FLEXIBLE PORTFOLIOS DISCLOSURE
You should carefully read this disclosure and consider your personal circumstances before deciding whether to elect i-wize’s Flexible Portfolio Strategy (“Flexible Portfolio”).
A Flexible Portfolio allows you to create a custom portfolio comprised of exchange-traded funds (“ETFs”). Unlike with the i-wize Portfolio Strategy, which uses preset weights for each individual asset class based on your selection of an overall allocation between stocks and bonds, a Flexible Portfolio allows you to choose your own individual asset class weights.
If you elect to use a Flexible Portfolio, i-wize will provide default individual asset class weights that correspond to the recommended i-wize Portfolio Strategy, which you can then adjust. For new goals in tax-advantaged accounts, these defaults will correspond to the recommended IRA portfolio. For new goals in taxable accounts, i-wize will provide a slightly different set of defaults, which correspond to the recommended taxable portfolio. Unlike the i-wize Portfolio Strategy IRA portfolio, the i-wize Portfolio Strategy taxable portfolio has exposure to municipal bonds, which carry certain tax advantages. The default individual asset class weights for a new tax coordinated goal will not include an allocation to municipal bonds even if i-wize would include an allocation to municipal bonds in a new tax coordinated goal with a different portfolio strategy. For existing goals, i-wize will provide default individual asset weights that correspond to your current allocation between stocks and bonds.
As with every portfolio strategy that i-wize offers, i-wize has the discretion to choose which specific ETFs to purchase or sell to further your investment objectives, as well as when to place trades for those ETFs. The particular ETFs used in a Flexible Portfolio are subject to change based on i-wize’s evaluation of the cost of ownership of ETFs representing exposure to each asset class, among other factors. You can read more about i-wize’s ETF selection process here.
The i-wize Portfolio Strategy is i-wize’s recommended portfolio strategy and is designed at each risk tolerance level (ranging from 0% stocks to 100% stocks) to deliver well-diversified portfolios that seek to maximize risk-adjusted returns. If you decide to build a Flexible Portfolio instead, you should be aware that selecting individual asset class weights results in tradeoffs along several dimensions, including expected return, risk, diversification, and tax-efficiency. Although i-wize will provide feedback on the overall risk and diversification of your individual asset class weights, the allocation you choose is your own responsibility, and the performance of your Flexible Portfolio may be better or worse than the performance of your recommended i-wize Portfolio Strategy.
There are several ways that a Flexible Portfolio differs from the i-wize Portfolio Strategy. You should consider these differences when deciding if you wish to elect a Flexible Portfolio.
Depending on the individual asset class weights you select, you may incur aggregate fund costs that are greater or less than those in the i-wize Portfolio Strategy for a comparable level of risk and expected return.
Unlike with the i-wize Portfolio Strategy, i-wize’s SRI Portfolio, or the Goldman Sachs Smart Portfolio, a Flexible Portfolio cannot be setup so that the allocation changes as a goal’s term approaches in order to control risk. To the extent that you would like for a goal with a Flexible Portfolio to become more conservative as you approach the end of its term, you will need to adjust the allocation yourself. Adjusting the allocation over time yourself may be less tax efficient than allowing i-wize to automatically adjust your allocation.
Investors considering a Flexible Portfolio should consider how it impacts the operation of i-wize’s Tax Loss Harvesting+™ and Tax Coordination™ features. Depending on the individual asset class weights you select, there may be more or fewer opportunities for tax loss harvesting in your Flexible Portfolio relative to tax loss harvesting opportunities in the i-wize Portfolio Strategy with a comparable level of risk or expected return. Eliminating exposure entirely to individual asset classes in a Flexible Portfolio will generally also reduce opportunities for tax loss harvesting. You can use Tax Coordination with a Flexible Portfolio. If you elect a Flexible Portfolio for your Retirement Goal, all i-wize investment accounts within your Retirement Goal will share the same Flexible Portfolio, with individual asset classes distributed using our asset location strategies. However, altering or removing asset classes may impact the effectiveness of Tax Coordination relative to its effectiveness when used with the i-wize Portfolio Strategy.
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