that investment decisions should be based on investment merit, not solely on tax considerations. However, the effects of taxes are a critical factor in achieving a desired after-tax return on your investment. The information provided is based on internal and external sources that are considered reliable; however, the accuracy of the information is not guaranteed. Specific questions on taxes as they relate to your situation should be directed to your tax advisor. Wells Fargo Advisors is a broker/dealer affiliate of Wells Fargo & Company; other broker/dealer affiliates of Wells Fargo & Company may have differing opinions than those expressed in this report. Contact your Financial Advisor if you would like copies of additional reports. Investment and Insurance Products: NOT FDIC Insured NO Bank Guarantee MAY Lose Value Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company. First Clearing, LLC is a registered broker-dealer and non-bank affiliate of Wells Fargo & Company. 2013 Wells Fargo Advisors, LLC. All rights reserved. 91837A-v1 0713-02965 0000591616 (Rev 00, 1 ea)