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White paper sent to Wells Fargo's wealthiest clients,. Subject: Asset Allocation strategies

White paper sent to Wells Fargo's wealthiest clients,. Subject: Asset Allocation strategies

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White paper for WFB Private Clients White paper for WFB Private Clients Document Transcript

  • Special ReportGoals-Based Asset AllocationA Personal Approach to Investment StrategyJanuary 2007
  • Goals-Based Asset AllocationA Personal Approach to Investment Strategy Prepared by: Table of Contents Ronald Florance, CFA Asset Allocation—A Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Director of Asset Allocation & Strategy Prudent Efficient Frontiers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Editorial Review: Hypothetical Goal: Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Hypothetical Goal: Vacation Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Dean A. Junkans, CFA Hypothetical Goal: Philanthropic Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . .4 PCS Chief Investment Officer Hypothetical Goal: Wonderful Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Anne Symanovich Goals-Based Optimization and Asset Allocation . . . . . . . . . . . . . . . . . . . . . . . . . .7 Senior Analyst January 2007
  • Goals-Based Asset AllocationA Personal Approach to Investment StrategyAsset allocation is the cornerstone of sound investment strategy. Unfortunately, too many times, the asset allocationprocess involves complicated risk analysis with little concern for your goals or real investment requirements. Intraditional asset allocation, risk is measured by annualized standard deviation, though most investors do not definepersonal investment risk in this way. For that reason, standard deviation is not always a good measure of an investor’sintuitive risk tolerance. An asset allocation approach solely based on standard deviation may lead to inappropriateinvestment strategies because it fails to take an investor’s unique goals into consideration. A goals-based approach torisk tolerance can lead to investment strategies that are better suited to your specific wealth goals and behavioralfinance risk tolerances.1Traditional asset allocation is based on asset class optimiza- achieve tangible goals, such as paying for children’s education,tion. It asks the question: how can different asset classes be making charitable contributions, or funding retirement.combined to make the return-to-risk relationship as favorable Looking at the greater picture, which includes your wealthas possible? Note that there is no reference to client goals. objectives and goals-based risk tolerance, can lead to a muchA goals-based approach takes into account a client’s unique more satisfying asset allocation and investment strategy.definition of risk, required return, and success. An investor’sbroader satisfaction is based on more than the return/risk Asset Allocation—A Reviewrelationship. Asset allocation is the process of combining differentThis report takes a different approach. We want to use the investment vehicles into a portfolio that addresses ansophisticated science of Modern Portfolio Theory and investor’s risk and return requirements. Traditional assetmathematical optimization, but within a context that is allocation involves determining an investor’s risk tolerance,focused on your unique investment goals. At Wells Fargo and then—based on that—finding the investment mix thatPrivate Client Services (PCS), we take a client-centric or has the greatest potential for return. This is done through angoals-based approach to developing your investment optimization process, which maximizes the return-to-riskstrategy. By focusing on your investment goals, we can create relationship. Let’s review the fundamentals of asset allocationan investment strategy tailored to your specific wealth needs. before addressing goals-based vs. risk-based optimization.Identifying desired return, minimum acceptable return, andinvestment time frame leads to an asset allocation designed The asset allocation process starts with capital marketfor your financial goals with a more realistic risk tolerance than assumptions for each asset class that is available in yourtraditional standard deviation analysis. investable universe. These assumptions are not intended to predict the future but rather, to put in perspective realisticThis process relies on you, the investor, being able to articulate expectations of potential investment risk and return traits.the real needs you have for your investment portfolio. The capital market assumptions include hypothetical return,Satisfaction generally does not come from simply maximizing hypothetical risk, and correlation. Return is measured asreturn or minimizing risk. A study of behavioral finance annualized total return, with risk measured by annualizedrevealed that investors are not focused on statistics to define standard deviation of returns. The correlations measure howinvestment satisfaction.1 In fact, few clients articulate risk in much diversification you get by adding a specific assetterms of annualized standard deviations. Investors tend to class to the existing mix. A low correlation helps to addthink of risk in terms of minimum wealth level or probability of diversification and reduce total portfolio risk.losing money. True satisfaction comes from having a portfolio1 Wells Fargo Special Report, Asset Allocation for Real World Investors, 2006 Goals-Based Asset Allocation—A Personal Approach to Investment Strategy | 1
  • The Wells Fargo PCS Asset Allocation Team has developed a Prudent Efficient Frontiersset of capital market assumptions. Below is a table that high- Each of the two efficient frontiers represents a differentlights our multiple market-cycle (10–15 years) expectations for investable universe. The more diverse the universe, the betterselected asset classes. the risk/return tradeoffs available to the investor. Additionally,Selected Capital Market Assumptions different clients have other efficient frontiers due to the unique restrictions or constraints they have put on their Hypothetical Risk investment portfolios. These restrictions may be cash Hypothetical (Standard Sharpe requirements, concentrated stock holdings, social investing Asset Class Return Deviation [%]) Ratio* requirements, or other investment concerns. Our two efficient Inflation 2.75 — — frontiers represent portfolios with and without alternative Intermediate-Term 5.00 5.50 0.32 investments,2 which are defined as hedge funds,3 private Taxable Bonds equity, real estate, and commodities. Your specific efficient Long-Term Taxable Bonds 5.75 8.25 0.30 frontier will be different, depending on the restrictions that you require. We call this a “prudent efficient frontier.” U.S. Large Cap Core 8.75 15.00 0.37 International Developed 9.00 15.50 0.37 Now that we have established an efficient frontier, we need to Markets Equity determine where your appropriate portfolio lies along this Commodities 8.75 14.50 0.38 frontier. The risk-based approach uses a risk-tolerance questionnaire designed to assess your attitudes toward risk.* The Sharpe ratio is a measure of risk-adjusted returns: The profilers come in many forms, but generally they include hypothetical return – hypothetical risk-free rate 10-15 questions addressing your attitude toward capital loss, hypothetical standard deviation volatility, and liquidity needs. Your responses are scored on aSource: Wells Fargo PCS, 12/06 risk-tolerance scale, and you are assigned a risk range, defined by annualized standard deviation of returns.By using an optimization process, we can combine these Efficient Frontier Analysisasset classes into “efficient portfolios.” Efficiency is definedas maximizing hypothetical return, given each level of 10 Two-Asset Groupshypothetical risk. The set of these portfolios along the risk Four-Asset Groupsspectrum represent the efficient frontier. The chart below 9shows the two efficient frontiers that Wells Fargo PCS uses for 8developing asset allocation strategies. Return (%)Efficient Frontier Analysis 7 10 6 Two-Asset Groups Four-Asset Groups 9 5 8 4 4 6 8 10 12 14 16Return (%) 7 Standard Deviation (%) Source: Wells Fargo PCS, 12/06 6 On the efficient frontier above, your sample risk tolerance 5 range is highlighted. Your optimal strategic asset allocation is generally represented by the portfolio that falls in the middle 4 4 6 8 10 12 14 16 of this risk range. While the risk-based optimization approach Standard Deviation (%) is very effective in maximizing the risk-return relationship, itSource: Wells Fargo PCS, 12/06 may not address your specific investment goals or goals- based risk tolerance. Interestingly, many investors have a significant disconnect between their attitudes toward risk and the return requirements of their investment portfolios.2 Some alternative investments may be available for pre-qualified investors only.3 Hedge funds are available for accredited investors only. Goals-Based Asset Allocation—A Personal Approach to Investment Strategy | 2
  • One of the biggest problems facing investors is emotional risk. Today, the portfolio is worth $160,000, and your asset allocation is:When things go bad, investors often make short-term Original Portfoliodecisions that can be detrimental to the long-term success ofthe portfolio. When markets go down because of short-term International Emerging-Marketstrading reactions, some investors sell and wait for the rebound. Equity 5%This is classic market timing of selling low and buying high. On Internationalthe flip side, investors have been known to pile assets into the Developed-Markets Equity 20%”theme du jour” for fear of missing the party, while knowing U.S. Large Cap 55%that all rational valuation measures tell them not to. Because U.S. Small Cap 8%this usually occurs just before a very painful correction,investors end up buying high and selling low. The goals-based U.S. Mid Cap 12%approach reduces the chance that short-term emotions willderail your long-term strategy because it focuses on long-term Source: Wells Fargo PCS, 12/06goals rather than short-term market swings.By using a goals-based approach, you can reduce the chances In taking a goals-based approach to developing your investmentof this disconnect between risk tolerance, potential invest- strategy, a disconnect between the risk you are taking and thement return, and investment goals. Following are hypothetical risk you need to take becomes obvious. You have stated thatscenarios that use a goals-based optimization approach to this portfolio’s value needs to be $200,000 in four years. Givendevelop asset allocation and investment strategies. its current value of $160,000, the required annual rate of return to achieve your goal is about 5.75%. You also noted that your minimum acceptable return is 0%, or no loss of principal.Hypothetical Goal: Education Using our efficient frontier chart below, you see that you areYour daughter has just started her freshman year in high taking much more risk than is necessary to achieve your goal.school, reminding you that her college tuition bills will start in Why is this bad? Because risk has two sides: an upside and ajust four years. You have been saving and investing in a 529 downside. More risk means more chance for both. If youplan in anticipation of this responsibility. In speaking with your experience downside risk in the next four years, there is notfinancial professional and planner, you have determined that enough time to recover the losses before your daughter startsyou will need about $200,000 in four years to cover her total college. Why take unnecessary risk?college costs. Efficient Frontier AnalysisYou’re a long-time investor and are comfortable with a 10moderately high level of risk in your investment portfolios. Original PortfolioIn the past few years, the markets have performed well, 9increasing the value of your riskier investments. You would liketo achieve the $200,000 value, but don’t want to lose a lot of 8money, as you don’t have much time to recoup losses. You Return (%)also know that any shortfall at this point can be addressed 7 Risk-Basedthrough student loans. 6 Suggested PortfolioInvestment Goal: Education Education Goal-Based 5 Stated Risk Tolerance High Goals-Based Risk Requirement Low 4 4 6 8 10 12 14 16 Required Return 5.75% Standard Deviation (%) Minimum Acceptable Return 0.00% Source: Wells Fargo PCS, 12/06 Investment Time Frame 4–8 years The risk of a portfolio designed with the potential return goal of 5.75% is significantly lower than the current risk in your portfolio, and has an average expected return in line with the $200,000 goal. Because of the lower level of risk of this portfolio, there is less of a chance of falling below your minimum acceptable return. Goals-Based Asset Allocation—A Personal Approach to Investment Strategy | 3
  • By optimizing for your goal, we are able to develop the To achieve your goal of $300,000, you’ll need about 13.50% ofasset allocation below, which is designed to achieve your annual return. Our efficient frontier chart below shows thatinvestment objective, while reducing the chance of failure this is an extremely ambitious return goal for a portfolio,defined by your goals-based risk tolerance. This is the power especially with the relatively short investment time frame.of goals-based optimization. Though a portfolio may achieve this return level in some years, requiring this return year after year is probablyEducation Goal-Based Suggestion unreasonable. There is a good chance that a portfolio will not High-Yield Bonds 8% U.S. Large Cap 11% grow to the required size. In this case, you need to re-evaluate U.S. Mid Cap 2% your goal. Adjustments can be made to either the size of the Long-Term Bonds 12% U.S. Small Cap 2% International cabin, or the timing of the construction. Either approach can Developed-Markets reduce the required return to the portfolio. The goals-based Equity 4% International approach highlights how realistic the goal is in relation to the Emerging-Markets Equity 1% investment opportunities available. Intermediate-Term Bonds 45% Short-Term Bonds 15% Efficient Frontier Analysis 14 Goal-Based RequirementSource: Wells Fargo PCS, 12/06 13 Two-Asset Groups 12 Four-Asset GroupsAll portfolios have uncertainty. For this reason, you need to 11meet with your financial professional regularly to review and 10monitor your portfolio’s actual performance, any change in 9your goals, and rebalancing actions that are required. 8 Return (%) 7Hypothetical Goal: Vacation Home 6You spent many happy days camping out in a tent in the 5mountains as a child. When you retire you’d like to relive the 4 4 6 8 10 12 14 16experience, but with a more substantial kind of lodging—a Standard Deviation (%)vacation cabin. You estimate that in six years it will cost about Source: Wells Fargo PCS, 12/06$300,000 to construct a comfortable cabin on a piece of landthat’s been in your family for a long time. You have $140,000set aside so far. You don’t need the money until you start Hypothetical Goal: Philanthropic Distributionsconstruction, so you can tolerate illiquidity and short-term Your family has achieved financial success and you wish toloss. This indicates an above-average risk tolerance. How share your good fortune through philanthropic activities. Youshould you invest your $140,000? have set up a family foundation with $5 million. The goal is toInvestment Goal: Vacation Home maintain distributions and expenses equal to 5% of the market value every year, in perpetuity. You want your family to Stated Risk Tolerance Average enjoy the benefits and share in the responsibilities of wealth Goals-Based Risk Requirement High management for generations to come, and the family foundation is a wonderful vehicle to achieve your wealth Required Return 13.50% planning goals. Minimum Acceptable Return 13.50% Because the assets placed in the foundation are for charitable Investment Time Frame 6 years causes, you don’t want to take much investment risk with this portfolio. Your minimum acceptable return is 5%, which will cover the annual distributions from the foundation. A return below that level would cause concern. Goals-Based Asset Allocation—A Personal Approach to Investment Strategy | 4
  • You have the money invested in a lower-risk allocation as Philanthropic Goal-Based Suggestionshown below: Real Estate— Hedge Funds— Public REITs 2.5%Original Portfolio Aggressive** 3% Real Estate— Hedge Funds— Private REITs* 2.5% Conservative** 2% High-Yield Bonds 6% Private Equity* 2% U.S. Large Cap 21% U.S. Large Cap 27% Long-Term Bonds 9% Commodities 3% U.S. Mid Cap 5% High-Yield Bonds 4% Long-Term Bonds 3% U.S. Mid Cap 5% U.S. Small Cap 3% U.S. Small Cap 4% Intermediate-Term International Bonds 37% Developed-Markets International Equity 8% Intermediate-Term Developed-Markets Bonds 20% Equity 15% International Emerging-Markets Short-Term Bonds 3% International Short-Term Bonds 9% Equity 2% Emerging-Markets Equity 4%Source: Wells Fargo PCS, 12/06 * Some alternative investments may be available for pre-qualified investors only.As our efficient frontier chart to the right indicates, the **Hedge funds are available for accredited investors only.hypothetical return of this portfolio is projected to be about Source: Wells Fargo PCS, 12/066.8%. Let’s determine if this is consistent with your investmentgoals. Your goal is for distributions and expenses to be 5%annually, and to maintain this for perpetuity. To accomplish Efficient Frontier Analysisthis, you must generate 5%, plus keep up with inflation. 10Calculating the required return for your foundation showsthe following: 9 Philanthropic Goal-BasedDistributions and Administrative Expenses 5.00% 8 Suggested PortfolioInflation 2.75% Return (%)Total Required Return 7.75% 7 Original PortfolioInvestment Goal: Philanthropic Distributions 6 Stated Risk Tolerance Low 5 Risk-Based Goals-Based Risk Requirement Moderate 4 Required Return 7.75% 4 6 8 10 12 14 16 Minimum Acceptable Return 5.00% Standard Deviation (%) Investment Time Frame Perpetual Source: Wells Fargo PCS, 12/06Your current risk tolerance does not allow for a portfolio with A scenario analysis reveals that this portfolio, despite its higheradequate growth opportunities to accomplish your stated risk, has a reduced probability of falling below your minimumgoals. Using your goals as a basis for optimization, we see that acceptable return of 5%. This portfolio is well diversified,the following allocation, with an 8.14% hypothetical return is which helps to control overall risk, but still focused onmore appropriate: investment growth. The hypothetical return is slightly higher than your goal, which allows for some level of uncertainty in the returns. This provides a better opportunity for your investment goals to be achieved over multiple generations. A goals-based approach has better aligned the investment strategy of the foundation with your philanthropic goals. Goals-Based Asset Allocation—A Personal Approach to Investment Strategy | 5
  • Hypothetical Goal: Wonderful Retirement By looking at your efficient frontier from a goals-based stand- point, we determine that a balanced portfolio is appropriate forYou and your husband have worked hard and saved for your investment requirements:retirement. You met while working at the same company, andyour investments are dominated by the company stock. It has Efficient Frontier Analysisdone well over the years, and it does pay a dividend, but you 10know that the risk of having all of your eggs in one basket isnot appropriate. The assets are in tax-deferred vehicles, both 9401(k) and IRA accounts, so diversifying the assets should notincur any tax liabilities.4 8 Retirement Goal-Based Suggested PortfolioThe current value of the portfolio is $1,500,000. Your intent is to Return (%) 7have this portfolio supplement your pension and Social Securitybenefits. Working with your wealth planning specialist, you 6determine that a 4% withdrawal rate, equaling about $60,000adjusted for inflation annually, is sustainable. You also feel that 5the portfolio’s performance should at least cover the 4%withdrawal, making 4% your minimum acceptable return. 4 4 6 8 10 12 14 16What investment strategy is appropriate for this portfolio? Standard Deviation (%)You know that the current concentration in company stock Source: Wells Fargo PCS, 12/06is not prudent. You and your husband are both 63 years oldand starting retirement, so you are nervous about risk. A Balanced Portfolio Suggestionlong time horizon of 30 years or more is not unrealistic. Let’s Hedge Funds—take a goals-based approach to determine the appropriate Aggressive** 2% Real Estate— Public REITs 3%investment strategy. The required return is calculated as follows: Hedge Funds— Real Estate— Conservative** 4% Private REITs* 2% Private Equity* 2%Distribution Requirement 4.00% U.S. Large Cap 20% Commodities 2%Inflation 2.75% High-Yield Bonds 5%Administrative Expenses 0.75% Long-Term Bonds 3% U.S. Mid Cap 4% U.S. Small Cap 3%Total Required Return 7.50% International Intermediate-Term Developed-MarketsInvestment Goal: Wonderful Retirement Bonds 28% Equity 12% International Emerging-Markets Stated Risk Tolerance Low Short-Term Bonds 7% Equity 3% Goals-Based Risk Requirement Moderate * Some alternative investments may be available for pre-qualified Required Return 7.50% investors only. Minimum Acceptable Return 4.00% **Hedge funds are available for accredited investors only. Source: Wells Fargo PCS, 12/06 Investment Time Frame 10–40 years This investment strategy provides sufficient liquidity to satisfy your 4% annual distribution, along with growth opportunities to provide assets throughout your retirement. The diversified asset allocation controls risk much better than your concentration in the company stock. Statistical analysis shows that this portfolio has a lower probability of falling below the 4% minimum required return. This is important in retirement, because you do not have the same opportunity to overcome loss as you did while working. This goals-based approach has provided you with an investment strategy that meets both short-term cash flow needs and longer-term growth requirements in a well diversified allocation.4 Wells Fargo & Company cannot provide tax advice. Please consult your tax advisor to determine how this information may apply to your own situation. Goals-Based Asset Allocation—A Personal Approach to Investment Strategy | 6
  • Goals-Based Optimization and Asset Allocation Every investment portfolio has some level of uncertainty. Also, capital markets don’t always behave as expected. As a result,Successful investing requires a multi-faceted approach. Risk you and your financial professional need to have regulartolerance alone does not provide enough information to monitoring and reviewing discussions. You need to reviewdevelop a comprehensive investment strategy. Focusing solely your desired goals, minimum acceptable return requirements,on return may lead to a strategy with inappropriate levels of and minimum wealth levels. If your goals change, your targetrisk, given your cash-flow, liquidity, or time-horizon require- asset allocation should be adjusted to accommodate thesements. To maximize the probability of having a successful changes. Your portfolio needs to be monitored to determineinvestment portfolio, you need to address risk and return, how different your target strategy is from your actualalong with cash flow, liquidity, and tax efficiency.5 A behavioral investment mix, and if you need to rebalance your portfolio.finance approach to risk tolerance uses a minimum acceptable These regular meetings are a critical component for successfulreturn or minimum wealth target to articulate risk, as opposed goals-based strategy analysis.to a traditional standard deviation (volatility) range.Maximizing returns is not the goal for truly successful investors.Your success is measured by achieving the required return tomeet your investment goals, while controlling risk. Risk toler-ance is commonly associated with a minimum wealth level,as opposed to a pure volatility measure. You must be able toarticulate your goals, not only in terms of total return, but alsoyour cash flow, liquidity, and time-horizon requirements. Bythoroughly analyzing your comprehensive investment goals,you are able to develop an investment strategy that addressesall of your needs. A goals-based optimization approach toasset allocation can lead to a customized strategy designedfor your unique investment objectives.What can you do today to start developing a goals-basedstrategy for your wealth? In talking with your Wells Fargo PCSfinancial professional, there are three steps to follow:1. Develop a plan. Articulate what your goals are and assign an appropriate time frame to each goal. If you have only one or two goals, you probably need to be more thorough.2. Create an investment policy statement. Work with your financial professional to create an investment policy statement that will serve as a complete road map for your wealth plan.3. Measure success over time. Determine appropriate benchmarks based on your goals (not necessarily based on industry standards like the S&P 500), and measure your portfolio’s performance against this customized benchmark.5 Wells Fargo & Company cannot provide tax advice. Please consult your tax advisor to determine how this information may apply to your own situation. Goals-Based Asset Allocation—A Personal Approach to Investment Strategy | 7
  • Disclosures Wells Fargo Private Client Services provides financial products The Well Fargo PCS capital market assumptions and associated and services through various banking and brokerage affiliates of strategic asset allocations will change periodically, based on our Wells Fargo & Company, including Wells Fargo Investments, LLC long-term capital markets outlook. Please consult your relationship (member SIPC). manager to obtain the complete and most up-to-date capital market assumptions and help determine the strategic asset allocation that is The information and opinions in this report were prepared by PCS most appropriate for your circumstances. Investment Management, the investment management organization within Private Client Services. PCS is a division of Wells Fargo Bank, The hypothetical goals mentioned in this report do not represent N.A. (WFB). actual performance results achieved and are for illustrative purposes only. Information and opinions have been obtained or derived from information we consider reliable, but we cannot guarantee their Investing in foreign securities presents certain risks that may not be accuracy or completeness. Opinions represent WFB’s opinion as of present in domestic securities. For example, investments in foreign the date of this report and are for general information purposes only. and emerging markets present special risks including currency WFB does not undertake to advise you of any change in its opinions fluctuation, the potential for diplomatic and political instability, or the information contained in this report. WFC affiliates may issue regulatory and liquidity risks, foreign taxation and differences in reports or have opinions that are inconsistent with, and reach auditing and other financial standards. different conclusions from, this report. Fixed income securities are subject to availability and market Past performance does not indicate future results. The value or fluctuation. These securities may be worth less than the original cost income associated with a security may fluctuate. There is always the upon redemption. Certain high-yield/high-risk bonds carry particular potential for loss as well as gain. market risks and may experience greater volatility in market value than investment-grade corporate bonds. Government bonds and The investments discussed in this presentation are not insured by the Treasury bills are guaranteed by the U.S. government and, if held to Federal Deposit Insurance Corporation and may be unsuitable for maturity, offer a fixed rate of return and fixed principal value. Interest some investors depending on their specific investment objectives from certain municipal bonds may be subject to state and/or local and financial position. taxes and in some instances, the alternative minimum tax. This report is not an offer to buy or sell, or a solicitation of an offer to Real estate investment carries a certain degree of risk and may not buy or sell any securities mentioned. Investments discussed or be suitable for all investors. recommended in this presentation may be unsuitable for some investors depending on their specific investment objectives and Some alternative investments may be available for pre-qualified financial position. Additional information on any security mentioned investors only. is available on request. You cannot invest directly in an index. Index returns do not include Wells Fargo & Company cannot provide tax advice. Please consult management fees, so your actual return may differ from those listed your tax advisor to determine how this information may apply to your in charts. own situation. S&P 500 Index is a capitalization-weighted index calculated on a Wells Fargo & Company cannot provide legal advice. Please consult total-return basis with dividends reinvested. The index includes your legal advisor to determine how this information may apply to 500 widely held U.S. market industrial, utility, transportation and your own situation. financial companies. Asset allocation does not guarantee better performance and cannot Additional information is available upon request. eliminate the risk of investment losses. © 2007 Wells Fargo Bank, N.A. All rights reserved. Your individual asset allocation may be different from the strategic asset allocations shown in this special report due to your unique circumstances. A portfolio’s asset allocation may fluctuate based on asset values, portfolio decisions and account needs.© 2007 Wells Fargo Bank, N.A. PCS-AB24001 (200612136 01/07)