WHY? Abbot Downing Advisor Joins PagnatoKarp WHY HAVE I JOINED PAGNATOKARP? The financial services landscape has caused me to question the large integrated firm model. My inherent fiduciary responsibility demands that I strive to deliver the best available world class investment solutions in a fully open environment. To maximize the ability to provide independent, objective, and transparent advice, I have joined PagnatoKarp. - Stephen Berardi, CFA At PagnatoKarp, there is great flexibility in managing our firm as we see fit while keeping your interests first and foremost. The PagnatoKarp solution is an optimum way for me to deliver an unbiased service platform with a transparent view. PagnatoKarp is a privately owned company with no outside investors, and takes a long-term strategic focus in building the resources necessary to exceed the expectations of our client base. We reinvest in our business every year to meet the changing demands of our clients, and are not forced by a parent company to make shortterm decisions to meet profitability targets to the detriment of the client experience. Our co-founders and senior leadership team are actively engaged in client activities, which allows a direct link to truly understand the needs and feedback of our clients. Our senior leaders know the day-to-day of what is going on with clients which we believe results in greater connectivity to the ACTUAL client experience than a bigger firm. PagnatoKarp is solely focused on one business line: family wealth management. It is not subject to the noise of other business units which could negatively impact the management of our core business. PagnatoKarp provides a comprehensive and integrated approach to wealth management with a range of services well beyond the traditional asset manager. Our offering assists in both organizing and simplifying your financial life while providing full transparency and a comprehensive view of your liquid and non-liquid assets. Enhanced Services Include: On-line Client Vault to store and organize financial information In-house tax planning/preparation and estate planning services Aggregated reporting with net worth statements and reconciliation, and investment provider consolidation Concierge services WHAT IS NOT CHANGING? Objective, independent, and transparent wealth management advice Comprehensive integrated wealth offering with services ranging from portfolio management, tax and estate planning, capital sufficiency, and balance sheet preparation Customized investment portfolio design Proactive, high touch client service Same advisory fee schedule Page 1
WHO IS PAGNATOKARP? PagnatoKarp is a fee-only transparent family wealth advisory firm with $3 billion in assets under advisement. We specialize in meeting the unique needs of some of the nation s wealthiest individuals and their families with holistic and centralized resources. PagnatoKarp has sought to build a reputation for protecting clients' capital and providing custom strategies. The firm is 100% employee owned and has no outside capital or investors. Our Fiduciary Family Office solution includes: True Fiduciary Advisors and Services Fiduciary Wealth Management Tax Planning and Preparation Services Legal and Estate Planning Services Multi-Pronged Financial Planning Fiduciary Insurance Services Bill Payment & Private Banking Services Liability Management Family Counseling Philanthropic Planning Concierge and Travel Services In accordance with our True Fiduciary principles, PagnatoKarp adheres to the following practices: 1. Embrace the legal fiduciary obligation to place clients interests first 2. Deliver comprehensive financial planning 3. Provide fee-only advice 4. Do not accept commissions 5. Receive only one source of revenue: client fees 6. Provide transparency on portfolios and investments 7. Remain independent from any bank, broker dealer, or custodian 8. Measure client performance returns using independent third parties 9. Do not create products to sell or price any public securities 10. Do not hold any client assets, securities, or money Our WHY? PagnatoKarp s WHY? is to change the financial industry so that every American has the opportunity to receive pure, transparent, and objective advice from a True Fiduciary. Experienced Management. Over the past 25 years, PagnatoKarp has evolved from working for one of the largest private banking firms, to opening a private banking office in Washington, DC, to joining a hybrid Registered Investment Advisory (RIA) practice, and finally to founding the independent True Fiduciary and Fiduciary Family Office RIA that PagnatoKarp is today. PagnatoKarp has received leading industry rankings and accolades* including: Barron's Top 100 Advisors in America Barron's Top 100 Independent Advisors in America Forbes Top 30 Advisors in America Financial Times Top 300 Advisors Washingtonian Best Financial Advisors Northern Virginia Magazine Top Financial Planners Washington Business Journal Best Places To Work Virginia Business Magazine Best Places To Work *Award Disclaimers Page 2
Respected Commentators. We are frequent contributors to media outlets including CNBC, Fox Business News, Bloomberg, Barron's, Wall Street Journal, CNN, and Reuters. WHAT IS MY FIDUCIARY ROLE? The fiduciary duty is the highest standard of care, highlighted by good faith, loyalty, and trust. It requires me to put the interests of you, the client, ahead of my own. As a Fiduciary Business, PagnatoKarp has a legal obligation not to subordinate clients' interests to our own. There is great clarity in knowing that our obligation is to you and your best interests. Not only does it bring transparency to our role, it also provides reassurance and peace of mind to you as a client. Via the PagnatoKarp platform, we serve you best by attempting to eliminate the potential conflicts of interest typically found in traditional brokerage firms and wirehouses and putting your interests first. Period. PagnatoKarp s True Fiduciary Advisors are totally independent and supported in ways that enable us to view the financial lives of our clients more completely, more effectively, and without obstruction or conflict. Putting clients interests first is not just a catchy slogan. As a fiduciary, it is PagnatoKarp s legal obligation. The Presidential Study. It was determined through a Presidential Study that the overall cost in working with a fiduciary is lower than with a nonfiduciary. The White House Council of Economic Advisers (CEA) found conflicts of interest on average lead to: +1 percentage point lower annual returns on retirement savings. $17 billion of losses every year for America s families. At PagnatoKarp, being fiduciaries means your overall investment costs will be lower. WHAT ARE THE ADVANTAGES TO YOU? At PagnatoKarp, I have the resources, backing, scale, and support of a sophisticated national boutique firm behind me. Fiduciary Family Office Solution. Our staff will perform a thorough assessment of your needs ranging from estate and tax, to investment and planning, to travel and security, to family and philanthropic planning, to bill paying and private banking, all to provide you with time, security, and peace of mind. Customized Portfolio Construction. PagnatoKarp has agreements with numerous money managers, money management platforms, asset custodians, trading counterparties, and world-class aggregation and performance reporting tools. We can design a solution appropriate for your unique needs with access to investment vehicles and managers that maintain the highest level of institutional sophistication. Page 3
Private & Direct Investments. offerings include: Our investment Private equity & venture capital, working with best in class partners such as Warburg Pincus, Apollo, Cerberus, Khosla Ventures, among others Bridge loans & mezzanine debt Direct real estate investments Unique investment opportunities Fidelity Family Office. Through our partnership with the Fidelity Family Office, we have access to direct investment symposiums, client-to-client investing, foundation support, family mindshare, along with a litany of other resources shared amongst the wealthiest families in America. True Fiduciary 360. We offer a personalized, secure online portal that links all of your accounts to one centralized location that is accessible from anywhere, any time, and on any device, in a completely secure environment. Investment Costs. Our open source platform gives us flexibility to transact anywhere, with anyone. We can leverage the open market to create competition and obtain many bid/asks from the street which may result in better execution. We can transact directly with other institutions, bypassing trading desks and other third parties, inherently reducing transaction costs and improving execution. We ve established direct relationships with third party managers to bypass any platform expenses. Transparent View. All PagnatoKarp advisors are committed to a fiduciary relationship with their clients. This means providing you with a transparent view of the marketplace, unencumbered by the typical conflicts found in wirehouses, and putting your interests first is more than just a worthy ambition; it is our duty. A third-party custodian brings yet another level of clarity. With your investments in the hands of a third-party answerable only to you, you are only a click away from your money. There is great clarity in knowing that our #1 obligation is to you and your best interests. Not only does it bring transparency to our role, it also provides you, as a client, reassurance and peace of mind. No Commissions or Sales Charges. The financial industry is plagued with conflicts of interest, obscure disclosures, commissions and an overall lack of transparency. As a fiduciary for our clients, we do not receive commissions, sales charges, employ any soft dollar arrangements, or receive financial incentives for any investment selections or recommendations. We are compensated solely by our clients for the advice we provide. Open Source. PagnatoKarp has an open source model of financial service decision making that allows concurrent input of different perspectives, approaches and priorities, and differs from the more closed, centralized models of product distribution, single platform and uniform investment opinions. We are not bound by products or asset classes that may be lucrative to a firm or advisor. Wherever possible, we employ the best resources from the best independent sources. This includes research, technology, institutional investment managers, insurance, financial planning software, trust services, and even independent custodians and trading platforms. Competition. Prominent individuals and their families advocate and expect an open source model which fosters competition to help drive their costs down. PagnatoKarp s open source model encourages this competition and sharing of the various pricing, solutions, and services offered by the industry s brokerage firms, custodians and Page 4
vendors. By executing this open sourced model, we have the ability to deliver better investment solutions and pricing to our clients. Since the principal clearing and custodial firms know they are competing for our business, they are incented to deliver the highest quality service at the most competitive price and that s better for the client. Furthermore, since the 45 contra-trading firms know they are competing for advisor-ownedtrades, they too are incented to deliver the best service at the most competitive price. Unconflicted Access. Clients working with an advisor at traditional wirehouses and trust companies are often met with the restrictions imposed by their firms to offer preapproved or proprietary products. We do not operate this way. Instead, we look at the whole marketplace for investments and offer the best options to our clients - we are free to choose the best solution and price from among multiple options. In addition, unlike most Wall Street firms, we do not charge outside portfolio managers a listing fee to be included on the platform of available investments. This helps us attract the world s best asset managers for our clients. An Unbreakable Bond of Loyalty. For most advisors and clients, there exists the kind of relationship that our fiduciary agreement merely contractualizes. And yet, we think it s important to be clear: the nature of the relationship between us and you, our client, is like the relationship between doctor and patient or lawyer and client. WHERE WILL YOUR ASSETS BE SAFELY HELD? In the wake of recent volatility in the credit and stock markets, investors want to know whether their investments are in strong hands. We can give a simple and clear yes backed by enterprise level partnerships with the major custody and clearing firms in the market today. We are legal fiduciaries with a separation of power between who holds your assets and who advises you. PagnatoKarp is not a custodian and is forbidden to hold a single cent of clients assets. Choice of Strong, Independent Custodians. PagnatoKarp is not bound by in-house or legacy custodial relationships. Our partnerships have been made based on your best interests. With that in mind, PagnatoKarp has chosen to work with reliable, secure and independent firms that do not take balance sheet risk nor engage in unsecured lending. These traits are indicative of custodians who excelled during past financial crises. Your assets will not be held by PagnatoKarp advisors, but rather by a select number of institutional custodians, or an institutional custodian of your preference. Just as your portfolio is managed today, we will be the advisor of record and will have the authority (granted by you) to manage the assets, but no authority to remove any assets from your accounts (except for the debiting of advisory fees, per your authorization). Important Consideration, Frequently Overlooked. Many firms do not discuss the custodial side of the business. We use third-party custodians, which eliminates conflicts of interest and brings yet another level of transparency and security. In uncertain times, investors and advisors rely on strong custodians. One of the center points of the PagnatoKarp solution is the use of independent, third-party custodians for your assets. Page 5
HAS THE INVESTMENT PROCESS CHANGED? No. I will be able to do everything I did in the past and much more. I will continue to operate in an open source model with the entire industry competing for your business every day. Whether it is an unbiased view of research and due diligence, access to elite institutional money managers, portfolio construction, and sophisticated capital market capabilities, this move empowers me to do more for you. PagnatoKarp s Investment Committee utilizes a range of internal and external resources to assist in our investment process and portfolio construction. We do not believe that any one firm has the best resources, and many have inherent conflicts of interest. Our unbiased approach results in a comprehensive research effort to identify both niche opportunities and investment managers. I have always provided you with comprehensive wealth management services, tailored to your unique needs. The additional resources and services available at PagnatoKarp will allow me to enhance how I serve you. WILL I WORK WITH YOUR OTHER TRUSTED ADVISORS? Yes. As in the past, your outside advisors, such as attorney and accountant, are an integral part of the team. We will continue to encourage their involvement and execute upon their strategies. My move to PagnatoKarp enables me to establish a deeper relationship with your other trusted advisors. CAN NON-INVESTMENT RELATED SERVICES BE TRANSITIONED TO PAGNATOKARP? PagnatoKarp s entire practice is centered around performance, service, and an uncompromising drive to deliver value for you. If you have been pleased with non-investment offerings in the past, I believe you will be impressed with my new firm and its robust capabilities. IN SUMMARY At PagnatoKarp, we enhance and simplify our clients financial lives by providing the following: A comprehensive and integrated wealth management approach Implementation without conflicts An organizational structure that provides resources and governance to dynamically incorporate client feedback as our firm evolves Focus on creating customized financial plans Striving to exceed our clients expectations Some firms may exhibit one or two of these characteristics, but very few organizations, if any, can meet all that PagnatoKarp does. I thank you for the years of trust and confidence you have placed in me and look forward to the privilege of serving you and your family for years to come. With every good wish, Stephen Berardi, CFA Family Wealth Advisor PagnatoKarp PagnatoKarp 11951 Freedom Drive Suite 1260, Reston VA 20190 703.468.2700 pagnatokarp.com PagnatoKarp Partners, LLC is a registered investment advisor with the SEC. Page 6