Customer FAQ

iSectors Allocations are unique and offer multiple advantages to investors:

  • iSectors® Post-MPT Allocations maintain optimal portfolio allocations by rebalancing portfolios regularly as the investment environment changes. Post-MPT models are iSectors’ flagship series. These models offer an enhanced approach to traditional Modern Portfolio Theory (MPT) that catapults MPT to a new level of excellence. iSectors Post-MPT models’ impressive returns and low risks can be attributed to:
    • A more robust asset allocation algorithm that uses more than a dozen relevant economic variables to determine and regularly rebalance back to an optimal portfolio allocation. This process modifies allocations based on changing economic conditions and factors.
    • A superior approach to diversification using asset classes such as: US Treasury bonds, real estate, infrastructure, commodities and others. Note: Diversification does not necessarily ensure a profit nor protect against a loss in a declining market.
    • Our approach considers “negative returns” as the “risk” investors want to avoid, volatility (standard deviation) is a less appropriate measure of “risk.” Standard deviation, the historical traditional measurement of risk measures both upside AND downside volatility as risk. For example, a stock or investment that has large upside volatility (unexpected gains) is considered to have the same level of risk as an investment with large downside volatility (unexpected losses) when measuring risk by standard deviation. Our approach is more congruent with behavioral finance and “real world” investor views.
    • Low fees (when compared to actively managed mutual funds). In addition, all accounts are highly liquid and separately-managed accounts.
  •  iSectors® Endowment Allocation is an institutional quality asset allocation model that embraces the philosophy pursued by the managers of Endowment portfolios at institutions such as Yale University. These endowment funds, have been aggressively allocating to “Alternative Investments” like hedge funds, private equity and real assets, for decades. The strategy of over weighting alternatives has enabled them to out-perform their university endowment fund peer group; they have achieved this superior performance while reducing overall portfolio volatility (risk). While the iSectors Endowment allocation is not designed to mimic a university endowment fund to the fullest extent, it does contain a significant allocation to “alternative investments.” While iSectors does allocate to alternative investments we do not invest in private partnerships which are illiquid and only available to accredited investors (i.e. investors with a net worth exceeding one million dollars). All iSectors portfolios remain liquid and available to any institutional or individual investor they may be suitable for. These unique advantages are achieved by using alternative investments that are available either through an ETF, open and closed end Mutual Funds, exchange-listed Business Development Companies (BDCs), listed Master Limited Partnerships (MLPs), or SEC registered pfunds. While our investment strategy doesn’t specifically exclude exchange-traded notes (ETNs), these are not typically in our models.
  • iSectors® Tactical Series (Tactical Global Balanced, Tactical International) offer flexible strategies that remain invested when it appears opportunities may provide return potential and rotate to cash when it appears that trends have reversed and investors may be better suited to be in cash.
  • iSectors® Inflation Protection and Precious Metals Allocations have been designed to help investors protect their portfolios from the threats of inflation.
  • iSectors allocations are available in separate or unified managed accounts. This means that your account is held in your name at an independent custodian; the securities held in your account belong to you. The investment platforms that we work with provide you with 24/7 access to information regarding your holdings, performance and tax reports. Therefore, you benefit from tax advantages, transparency, lower costs, liquidity and control not offered by mutual funds or other investments such as hedge funds.
  • iSectors is committed to the best service and low expenses. We are able to provide clients cutting edge investment management services and a world class web-based reporting platform (updated daily).

Exchange-Traded Funds (ETFs), open and closed end Mutual Funds, exchange-listed Business Development Companies (BDCs), listed Master Limited Partnerships (MLPs), or SEC registered funds. While our investment strategy doesn’t specifically exclude exchange-traded notes (ETNs), these are not typically in our models.

Click here for our article that explains why ETFs have lower fees than mutual funds.

iSectors allocations have been applied in investment accounts since 2005. As of July 2013, over $144 million is invested in iSectors allocations. iSectors, LLC is an affiliate of Sumnicht & Associates, LLC (Sumnicht) and, as such, iSectors and Sumnicht share certain employees’ services. Sumnicht is an SEC registered investment adviser located in Appleton, Wisconsin. iSectors became a separate Registered Investment Advisor in August, 2008. Sumnicht & Associates has provided clients with independent investment advice and wealth management services since 1988. The firm was founded by Vern Sumnicht, CEO, MBA, CFP®. Sumnicht & Associates is independent and is not affiliated with any bank, broker or asset management firm.

Sumnicht & Associates advises clients whose aggregate assets under management is $275 million (as of July 2013) Sumnicht & Associates has been awarded the following recognition over its history:

  • Ranked as one of the Top 100 Independent Private Wealth Managers in the Country by Bloomberg in 2003, 2004, 2005;
  • Ranked as one of the Top 75 Independent Multi-Client Family Offices in the Country by Bloomberg in 2004 and 2005;
  • Recipient of Small Business of the Year Award by the Fox Valley Chamber of Commerce and Industry;
  • Registered as an NFL Players Association Financial Advisor since 2004;
  • Vern Sumnicht was honored as one of the nation’s Top 100 Wealth Advisors by Worth Magazine in issues dated October 2005, 2006 and 2007 and was included in Worth’s expanded list of 250 Top Wealth Advisors in their October 2008 issue.

iSectors® implements a number of proprietary strategies which are intended to help investors increase their risk-adjusted return (the return generated by measuring how much risk is involved in producing that return). Our various series of models implement different methodologies in order to generate risk-adjusted returns. For example:

iSectors® Post-MPT Series implements a dynamic approach that allocates its investments to as many as nine different asset classes that have less correlation to each other than the traditional asset classes that are perhaps more commonly used for portfolio diversification. iSectors’ research has shown that this strategy offers more effective diversification and can lessen the impact of prolonged market declines. Of course, it should not be assumed that future performance of any specific investment product, including iSectors, will equal past performance.

iSectors® Tactical Series attempts to provide improved risk adjusted returns by rotating to cash when each respective model’s targeted asset classes appear to be headed into protracted declines. These models apply momentum-based algorithms to identify and time these decisions so that the process remains systematic and objective.

iSectors® Endowment Allocation seeks to provide superior risk-adjusted returns by blending liquid alternatives with traditional stock-bond portfolio. These liquid alternative investments include private equity, hedge strategies, and real assets, all in the form of registered securities such as ETFs, open-end mutual funds, closed-end funds, exchange-traded notes and business development companies (BDCs). The Endowment Allocation is based on the approach pioneered by large university endowment managers, who dedicate a greater percentage of the portfolio to alternative investments than most traditional endowment funds. Because alternative investments are typically less liquid than stocks and bonds, alternative investments often possess pricing inefficiencies that offer the potential for improved returns.

iSectors® Inflation Protection Allocation and Precious Metals Allocation offers investors two vehicles which may help hedge against the risks of inflation. Official government figures maintain that there doesn’t currently appear to be significant inflation in our economy. However, official government statistics typically don’t include food and energy costs, both of which are significant costs to most households. Thus, inflation tends to be understated. The Inflation Protection and Precious Metals Allocations have been designed to help investors prepare themselves and their portfolios for ongoing inflationary pressures.

iSectors assesses an annual model license fee, based upon assets under management of between .30% and .50%, dependent upon the platform provider and the sophistication of the respective investment model selected. In addition to iSectors license fee, investment platform and custodian fees may apply. These are typically prorated and may be assessed quarterly or monthly, in advance, based upon the portfolio value at the end of the previous period. Fees charged by your advisor, depending upon your separate agreement with your advisor may or may not be assessed in similar fashion. For 401(k) plans, fees are typically accrued daily and deducted monthly. Additional record keeping and/or TPA fees, as well as other fees may apply for 401(k) plans.

Check with your financial advisor or review your investment proposal form for a review of the specific fees that will apply to any specific account. You should review all fees prior to investing.

iSectors requires the following minimums for each respective allocation series:

Capital Preservation, Domestic Equity, Global Series, Post MPT Series, Precious Metals, Tactical Series $25,000
Liquid Alternatives $50,000
Endowment Allocation $100,000

*Refers to minimums set by iSectors. Investment minimums may be higher for certain platforms. Investment minimums are negotiable and may be waived solely at iSectors’ discretion.

All iSectors allocation investments use separately managed accounts (SMA) or unified managed accounts (UMA). A separately managed account is a brokerage account that is opened in your name and held at an independent custodian (such as Fidelity, Pershing, TD Ameritrade, Schwab or FOLIOfn). After your account is opened and funds are deposited in the account, any and all securities in that account belong specifically to you (unlike a mutual fund or hedge fund where all investor assets are co-mingled in one account). With an SMA, all the securities in your account have their own individual tax basis, so you know what has been bought and/or sold in your account at any time. The corresponding gains and/or losses on those securities belong to you (unlike mutual funds when you may be responsible to pay taxes on gains incurred by a fund when someone else liquidates their shares). In addition, a performance report and realized/unrealized, gain/loss tax reports are updated daily and available to you over the internet at anytime from anywhere. Unified managed Accounts (UMA) accounts are very similar to a separately managed account (SMA), in that the account is opened in your name and held at an independent custodian and all securities in the account are held in your name. However, in a UMA, multiple models or strategies are held in a single account.

iSectors accounts can be opened for individuals, joint tenants, JTWRS, trust accounts for spouses and families, revocable trusts, irrevocable trusts, UGTM accounts, business accounts, corporations, investment clubs, CRT accounts, limited partnerships and non-profit accounts can also be created. Depending upon the custodian chosen, foreign investors may also open an iSectors account.

Yes, iSectors accounts can be opened for a traditional IRA, rollover IRA, Roth IRA, SEP IRAs, 401(k), pension, other defined contribution or defined benefit accounts, and qualified or non-qualified retirement accounts.

iSectors wants clients to be pleased with their investments in the iSectors models. Today’s financial markets are complex, they offer expansive opportunities, but they are rapidly changing and volatile. A full-time, independent financial advisor is in a unique position to understand your financial situation. The fiduciary responsibility of an independent Registered Investment Advisor requires your advisor to legally place your interests above his/her own. Advisors can offer independent advice, help structure your portfolio, and diversify your investments in a way that will help achieve your personal financial objectives. After all, in your efforts to be a successful investor, isn’t that the legacy you want? An independent investment adviser can help you achieve your financial objectives in life.

In addition, iSectors offers a variety of allocation models, each with a different objective and risk category. Your investment advisor is uniquely qualified to evaluate your financial needs and risk tolerance and to assist in selecting the appropriate allocation model (or models) for you.

To learn more and to ask further questions,  contact: 

Scott Jones
1.800.iSectors (1.800.473.2867)
Fax: 1.800.473.2867
Write: iSectors | W6240 Communication Ct. | Suite 1 | Appleton, WI, (USA) 54914-8549

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