Consulting Group

Frequently Asked Questions

Q: How can individual investors benefit from a managed money relationship with Consulting Group?
A: Through Consulting Group, investors can access leading money management firms — including firms that normally set account minimums in the millions of dollars. Through our TRAK^® program, individuals can take advantage of the Consulting Group process while investing in a diversified portfolio of mutual funds.

Q: How does a wrap fee program work?
A: Wrap programs bundle a number of investment services together for one fee. The fee is expressed as a percentage of the value of the assets in the account, and is paid quarterly in advance. So, if an account is valued at $100,000, and the annual wrap fee is 3%, the client is billed $750 per quarter, or $3,000 per year.

Q: What are the advantages of wrap fee programs?
A: Wrap programs eliminate the potential for conflict in commission-based relationships. Clients' expenses are based on assets under management, and are not affected by the frequency of transactions. Wrap programs also ensure transparency to the investor of the costs of execution by the sponsoring firm — unlike mutual fund fees, which do not include commissions paid to dealers and brokers by the fund.

Q: What is Consulting Group's investment philosophy?
A: Consulting Group believes in the principle of asset allocation — the creation of diversified portfolios composed of different asset classes, such as stocks and bonds. We believe most investors can benefit by investing in both domestic and international markets, and by selecting managers with different investment styles — such as value investing, growth investing, etc.

Q: How does Consulting Group meet the special needs of institutional investors?
A: Consulting Group was created because we understood that prudent fiduciary management can pose a formidable challenge for even the largest institutions. Our institutional clients are served by 70 specially trained Financial Advisors who have been designated as Consulting Group Directors. Each is well qualified to address the specific issues facing fiduciary investors.

Q: How does Consulting Group select the investment managers it recommends to investors?
A: Our analysts use a screening system to narrow over 24,000 registered investment managers down to the much smaller group recommended by Consulting Group. First, promising firms are added to our data base, which tracks over 5,400 investment products. Next, eligible firms are researched by our analysts, who submit written opinions to Consulting Group's Evaluation Committee. The Committee assigns each firm a diamond rating. Firms are reevaluated regularly to ensure they continue to meet our standards.

Q: What do the different diamond ratings mean?
A: A 4-diamond rating indicates our belief that the manager is among the highest-quality advisors available. A 3-diamond rating also represents a Consulting Group recommendation, but indicates our confidence in the manager is somewhat lower than for a 4-diamond manager. Managers with 3-diamond ratings typically are not admitted to the FS or CES programs. However, participating managers downgraded to a 3-diamond rating are not terminated from those programs. A 2-diamond manager is one we do not recommend to our clients because of deficiencies identified in the research process. A 1-diamond ranking indicates we perceive serious and persistent problems and strongly recommend the manager be avoided. One and 2-diamond firms are ineligible for the FS and CES programs, and are not included in our research coverage. Participating managers downgraded to 2 diamonds or lower are removed from the FS and CES programs and also are dropped from coverage.

Q: What criteria does Consulting Group use to rate investment managers?
A: Many investors judge management firms based solely on past performance — which frequently is no guide to future results. Consulting Group believes investors should look at a number of factors — such as personnel, research capabilities, the firm's investment process and its business operations. Our ratings are based on five such qualitative factors, as well as two "composite" factors designed to test the accuracy and comparability of the firm's performance data.

Q: Does Consulting Group receive fees from investment managers for rating them?
A: No. Unlike some competitors, we do not charge managers for the ratings we assign. We believe such a practice could raise doubts about the objectivity of our process. Accordingly, all costs associated with the research program are absorbed by Consulting Group.

Q: Does Consulting Group evaluate investment managers associated with Smith Barney?

A: No. Managers affiliated with Smith Barney are evaluated by an outside, independent rating agency, using the framework created by Consulting Group. The firm currently providing this service is Evaluation Associates Inc. of Norwalk, Conn.

Neither Smith Barney nor Consulting Group provide tax or legal advice. Please consult with your tax and/or legal advisor for such guidance.

Consulting Group, a division of Citigroup Global Markets Inc., provides Financial Advisors with investment advisor research and capital markets analysis to assist in planning your personal investment strategy. This site describes asset management services provided to U.S. persons and entities by firms that are registered as investment advisers under the Investment Advisers Act of 1940. This site is not a solicitation on the part of Consulting Group or any asset management firm recommended by Consulting Group to provide asset management services to non-U.S. persons and entities. This site is for informational purposes only and does not constitute either investment advice or recommendations on the part of Consulting Group or any asset management firms described herein.

Although the statements of fact and data herein have been obtained from, and are based upon, sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. All opinions included herein constitute the Firm's judgment as of the date indicated and are subject to change without notice. This material is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.

For information about the Consulting Group research process and the diamond rating system, please ask your financial Advisor for a copy of the Consulting Group White Paper entitled Behind the Diamonds.

For more information, please contact your Financial Advisor.

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Consulting Group

Frequently Asked Questions