Schedule E- Personalized Distribution Strategy Disclosure Statement
The Personalized Distribution Strategy (PDS) consists of two elements: an actively managed cash liquidity reserve (a money market fund) and a portfolio invested in the Brinker Capital asset allocation strategy (“the Investment Portfolio”) as set forth in the Questionnaire Summary of Client’s Investment Advisory Agreement.
Client determines the amount of each monthly distribution. The initial cash reserve will equal up to 24 months of distributions. Accordingly, the amount in the cash reserve will vary depending upon the monthly distribution amount specified by Client. All interest and dividends on the Investment Portfolio will be swept into the cash reserve.
As the cash reserve is depleted by distributions, Brinker will liquidate the Investment Portfolio and replenish the cash reserve. The timing of such liquidations will be based upon Brinker’s analysis of positive technical trends in the market, with a view to avoiding significant liquidations in a “down” market. Brinker will generally employ the following methodology in replenishing the cash reserve:
During Portfolio Reallocations:
•Evaluate the markets to determine how much to replenish based on the strength or weakness of the market at the time of the reallocation and the Client’s target distribution rate.
•If the cash reserve has fallen below six months’ distributions, Brinker will generally replenish the reserve back to at least six months of distributions, regardless of market conditions, and may increase the reserve to more than six months’ distributions if technical trends support creating a larger cash reserve.
Between Portfolio Reallocations:
At any time the cash reserve is depleted, Brinker will generally replenish the reserve back to a minimum of six months’ distributions and may increase the cash reserve by more if technical trends support creating a larger cash reserve.
Brinker will provide Client with quarterly reports which detail:
•Withdrawals over the past 12 months.
•Distribution Stability – the estimated number of years which the current level of stable assets would support, given the current annual distribution.
•Probability of Client’s account being depleted, taking into consideration the current distribution rate and current market value, and a comparison to the original projection.
With the PDS feature, Client may start, stop or modify a scheduled distribution or take additional ad hoc distributions at any time, upon written request to Brinker. Such requests will not terminate the PDS feature.
The fee for the PDS feature is an additional 0.10% of net asset value which will be added to the standard Brinker fee. The fee will be charged on Client’s entire account, including the cash reserve portion. Client may elect to terminate the PDS feature at any time on 5 days written notice to Brinker.
Risks Associated with PDS
Brinker has provided Client with an estimate for the number of years their portfolio is likely to last with their requested distribution rate based on a Monte Carlo simulation, using 50% and 90% confidence levels, as set forth in the proposal provided to Client. The return and risk information used in the projection represent a blended portfolio of major asset classes which approximates the asset allocation of the recommended Investment Strategy. Asset class return, standard deviation, and correlation data are forward looking estimates. There can be no assurance that the account will achieve such returns or that Client’s assets will be sufficient to fund distributions for the projected period.
If the distribution amount or initial account value is more or less than the amount(s) assumed in the proposal, the percentage of assets allocated to the cash reserve will be different than reflected in the proposal, which will impact the period that assets are projected to last based upon the specified distribution rate.
There can be no assurance that Brinker’s methodology will avoid liquidation of Client’s investment account during “down” market cycles or that such liquidations will occur at the most optimal time.
The larger the percentage of the account allocated to equities, the greater the volatility in account performance, which will impact the duration of the account assets. An account utilizing the PDS feature will likely underperform relative to a full investment strategy if the market generally rises during the projected distribution period as the account will have lower exposure to positive market returns.