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A Letter from our Chief Investment Officer

I began working for Palisades Hudson in 2002, and I have seen our firm’s investment approach develop and adapt to the dramatic changes in the financial markets since I arrived. Yet in that time, we have never deviated from our core principles: maintaining diversification, staying disciplined, protecting capital, and focusing on the long term.

At Palisades Hudson, we customize each client’s portfolio based on his or her financial goals and risk tolerance. An investment strategy for a young investor beginning to build a portfolio may not be appropriate for a mature investor whose accumulated wealth must support a couple throughout retirement. Also, some investors are more comfortable, or less comfortable, with significant exposure to the stock market. While we do not recommend stock-heavy portfolios to all clients, we do recommend that all clients - except those with the shortest time horizons - have at least some exposure to stocks.

Once we understand a new client’s goals and risk tolerance, we work with him or her to develop an appropriate long-term asset allocation (a target mixture of stocks, bonds, cash, alternative investments, etc.). If requested, we then manage the client’s portfolio according to that asset allocation over the long term. As markets fluctuate, we rebalance client portfolios back to their targets by selling investments that have overachieved and buying investments that have underperformed. We aim to continually buy low and sell high.

Palisades Hudson uses a combination of academic wisdom that has stood the test of time (including the findings of economists such as Harry Markowitz and professors such as Eugene Fama and Kenneth French) and real-world practical knowledge that we have gained from managing client portfolios. We do not attempt to time the markets or to invest based on short-term market movements. Our clients’ portfolios typically consist of a mix of mutual funds, exchange traded funds and other diversified investment vehicles. We use separately managed accounts, private equity and other nonpublic investment vehicles when appropriate, and we do everything we can to keep fees and expenses, which can act as a significant drag on returns over the long term, to a minimum.

We are independent and objective advisers, not salespeople. We are not paid to sell products. We are only compensated by our clients. Our goal is to help our clients grow their portfolios, while managing risk to the best of our abilities. Our other areas of knowledge and experience as financial planners, which include tax, retirement planning, insurance and estate planning, add to our capabilities and allow us to understand the impact our investment decisions will have on our clients’ overall financial position.

Our portfolio managers do not have hundreds of clients each. At the beginning of 2012, we managed over $1 billion for less than 100 families. By keeping our ratio of advisers to clients low, we ensure that all our clients receive the full, personalized service they require and deserve. We aim to provide the same level of excellent service to each and every one of our clients.

If you have any questions, please feel free to contact me or one of our client service managers.

Paul Jacobs, CFP®, EA