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DUNPHY WEALTH MANAGEMENT

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DUNPHY WEALTH MANAGEMENT

INVESTMENT POLICY AGREEMENT (completed upon engagement)

 THE INVESTMENT RISK/REWARD RELATIONSHIP

Invested money may result in higher returns if it is subject to higher risk (volatility).  It is crucial that you as the investor come to terms with your personal risk tolerance so that a portfolio is created in accordance with your comfort level. Assuming at least some risk is the price you pay to make money. However, while the objective is to earn profits, we advise a sensible risk level relative to your short and long-term financial needs.

·         In general, the more risk you take the higher your returns will be over the long term.  A good blend of risk vs. return depends on not being unreasonably conservative or uncomfortably aggressive.

·         Diversification among different investments using mutual funds and Asset Allocation among different investment types, e.g. stocks, bonds, real estate, commodities/gold and cash, will reduce overall risk.

·         Some investments are more volatile (subject to bigger gains or losses) than others.  The more volatile the investment, the longer your time horizon should be (how long before you need the funds).

·         Taxes (for taxable accounts) and inflation can have a dramatic eroding effect on investment returns over time.  Bank certificates of deposit (CDs) can actually be high-risk since you may only break even over time after the impact of taxes and inflation.  Therefore, it is important to take as much risk over the long-term as investment return goals and time horizon allow.

 The following questionnaire assumes that the money you plan to invest will be used for a single purpose, such as retirement.  Please make a specific note on the final page if this is a multiple-purpose account.

1. Is this a tax-deferred or tax-free account such as an IRA, Roth IRA or Simple IRA account?    q  Yes    q  No
2. For taxable accounts, such as brokerage or trust accounts, what is your Federal marginal income tax bracket?

q  N/A    q  28% or lower (includes AMT)   q  33% or higher

3. I plan to start withdrawing my investment in:    q  4 years or less    q  10 years or more    q  Other: _________

4. Once withdrawals begin, they will be:    q  In a lump sum    q  Over at least 10 years    q  Other: ___________

5. Over the next five years, I expect my income to:    q  Decline    q  Stay about the same    q  Increase          

6. For this investment, I would feel most comfortable (check ONLY ONE):

q    A. Invested in cash and other safe, short-term investments (Conservative)

q    B. Invested in a mix of stock, bond and cash funds (Moderately Conservative to Moderately Aggressive)

q    C. Invested in stock funds to maximize my returns over time (Aggressive) 

q    D. Allowing DWM to select the best mix of investments at any one point in time (Aggressive)

7. For this investment purpose, this account makes up approximately what % of the total?    _________________ %

8. If less than 100%, the other accounts are invested:    q  Conservatively    q  Moderately    q  Aggressively

9. I am willing to accept some periods of short-term underperformance during market upturns in an effort to achieve superior long-term returns:    q  Yes (+1)    q  No (-1)

10. If this is a taxable account, I am willing to accept additional current long-term capital gains taxes if DWM believes this is necessary in an effort to achieve superior long-term returns:    q  Yes (+1)    q  No (-1)    q  N/A (0)

11. I realize there can be no guarantees, but one of my primary goals is safety of principal whereby my account will make positive returns in both up and down markets (Absolute Returns):    q  Yes (+1)    q  No (-1)

12. This account is either a Trust account or one that is primarily building up assets for a future lump-sum payment, such as college tuition or the purchase of a home.  As such, I either have an actual or implied fiduciary responsibility to have this account managed in a very standard, mainstream fashion:    q  Yes (-3)    q  No (+1)

13. I place a high degree of reliance on my investment advisor and am comfortable with active management including occasional market timing which may involve significant changes to my portfolio (in a taxable account, this will cause current long-term capital gains tax):    q  Yes (+1)    q  No (-1)

14. I prefer a more structured, predictable approach to investing that involves a set portfolio with periodic re-balancing that excludes all efforts at market timing, even if this means occasional periods of negative returns (Relative Returns):    q  Yes (-1)    q  No (+1)   (Note: If Question 13 was “Yes”, then this should be “No”)

15. I am comfortable riding out occasional severe market down-turns without my advisor (DWM) taking any significant special precautions since my investments will eventually recover and provide positive returns over the long-term:    q  Yes (-1)    q  No (+1)

Point score for items 9 -15: ______________ 

A positive score indicates a preference for Active Management while a negative score indicates a preference for a Structured Portfolio.  A score of one (1) or zero (0) should be reviewed with the Investment Manager.

16. How are you likely to respond to fluctuations in your investment value?

q       A. I am very concerned any time my investments lose value.  I check the prices of my holdings frequently, so that I can sell if they start to lose money. (Conservative)

q       B. Day-to-day market moves make me uncomfortable but I try not to overreact.  If my investment is down 5% over a full quarter, I am likely to sell for a better alternative.  (Moderately Conservative)

q       C. I realize there are lots of random day-to-day movements in the markets.  I focus more on long-term trends.  I usually monitor the performance of an investment for at least a year before making changes.  (Moderate to Moderately Aggressive). 

q       D. Even if poor market conditions resulted in fairly substantial losses in any given year, I would continue to follow a consistent, long-term investment plan to reach my goals.  I place a high degree of reliance on my investment advisor to help me achieve my long-term goals. (Moderately Aggressive to Aggressive)

 Acceptable Risk Level (Circle One)

For this investment purpose, which range of potential annual returns or losses (volatility) would be most acceptable to you?

These figures are based on the best and worst one-year periods for our model portfolios through 9/30/05.  Actual returns differed due to active management and/or re-balancing.  

Return Goal (Circle One)

Which level of potential outcomes would be most acceptable given an initial investment of $10,000?

These figures are pre-tax, net of a one-percent management fee and based on our model portfolios for the ten year period ended 9/30/05.  Actual results will differ due to active management based on the best and worst one-year periods for our model portfolios through 9/30/05.  Actual returns will differ due to active management and/or re-balancing.  Past performance does not guarantee future results.  

17. ONLY if you selected an Aggressive Risk Level, please choose one of the following (check ONLY ONE):

q       A. I am comfortable with an Aggressive Risk Level, since I trust my advisor (DWM) to use an active management style in an effort to protect my account during any severe market downturns.

q       B. I want a more standard, mainstream, structured management style that will allow my account to benefit most from the periodic rebalancing of my investments.  I understand that these benefits will be greatly reduced with an Aggressive portfolio that utilizes only equity mutual funds or stocks.

q       C. I need more information and would like to discuss these options before making a choice.

¨ A.       Use this account to complete my total portfolio asset allocation (using comprehensive management). I will provide   

                periodic updates of investments managed elsewhere.

¨  B.    ____________________________________________________________________________________________

Type of Account(s):    q  Brokerage/Trust    q  Retirement Plan (IRA, 401(k), etc.)    q  Other: _________________ 

Investment Management Style:    q  Active Management    q  Structured Portfolio    q  Comprehensive 

Risk/Return Level:    q  Aggressive  q  Moderately Aggressive  q  Moderate  q  Mod. Conservative  q  Conservative      

 10/07

Sendmail to sandy@dunphywm.com
Last modified: 10/26/07