Introduction
This material is provided for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or to participate in any trading strategy, financial product, instrument, program or service. It is your responsibility to determine if and how to implement the VestWise™ program.
Park Avenue Securities LLC (“PAS”) and its affiliates, subsidiaries, agents, sub-agents and vendors, including those providing Information as defined below or providing technology platforms, workflow, software or services, disclaim any and all liability for the data, projections, forecasts, returns, reporting, recommendations and analysis (“Information”) herein including without limitation, any express or implied representations or warranties for the Information or errors contained in, or omissions from, the Information. PAS, and its affiliates, subsidiaries, agents, sub-agents and vendors shall not be liable for any loss or liability suffered by you resulting from the provision to you of the Information or your use or reliance in any way on the Information.
PAS is both a registered broker-dealer and investment adviser. PAS is a wholly owned subsidiary of The Guardian Insurance & Annuity Company, Inc. (GIAC). GIAC is a wholly owned subsidiary of The Guardian Life Insurance Company of America.
VestWise is an automated or digital (i.e., internet/web-based) investment solution available directly to individual investors through our website (www.vestwise.com). Through this automated program (“Program”), PAS makes available diversified investment strategies that are tailored to an individual’s risk profile and investment objectives.
The investment advice rendered under this Program is based upon information you submit via a web-based, electronic Risk Tolerance Questionnaire (“RTQ”). The RTQ elicits information about your financial circumstances, investment objectives, risk tolerance, and other relevant information relating to your account.
PAS is responsible for implementing the strategy in your VestWise account, as well as any reasonable restrictions you may impose.
For a full description of the VestWise program, please refer to the VestWise Wrap Fee Program Brochure.
Differences between a brokerage and an investment advisory relationship:
An advisory account may not be appropriate for low trade volume activity, if you have a long term buy-and-hold investment strategy, or if you would like to direct trading in your account. In these instances, a transaction-based brokerage account may be more appropriate. Trading activity and the costs and expenses associated with an investment product or an investment program, among other things, should be considered when deciding whether an advisory account is appropriate for you.
If you are looking for the following scenarios, a brokerage relationship may be right for you:
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You want an adviser to provide occasional advice and recommendations on certain investments and execute on your investment decisions;
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You plan to buy only a few securities and follow a buy-and-hold strategy over a long-time period without the need for ongoing advice from the advisor; and/or
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You wish to pay fees based on each transaction that you place and not for ongoing advice.
If you are looking for the following scenarios, an investment advisory relationship may be right for you:
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Discretionary management of your investment portfolio;
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Ongoing advice and/or investment services;
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Trading and rebalancing of your portfolio on a periodic basis; and
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An annual fee based that is based on the amount of assets managed and is not tied to the number or type of transactions in the account.
In some cases, an investment advisory relationship may cost you more than a brokerage relationship and vice versa.
Model Portfolio Recommendations:
PAS utilizes a risk tolerance questionnaire (“RTQ”) to determine an appropriate investment strategy for you. The RTQ has ten questions. VestWise uses an algorithm that scores your answers to the questionnaire and uses the score to determine your overall risk profile. Based on the risk profile generated by the RTQ, you are matched to an investment strategy (“Model Portfolio”) as indicated in the Investment Policy Statement (“IPS”). PAS believes the algorithm it uses indicates the most appropriate Model Portfolio for you, but other investment advisory programs may use different algorithms with different results. VestWise does not consider your broader financial situation or use any other information about you, such as other investments or your tax situation, to determine the assigned strategy. It is important to note that the VestWise program is not a comprehensive financial plan and the investment advice that is provided to you is targeted to meet the specific goals that you specify in your answers to the RTQ.
Throughout the life of your account, if you make any changes to your RTQ, the algorithm will also evaluate whether your account should be rebalanced and/or a different strategy should be recommended. It is important to note that in a taxable account, a rebalancing or different strategy may cause a taxable event.
Based on your RTQ, you will be matched to a Model Portfolio which corresponds to PAS standard investment objectives. There are four types of VestWise Model Portfolios: Strategic, Income, Global Opportunities and Fundamental, as described below. Each model uses index-tracking exchange traded funds (“ETFs”) as part of the model’s investment allocation. The models described below will each have variations of asset allocations based upon risk tolerance.
VestWise Model Portfolios:
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Strategic Model Portfolios –These portfolios are designed to provide exposure to a diversified allocation of ETFs that invest in stocks and bonds. These portfolios seek to provide capital growth, while mitigating equity volatility by incorporating bonds. These portfolios consist of seven models based on your risk tolerance ranging from very conservative to very aggressive.
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Income Model Portfolios – These portfolios are designed to provide exposure to a diversified allocation of ETFs that invest in stocks and bonds while maximizing income and providing potential for capital appreciation. These portfolios consist of seven models based on your risk tolerance ranging from very conservative to very aggressive.
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Global Opportunities Model Portfolios – These portfolios are designed for investors who seek to incorporate ETFs that invest in alternative investments into a traditional portfolio using ETFs. They typically include ETFs that invest in U.S. and international equity, and fixed income securities utilizing commodity-focused, long-short, option-writing and other alternative strategies. These portfolios consist of five models based on your risk tolerance ranging from conservative to aggressive.
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Fundamental Model Portfolios - These portfolios are designed for investors who seek to incorporate ETFs that invest in alternative investments into a traditional portfolio using ETFs. They typically include ETFs that invest in U.S. and international equity, and fixed income securities utilizing commodity-focused, long-short, option-writing and other alternative strategies. These portfolios consist of four models based on your risk tolerance ranging from conservative to aggressive.
General Risks of Investing:
Investing in securities involves risk of loss that you should be prepared to bear. You may experience loss in the value of your account due to market fluctuations. There is no guarantee that your investment objectives will be achieved by participating in VestWise. Prior to investing, you should read carefully a copy of the current prospectus for each security, where a prospectus is available, or other offering documents associated with the particular investment. The prospectus or offering documents contain information regarding the fees, expenses, investment objectives, investment techniques, and risks of each particular investment. The investment returns on your account will vary and there is no guarantee of positive results or protection against loss. No warranties or representations are made by PAS or Investment Adviser Representatives (“IARs”) concerning the benefits of participating in the VestWise program described in this Brochure.
PAS and its IARs do not provide legal or tax advice. If you have tax or legal questions, you should seek a qualified independent expert.
Depending on the types of securities you invest in, you may be subject to the following investment risks including, but not limited to:
ETF Risk: ETFs are subject to the following risks: (i) the market price of an ETF’s shares may trade above or below the net asset value; (ii) there may be an inactive trading market for an ETF; (iii) the ETF may employ an investment strategy that utilizes high leverage ratios; (iv) trading of an ETF’s shares may be halted, delisted, or suspended on the listing exchange; and (v) the ETF may fail to achieve close correlation with the index that it tracks.
Interest-rate Risk: Fluctuations in interest rates may cause investment prices to fluctuate. For example, when interest rates rise, yields on existing bonds become less attractive, causing their market values to decline.
Market Risk: The price of a security, bond or mutual fund may drop in reaction to tangible and intangible events and conditions. This type of risk is caused by external factors independent of a security’s particular underlying circumstances. For example, political, economic and social conditions may trigger market risks.
Inflation Risk: When any type of inflation is present, a dollar today will not buy as much as a dollar next year, because purchasing power is eroding at the rate of inflation.
Currency Risk: Overseas investments are subject to fluctuations in the value of the dollar against the currency of the investment’s originating country. This risk is also referred to as exchange rate risk.
Reinvestment Risk: This is the risk that future proceeds from investments may have to be reinvested at a potentially lower rate of return (i.e., interest rate). This primarily relates to fixed income securities.
Business Risk: These risks are associated with a particular industry or a particular company within an industry. For example, oil-drilling companies depend on discoveries of oil and then refining it, a lengthy process, before they can generate a profit. These companies carry a higher risk of profitability than an electric company, which generates its income from a steady stream of customers who buy electricity no matter what the economic environment is like.
Financial Risk: Excessive borrowing to finance the operations of a business increases the risk of loss if the company is unable to meet the terms of its loan obligations. During periods of financial stress, the inability to meet loan obligations may result in bankruptcy and/or a declining market value.
Liquidity Risk: When consistent with a client’s investment objectives, guidelines, restrictions and risk tolerances, client portfolios may be invested in illiquid securities, subject to applicable investment standards. Investing in an illiquid (i.e., difficult to trade) security may restrict the ability to dispose of investments in a timely fashion or at an advantageous price, which may limit the ability to take full advantage of market opportunities. Accounts may hold securities which are partnerships. Some partnerships are relatively liquid and may be either exchange listed or traded over-the-counter. However, most partnership securities are often illiquid and are subject to significantly less regulation than public investments.
Fixed Income Risks: Portfolios that invest in bonds and other fixed income securities are subject to certain risks, including but not limited to, interest rate risk, credit risk, prepayment risk and market risk, which could reduce the yield that an investor receives from his or her portfolio.
Foreign and Emerging Markets Risk: Investments in securities of foreign and emerging markets issuers involve different investment risks than those affecting obligations of U.S. issuers. Public information may be limited with respect to foreign and emerging markets issuers, and they may not be subject to uniform accounting, auditing and financial standards and requirements comparable to those applicable to U.S. companies. Additional risks include future political and economic developments, the possibility that a foreign jurisdiction might impose or charge withholding taxes on income payable with respect to foreign and emerging markets securities, and the possible adoption of foreign governmental restrictions such as exchange controls. In addition, foreign currency exchange rates may affect the value of securities in the portfolio.
High-yield Bond Risk: Investments in high-yielding, non-investment grade bonds involve higher risk than investment grade bonds. Adverse conditions may affect the issuer's ability to make timely interest and principal payments on these securities.
Structured Products Risk: These products often involve a significant amount of risk and should only be offered to clients who have carefully read and considered the product's offering documents, as their structure may be based on derivatives or other types of securities, which may be volatile. Structured products are intended to be “buy and hold” investments and are not liquid instruments.
Derivatives Risk: Derivatives are securities whose price is dependent upon or derived from one or more underlying asset. The derivative itself is a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. Derivatives may involve significant risks and are not suitable for everyone. Derivatives trading can be speculative in nature and carry substantial risk of loss, including the loss of principal.
Small/Mid Cap Risk: Stocks of small or mid-sized, emerging companies may have less liquidity than those of larger, established companies and may be subject to greater price volatility and risk than the overall stock market.
Diversification Risk: Investments that are concentrated in one or a few industries or sectors may involve more risk than more diversified investments, including the potential for greater volatility.
Security Selection and Asset Allocation Risk: Securities selected from a particular asset class (e.g., stocks, bonds, money market instruments) may experience unusual market volatility or may not perform as expected. An asset allocation program does not guarantee achievement of a client’s investment objective or protect against loss.
Real Estate Risk: Investment in real estate and real estate related assets is subject to the risk of adverse changes in national, state or local real estate conditions (resulting from, for example, oversupply of or reduced demand for space and changes in market rental rates); obsolescence of properties; changes in the availability, cost and terms of mortgage funds; and the impact of tax, environmental and other laws.
Fees and Charges related to investing Exchange Traded Funds (ETFs) and Money Market Mutual Funds:
Please refer to the VestWise Wrap Fee Program Brochure for an explanation of the fees and charges that will apply to your investments in Money Market Mutual Funds and ETFs.
Asset Allocation and Rebalancing:
Asset Allocation refers to how your investments are diversified across different asset classes, such as stocks, bonds, cash and alternative investments.
Rebalancing describes the discipline of selling assets and buying others to match the target weightings of an asset allocation model. Because assets increase and decrease in value over time, the percentage amounts of assets invested in each class will tend to vary from their original target weightings.
Performance of an asset class within a portfolio is dependent upon the allocation of securities within the asset class and the weighting or the percentage of the asset class within that portfolio. Potential for a portfolio’s loss is exacerbated in a downward trending market. A well-diversified portfolio may be less vulnerable in a falling market.
Asset allocation, diversification, and rebalancing do not assure a profit or protect against loss in a declining market.
Total Net Worth Disclosure.
VestWise’s Total Net Worth functionality allows you to enter asset and liability values associated with your financial holdings outside of the VestWise program. This data has been either directly provided by you or obtained by electronic feeds from your financial institutions or third-party sources. PAS, and their agents and employees do not guarantee the accuracy or completeness of the information provided by you or obtained through electronic feeds. Any assets, other than assets in your VestWise account(s) or other PAS investment advisory account(s), that are classified as Total Net Worth holdings are not managed by PAS or your IAR. PAS and your IAR do not provide investment advisory services of any kind with regard to such assets and will not charge an advisory fee on such holdings. The data that is input or received may indicate “current information,” which was provided by you or the financial institutions or other third-party sources as of the date and time noted. Current information, however, may reflect valuations obtained from an earlier date and time. Actual current valuations may be different, perhaps by a significant amount. Information, data, and valuations obtained from either from you or electronically from your financial institutions or third-party sources have not been verified. Hence, you should rely on your account statements and confirmations or other information provided directly by the financial institutions or third-party sources as the official record of current account and product information.
Glossary of Terms:
Asset: An item of economic value. An asset may be something can generate future cash flow or can be sold. An example of what an asset is can be a stock, bond or home.
Asset Allocation: Asset Allocation is a way to describe how a portfolio is divided or diversified among the universe of Asset Classes.
Asset Class: Asset Class is a term used to categorize assets. Asset Classes represent segments of the overall securities market, such as but not limited to U.S. equities, emerging market bonds, or commodities. If the security is comprised of other securities, such as in a mutual fund or exchange traded fund (ETF), the Asset Class or Classes is a weighted average of the individual securities contained within it.
Benchmark: A Benchmark is a feasible alternative to a portfolio, typically an asset class-based index, against which performance is measured.
Bond: A bond is a fixed income investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate.
Liability: Debt that is owed by a company or individual. Some examples of debt are a mortgage, car loan or student loan.
Market Value: Charts display the Market Values provided by the custodian, typically one day after each date reflected in the report. This may not reflect corrections to Market Value made after the date displayed and may exclude the effects of the transactions not posted by the custodian when the Market Values were generated. Market Value may not reflect the value that could be obtained in the market.
Monte Carlo: Monte Carlo simulations are used to model the probability of different outcomes in the investment process that cannot easily be predicted due to the intervention of random variables. Notably, simulations are based on the premise that financial markets are efficient. By using probability distributions, variables can have different probabilities of different outcomes occurring.
Portfolio: A portfolio is one or more securities bundled together for analysis.
Security: A security is any purchasable investment instrument, such as a stock or bond.
Standard Deviation: A measure of the extent to which observations in a series vary from the arithmetic mean of the series. The Standard Deviation when applied to the rate of return of an investment is a measure of historical volatility of the investment.
S&P 500®: S&P 500® is widely regarded as a benchmark or gauge of large-cap U.S. equities.
Stock: A stock (also known as "shares" and "equity) is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.
Treasury (T-bill): Treasury a short-dated government security, yielding no interest but issued at a discount on its redemption price.