Welcome to Cornerstone Revolution’s

September Webinar.• Today’s Guest Speaker:Dennis Gibb-President, Sweetwater

Investments, Inc.• If you haven’t done so already, please dial

1-800-610-4500, access code 4423916 for the audio portion of today’s presentation

• We will be starting in just a moment

Cornerstone RevolutionsMonthly Webinar Series

September 18, 2007

Guest Speaker-Dennis GibbSweetwater Investments, Inc.

Summer News• Cornerstone is moving the week of October 15- With the addition of

a new developer and two new Back-Office representatives ,we are growing up and out. We will send an email in a few weeks with the new address. You can view it today on our new Website as well.

• Cornerstone has entered into an alliance with SonicWall, producers of VPN software for remote users. Cornerstone customers will recognize a 20% discount.

• With growth there is demand and we have both, having said that our BackOffice pricing will be going up 17% on October 15. Existing customers will not be effected until their next renewal.

• Both Vista and the new SQL reports are close to release.

Dennis Gibb and

Sweetwater Investments, Inc.

Dennis has over 30 years with multiple personas in the investment industry. In addition to his senior roles at Morgan Stanley and Bear Sterns, Dennis has experience with fixed income sales, investment

banking and compliance.

Sweetwater was named one of the Top 100 Independent Investment Managers in

the US by Barron’s Magazine

A New Model for Advisor Compensation

Dennis GibbPresident

Sweetwater InvestmentsRedmond, WA

Four Methods of Advisor Compensation

• Assets under Management (AUM)

• Fee for Service

• Commission

• A combination of fees and commission

• The model had its origins in the Money Management Business

• Money Management is a very different business than what we do

The Truth about Money Management• High Operating leverage

• once costs are covered profits increase dramatically

• lose money on every account but make it up in volume

• Very commodity like

• dependant on performance

• constant pressure on fees

• difficult to separate from the crowd

• Big Money syndrome

• bigger money get more access to better information

• costs to be big are very high

Advisory Practice• Money Management

• Financial Planning

• Due diligence

• Hand Holding

• Consulting

The value of the last four is greater than the first one.

We often do not pay ourselves for what we really do.

What do we really sell?We only have two products:

Our Time

The Collective knowledge stuffed between our ears.

Both are terrible tyrants

The Tyranny of Time

Working days per year 222

Working hours per year at 10 hours/day 2,220

Revenue needed to generate $250,000

at 50% margin $500,000

Hourly rate to generate $250,000 $ 225.00

The Danger of AUMYour relationship with the client is dependant on investment performance

Client has $8 million in investments

You manage $2 million at 1%= $20,000

You have a bad year and you get fired

You lose the entire relationship

You act as a consultant to the entire $8 million at .375%

$8 million at .375% = $30,000- a $10,000 raise

If the manager you select has bad year they get fired not you

The Danger of AUM Part IIYour relationship with the client is very likely more than just investment Management

If the client asks you to look at his estate plan do you get paid?

Can you afford the time to do all the things clients ask and still perform?

If the client gets a lot of services for free they tend to demand more services not less.

Providing more services, requiring more time for the same money reduces profitability.

The solution is to find a way to be able to charge for what you actually do.

Class ofClass ofBusinessBusiness

Investment Investment ManagementManagement

Investment Investment ConsultingConsulting

Financial Financial planning/adviceplanning/advice

ServicesServices Discretionary Discretionary Management Management assetsassets

Due diligence of Due diligence of other managers, other managers, portfolio portfolio structuring for risk structuring for risk and reward, and reward, performance performance reporting, research reporting, research on investment on investment proposalsproposals

Delineation of goals Delineation of goals and objectives, and objectives, discussion of risk discussion of risk tolerance, tax tolerance, tax planning, insurance planning, insurance planning, hand planning, hand holdingholding

Form of Form of compensationcompensation AUMAUM

Retainer fee Retainer fee based on total based on total assets and assets and projected time projected time on caseon case

Retainer fee with Retainer fee with annual review feeannual review fee

Benefit to Benefit to ClientClient

Knowledge of Knowledge of manager and manager and immediacy of immediacy of contactcontact

Simplified life, Simplified life, objective inputobjective input

Retain optionalityRetain optionality

What is our model to overcome the problem?

What are the DrawbacksCan be messy to explain

Can be messy to administer

Requires you to track time

Requires you to confront clients about the amount of time they take

Requires you to be able to demonstrate the value of what you do

Could result in the loss of some clients

What are the AdvantagesGives you a chance to get more revenue per client

Get you out of the rat race of investment management

Makes your client more of a partner

Gives you a chance to provide more services to the client which usually equals increased retention

Align Firm revenue with actual service offerings

Questions ?To un-mute your phone, press the 6 key on

your phone . When complete press the 6 key again to mute.

Thank you See you next month!

InquiriesEric D. Duran- Senior Account Manager

Andrew Kehoe- Product Specialist503-968-7202

www.poweradvisortools.com