From: John Gordon-Retirement Committee
Subject: Follow-up questions from original proposals
Date: April 25, 2005
As you know retirement benefits is something very new to the committee and I. After reviewing your proposal we had some questions that we hope you could answer which would enable us to make a decision. Please answer these questions to the best of your ability and feel free to elaborate if needed. Please answer all questions pertaining to the $300,000 which we will provide to the company chosen. As you understand the retirement program will be two fold, in that there will be both a program investment of $300,000 plus any monies that individual participants would like to invest on his/her own. Please answer questions in reference to both areas of investment and please specify.
1. Using the initial $300,000 and using a formula of 60% stock and 40% bond investment, please outline the annual commission rate, service charges, and any other expenses we might incur.
The “commission” is a flat fee charged as a percentage of the total assets in the account. Up to $500,000 in total assets, this annual fee is 2%. If there was a zero growth rate in the asset base during the first year, the annual investment fee would equal $6000. However, as the historical performance of the proposed portfolio has outperformed the S&P 500, an all-stock index, by over 3% annually over both the last 10 and 20 years, the account would have netted a nearly 1% out-performance over the S&P 500, after all fees and expenses, while only exposing 60% of the portfolio to the stock market. Again, our discipline is based upon providing a competitive rate of return while mitigating the up and down volatility of the overall market. The only other fee that is involved in this account is a $150 annual account maintenance fee, which will be waived when the total assets exceed $500,000. Finally, there is a ¼% reduction in the annual fee at three different “breakpoints”: $500,000, $1 million, and $2 million. Thus, the annual investment fee would drop to 1.75% when the assets exceed $500,000, 1.5% at $1 million, and 1.25% at $2 million.
2. If a broker is used by your firm does their commission come from the commission collected by your company or is there an additional charge?
It is my responsibility to recommend and purchase the securities or investment platform for your account. There are no additional charges to the ones detailed above. As a Series 7 and 63 licensed individual, I do not require the services of any outside brokers or agents to implement recommendations that have been accepted by my clients.
3. If your firm uses a broker what role would he/she play in this retirement plan?
4. What person in your firm would be handling our retirement program?
The Watts Group, of which I am the managing partner, would personally handle all operational, advisory, and performance reporting needs.
5. As I stated in earlier correspondence and discussed with you at a prior meeting, would your firm be willing to meet with our group annually and sponsor a breakfast meeting in which there would be time allotted to address the whole group ad also meet with individual members regarding their investment choices?
Yes, we welcome the opportunity to report upon on performance, answer questions, and provide individual advice to the plan participants. I also have no problem provide financial sponsorship of a breakfast or similar event.
6. Could your firm meet with our retirement committee quarterly?
We can and will. We meet with each of our clients on a quarterly basis for performance reviews, and obviously your plan would be no exception.
7. What are you hours of operation and does you firm have the ability to answer individual investment questions after normal working hours which will include evenings and weekends?
Our office hours are Monday through Friday, 8 am to 4:30 pm . All clients have access to both our online account services, which provides the same account information that I can see at my office desk to my clients at their home or place of business. It also allows for clients to reallocate their holdings if desired. For the participant (employee contribution) plan, there is also a toll free 24 hour phone number that can be used for the same purpose.