Transcript of Spoke Fund® Conference Call Held on Feb 7, 2014 Cale: Good afternoon, everybody.

Thanks for dialing in. For those of you I don’t know, I’m Cale Smith, the managing partner of Islamorada Investment Management down here in the Florida Keys. I don’t want to start off this call necessarily sounding like a jerk, but for the record, it is 81 degrees right now down in Islamorada. For those of you way up north, I understand Spirit Airlines still has those $29 flights to Fort Lauderdale. So, totally worth it this time of year…other than having to fly Spirit, I guess. Just a quick heads up - this call is being recorded. I’m planning to post a transcript of this call later. There are a number of guys who couldn’t make the call but did want to read up or listen to an MP3 afterwards, so at some point early next week, I’ll put a transcript or mp3 file, or both, up on the SpokeFund.com blog. I hope you all have a copy of the agenda for the call, either through that last blog post on SpokeFund.com or via that email blast put out last weekend. It has been a long time since we’ve had any sort of meeting of the minds regarding Spoke Funds and there’s no doubt a ton of stuff to talk about. I’m going to try to stick to the agenda in this call, so at this point, anything that comes up that isn’t on that agenda but seems worthy of discussion, we’ll put it on a list for the next call. That said, I do want this to be more of a forum than really a formal presentation of any sort. First, I wanted to talk about the recent developments in Spoke Fund® land, if you will, so the first five or ten minutes may be more of a one-sided broadcast of sorts from yours truly, but after that, it’s not going to be really formally structured at all, so we can dig deeper or shallower than needed as best you all see fit. We do seem to getting some feedback from somebody’s phone. If you think that might be you and you could mute it, I would appreciate it. If it’s me, we’ll just have to deal with it. There are a couple of reasons for doing this call today. The first really is that Gopal Gantayat of The Free Investors emailed me a couple of weeks ago and said basically, “Hey, man, let’s get everyone together again to see what people have been up to.” The second is that, despite my own neglect in keeping any sort of regular blog posting schedule last year, the idea of Spoke Funds among emerging managers continues to sort of slowly grow. I’ve been feeling particularly guilty about not being able to do more for Spoke Funds in general, but I guess the bottom line is that, in spite of my abdication of those duties, I still get contacted by somebody at least every few weeks wanting to start a spoke or at least find out more about it - from the portfolio managers’ perspective. Incidentally, that email list I sent this call notice out to last weekend has grown to just under 250 people, so despite my own tunnel-vision on-the-day job, things are still moving forward with Spoke Funds in general. 1
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I wanted to start by giving anybody who wanted to the chance to say a quick hello if you want to - and no problem if you’d rather just lurk and listen. That’s fine, too. I’ll ask you to state your name, the name of your firm, what part of the country you may be in, and then where you are in the process of launching a Spoke Fund®. Just so we don’t all step on each other, I’ll start and then I’m going to ask at least two other guys who I think are also on the call to introduce themselves, and then we’ll go from there. So, again, I’m Cale Smith. I run Islamorada Investment Management down here in the Florida Keys. I have run two Spoke Funds, each for over five years now, which sounds kind of hard to believe, but there you have it. Last summer my firm actually brought on board another portfolio manager named Lauretta Reeves. She goes by Retz. And this may sort of fall under the recent development discussion but I’ll just keep going with it anyway. Retz is really a huge addition to IIM for a lot of reasons. She’s a CFA charterholder. She’s had decades of international value experience, running hundreds of millions in mutual funds, and she literally grew up in the business working right next to John Templeton. In terms of Spoke Funds particularly now, I think adding her was significant for all of us really, because she is officially the first former mutual fund manager who made the leap, who made that jump to managing a Spoke Fund®, so I think that validates the Spoke Fund® idea that much more. Anyway, I could talk about that and Retz all day long. The last I heard, Retz was not going to be able to make the call today, but my point is, you’ll probably see or hear more from her on Spoke Funds from our firm down the road. All right - Gopal, are you there? And if so, could you do a quick intro of yourself please? Gopal: Hey, Cale, yeah, I am here. I’m Gopal Gantayat. I run The Free Investors from Princeton, New Jersey. We have one Spoke Fund® called the Mosaic Portfolio. I launched the firm in 2012, which makes it almost a year and a half, and, yeah, it has been going great, thanks to Cale and everybody else in the Spoke Fund® community. The launch was pretty smooth and since then I’ve been running it and I’m pretty happy with it. So, if anybody is around the New Jersey area, I would love to catch up and meet. All right, thank you. How about Dustin? Are you there? And if so, could you do a quick intro, too, please? Paging Dustin. <Crickets. Dustin had phone trouble but got on the call a bit later.> All right, let me expand a little bit: are there any more current Spoke Fund® managers out there who are willing and able to say a quick hi? How about anybody who is thinking about launching a Spoke Fund® and also wants to do a quick intro? And again, lurking is fine, but if you want to say hey, now’s your chance. 2
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Cale:

All right, well, I know there are more than two people on the call, but we’ll just keep rolling. That’s fine. I understand some of you may be working at your day jobs and be unable to speak, too, so we will just keep rolling. Let’s start right in with the rest of the agenda then. I’m kind of coming in on that agenda right after the intro portion. In the end, this is probably one of the sections that is a broadcast from my side - and this is with regards to recent developments and plans for 2014. There’s going to be some overlap with what I say next with some of the subjects we get into below, but so be it. There are four things at this point that I wanted to be sure to mention on this call in particular. Recent development number one. I think the biggest development on my end over the past year was frankly beginning to work with MarketCounsel. RIA in a Box was great for me for getting stood up, and really up until about a month ago I was still using them, but in the end, I felt like I sort of needed the expertise of a pool of lawyers and a certain degree of kind of unconventional thinking to get to where I wanted to go on with IIM. There’s also just some redundancy between what MarketCounsel and RIA in a Box was doing on an administrative level. Now, to be clear, MarketCounsel is significantly more expensive. I think if I had to do it over again I would still do the same path and start out with RIA in a Box. I still think highly of those guys, but working with MarketCounsel has been a great experience, too, both to kind of reinforce everything that my firm has already been doing and to sort of confidently tweak a few other things - and more generally have some true legal experts to help navigate some other ideas I have as the owner of this firm for growing, in kind of a real-time sort of way. So, more specifically, because of MarketCounsel, I do now plan to later this year once again be able to start discussing and publishing the performance of my Spoke Funds on my website. And those of you guys who’ve been involved for a while know that I used to do that. I stopped really after some consulting with the guys at RIA in a Box. There were no issues, but it was more to avoid any potential issues, and long story short is there’s a pathway to do that that has been articulated by MarketCounsel, which is great, because so much of it is performance driven, it seems, like when it comes to finding new investors. Also, I’m going to be working with some solicitors hopefully as this year progresses and in general just do a few other things that are going to help the firm grow, which I’ve really been too paranoid to even try previously. So, anyways, working with MarketCounsel has been a great thing and I could go on, but specifically in terms of both those kind of details and what I would call “compliance confidence” in general. The second recent development that I think is relevant for you guys, too, maybe in an indirect way, is about a year ago I started co-managing a hedge fund - and I know that 3
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can be a dirty word in this crowd - with a very sharp value investor. His name is Marcelo Zinn and he runs Maredin Capital Advisors in Miami. Marcello basically was able to, after a ton of time and effort, get an emerging fund he developed onto the platform of a private bank that was headquartered over in Europe and then, to fast forward quite a bit, basically asked me to help out. That fund is only offered to clients of that bank, specifically, just international investors, so there’s no overlap or conflict in terms of the customer base here at IIM, and, so I jumped at the chance to work with him. To be clear, I’m not doing that through IIM, I’m basically doing that as an independent contractor, so it’s distinct from my firm. And it has been going really well. From the perspective of Spoke Fund® managers, I would say this though: one of the things that has really become readily apparent to me is that the hedge fund world or, I guess, the new hedge fund world... I had some experience with that a long time ago…is just how different and how really difficult the process of finding investors can be for a hedge fund - for an emerging hedge fund, specifically. If you’re not stepping out from a trading desk at Goldman Sachs with commitments for hundreds of millions out of the gate, it is just a sort of a much harder, more competitive effort than I remember it being 10 years ago. And long story short, it makes me even happier to be running a Spoke Fund® focused on individual investors. It seems like a lot of what goes on in trying to find institutional investors, even small ones, for a small hedge fund, is really indistinguishable from just sort of schlepping around and knocking on doors. Raising assets for a hedge fund these days, at least to me in my own little world down here, seems to be this sort of pride-swelling journey through a land of huge egos, and sometimes it’s a struggle for me to understand why some of these guys who run, say family offices believe they actually deserve to have a big ego to begin with…but I would summarize all that, I suppose, and say that, all things being equal, I’m that much more convinced now that I’d rather have 150 individual investors in my Spoke Fund® than be working for just a couple of fund-to-fund guys running a hedge fund. So, I’m sure there are differences all across the board on that, but take that, my two cents, for whatever it’s worth. Number three on my list of things that I did want to be sure to mention: this is a recent development that I think everybody should be aware of. Last year, or it might have actually been the end of 2012, there was a flag raised during an audit of an RIA in Virginia, and that RIA was running a Spoke Fund®. Specifically, that firm was an RIA and ran its Spoke Funds along with a larger hedge fund - and I’m going to intentionally avoid naming names here for just general privacy’s sake, although I know the principal of that firm would be happy to talk more to any of you offline about it. The heart of the issue appeared to be that Virginia really just wants RIAs to be financial planners and allocators, and not so much stock-pickers. And probably because of that, Virginia wanted really to define the word “fund” as a pooled account. 4
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So, calling a Spoke Fund® a ‘fund’ of any sort was an issue - at least to the field agent who did the audit. Somewhat incoherently though, that auditor said this RIA couldn’t really call it an SMA either…so in his eyes you couldn’t call a Spoke Fund® separately managed account either, because that’s explicitly designed for a client and a Spoke Fund® is not. So, there’s this sort of never-never-land that the firm was put in. To fast forward quite a bit, and some of you already know this, the word “fund” has never been specifically defined in the legal sense, and so this particular RIA essentially fought the issue for some time, via letters back and forth, and even though in the end I believe he thought he was on firmer ground, he also thought discretion was probably the better part of valor when it comes to challenging the regulators in any meaningful way. So, this RIA abandoned the Spoke Funds they were running, voluntarily deregistered the whole firm as an RIA, and then just focused on running the hedge fund, which, again, held most of the firm’s assets, anyway. So, here’s what I would say to you guys about all that. I was able to bring all those exact concerns from Virginia to my guys at MarketCounsel to closely review everything, and in the end, none of it changed on my firm’s ways of doing anything with one exception, and that is that we are making it clear that investors understand they have the ability to exclude a security from the portfolio desired. That’s it, really. Based on the lawyer’s interpretation of the word “fund” - and that comes from case law around the ‘40 Act, because again that word isn’t explicitly defined anywhere - as long as an investor can exclude something from a portfolio, and that ability is specifically offered at FOLIO, then whatever gray area might be there should basically become a lot more clear. So, in any case, I am, again, not a lawyer. I can’t guarantee that all you other guys running RIAs in other states might not have the same issue as the field agent doing this audit in Virginia brought up, so I would continue to lump all this under the heading of “Caveat emptor, state regulations can vary dramatically.” Now, all that said, I am also aware of other RIAs in other states that are running Spoke Funds that have been audited and went through with flying colors. There were no issues whatsoever. I have yet to have an audit here, but at this point, I’ve been registered in Florida for five years, in Texas for three years, and I’m in the process of getting registered in California and have yet to hear of any issues around that term, either. More to the point, the guys at MarketCounsel don’t see any serious issues with the term, either, but for what it’s worth, all that did happen in Virginia, and it may be something to keep in the back of your head. At this point, the thing that would probably most alleviate the risk of that sort of thing being an issue for anyone else in the other states essentially is for me to have MarketCounsel draft a legal letter of opinion around the use of that term “fund” and then somehow figure out a way to enable all of you to sort of lay claim to that same 5
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legal opinion. But frankly, that’s easily going to be a five-figure bill. That would take a lot of work on their part to do it on their side, and frankly, I guess I’d rather, say, buy a boat than pay that kind of bill, although we’ll just have to see how things develop with this concept over time. In the meantime, take all that for whatever it’s worth. Number four on my list of recent developments is in regards to plans for 2014. I’m certainly guilt of over promising and under delivering when it comes to getting out more info on Spoke Funds in general of late. I still have delusions of grandeur about where all this could go, I suppose, but more realistically and to maybe set the bar in a realistic way for me, I’ll tell you that in 2014 I’m really focused on three things when it comes to Spoke Funds. Number one is getting a good, steady stream of info back out on the blog. Number two would be putting together an online course for folks on how to launch a Spoke Fund®. For those of you who have come to the FundLaunch event, this would be equivalent to basically taking the intro material I presented there and putting it online in sort of an on-demand kind of way. And then third is doing another conference like FundLaunch later this year. Again, I have some sort of strategic ideas beyond all that, but at this point, I’d just as soon consider all those extra things a pleasant surprise to kind of keep expectations in check for the time being. That said, if there is stuff that you guys need from me or if you have ideas on things that would be useful to each other and to new emerging Spoke Fund® managers, then fire away, and I will prioritize those things above those three things on my own list there. Okay, I am talking too much. Let’s jump down to the next item on the agenda - what is working and what is not. And let me see if anybody else wants to talk for a bit. When it comes to marketing, i.e., finding more investors, let me open it up. Does anybody have any thoughts on what’s been good and what’s been bad of late? I’m going to pause for a second and grab a slug of coffee, so feel free to please chime in if you do. Gopal: I’ll jump in here unless somebody else has something to say. I know we have the newsletter as a separate item there, but basically a newsletter works well for marketing for me in terms of people forwarding the newsletter to their friends and things like that. I’m still relatively small so I don’t have gangbuster success with it, but that’s one thing that works well. The other thing, and I don’t have much to report right now, but I am thinking about doing a direct mail campaign, to see how well that works. I will look to give an update of that maybe in the next call. Basically I just want to introduce that Spoke 6
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Fund® concept to the local community here and see if they want to talk more about it. Not sure right now how successful it will be, but I will report back once I do that. Cale: Yeah, that idea of a direct mail campaign is also high on my list for IIM as I think about 2014. I’ve got a friend in town who runs an accounting firm and, long story short, has had a surprising amount of success doing direct mail. I think this is very much is still a local business, at least if you look at sort of a distribution of investors of mine. Probably 75% of them are in Florida, the bulk of that number are here in the Keys and South Florida, and I’ve got folks in 16 different states at this point. But my biggest investors are my local ones, the guys I see or tend to see fairly regularly, so the idea of direct mail in the local area kind of makes intuitive sense. And I’ve seen a good friend in a different business, although still financial services related, have some really good results with it. So that’s also on my list, too, and yeah, happy to share any experiences with how that goes to whoever may want to know. Is anybody having a whole lot of luck blogging in general? And I know that’s kind of hard to quantify, but it’s kind of the perennial question I ask myself whenever I sit down to write a blog post, at least on the IIM site. I’ll put that one up there, open for debate if anybody’s got any thoughts to share. Or anything else in that section… advertisements, etc. <Crickets.> I think I did mention I do want to do a conference again later this year. It probably will be more geared towards kind of that intermediate level of Spoke Fund® stuff, maybe more in marketing specifically, just so guys who have launched spokes in the past can actually do some networking and get kind of fresh material. So I would put that under the same agenda header. Anybody else? Mike: Cale: Mike: Cale, this is Mike Curran of Cush Capital. Yeah, Mike. How are you doing? I’m filling in for Vern Cushenbery who asked me to sit in on this with you. I was just going to tell you a couple of things that are working for us. I’ll reiterate what the gentleman said before about the newsletter. We write a newsletter and try to release it monthly, but realistically it gets out there about eight times a year. We get a lot of interaction actually about the newsletters. So that’s been good for us. We also do a monthly event called “What’s the Big Idea?” where we actually bring clients and prospects in, and realistically, we usually have between seven and 12 people, and we know a lot of people can’t come. We do it on the second Wednesday of every month at 7:30 in the morning, and so it’s a tough time for a lot of people, but it is what it is, and we do a video recap of that for about five to eight minutes 7
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afterwards. We have a green screen and some nice video equipment that we have access to, and we put that on our website, which is pretty good. Then we also do a quarterly recap. And then one of the last things we do is we do a radio show with a local CPA that’s been on the radio for about 26 years now in Kansas. I’m in Kansas City, right in the middle of the country - a suburb of Kansas City. So, anyway, we do that every other week with him and that’s actually generated a fair amount of interest…enough to where we can justify paying for it and make a little money off of it. So, those have kind of been the things that we’ve done for the most part. Cale: Mike: Mike, how do you bring people in for your monthly event? I think I get those emails, but I get the sense that there are also some other ways to fill the room. Yeah, over the last six years we just amassed a huge email list and we do it all through Constant Contact. And I’ve got a specific list of people that have actually attended the events, so I give them a certain email. And so, we’ll do it a month out… a “save the date.” We obviously tout it out at the actual event. We’ll say, “Hey, put this on your calendar.” Then I send one out two weeks before, one week out before, a couple days before, so people pretty much, if they can make it, they’ll put it on their calendar. That’s basically the way we do it. I do a Linked In post and a Twitter post. I don’t know if anybody sees that, to be honest with you, probably a few people on Linked In. But that’s how we do it. Okay. Thank you, Mike. I’m going to throw this question out there, too, for anybody else to comment on: How about with regards to posting articles on SeekingAlpha? I’ve had sort of a mixed bag on my articles there. On that email list that I use to send out my own letter to investors - there’s a direct correlation between people reading something I post on SeekingAlpha and then signs up for the email list on my own site, which has been great. The downside of it is that you’re posting stuff on SeekingAlpha and it feels like every time you do that - prepare to spend eight hours just responding to the comments, many of which are sometimes kind of inane. So, I do think it has been useful in the past in finding kind of the right kind of investor… sophisticated folks who want to learn more about the companies that we invest in, but perhaps they’re just not investing professionals. So, there has been some clear utility to that. My issue, I suppose, is that it hasn’t been really sustainable because I feel like the amount of effort I want to put into something that’s going to be seen by that many folks, it’s hard to justify. It’s a ton of work, so it’s good and bad. Anybody else have an opinion one way or the other on SeekingAlpha? Or even VIC or even SumZero? Anything along those lines?

Cale:

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Gopal:

Yeah, Gopal here. I had the same experience. SeekingAlpha… yeah, it will send a little bit more traffic to the Website and things like that, but I haven’t seen anything substantial or positive in traction there yet. I was also going to say what was not working very well. I will tell you that I was using MeetUp.com to kind of set up local meet-ups. I thought there was value in things like that, but that doesn’t work well, even if you specify clearly the focus and value of investing, a lot of the folks who show up are people generally looking for a quick idea or quick system or trading system and things like that. So that MeetUp.com… that didn’t work out for me.

Cale:

Gotcha. I think under that same theme, under the category of things that don’t work well, I would probably put ‘putting ads in local newspapers.’ I did do a lot of that the first year or two, and I guess I sort of justified it in that I’m probably competing at least at a high level with the Merrill-Lynches and the Morgan-Stanleys that are down here…and to be clear, I don’t feel I am competing with those guys, but I think investors that don’t know the difference between our business models think I do. But those ads just seemed a lot like throwing money away and they never really made the phone ring. I know people were seeing the ads. I’d run into them in the Winn-Dixie and they’d comment on it or they’d at least say they noticed that things were going well. But it was, I guess, frustratingly inefficient in terms of really kind of converting anybody to become an investor. So that would be under my ‘it wasn’t really worth it’ column. One of the other things I do want to do this year, though, is get a little bit more into trying out online ads again. I kind of dabbled with this in the past and want to give Google AdWords another go. I have a little bit more help and a little bit of extra income at this point that I can kind of divert to building a real sales funnel, at least online, since optimizing that landing page and putting at least a little bit of money into AdWords every month just to kind of kick the tires again. What I love about that whole idea is it’s very efficient, and by efficient, to be clear, I think you can potentially acquire new investors at a very low cost, which is the whole reason you’re going to do it, but again, there is a whole new learning curve in terms of figuring out how AdWords works and all that. So, I do plan to rely on some other folks and for what it’s worth I will keep you guys posted on how that works. The last thing I’d throw out under this heading, unless anybody else wants to jump in, is that SumZero in particular has been really good to me and my firm the last year or so. I don’t post on VIC, Value Investors Club, at all anymore. SumZero I like much more compared to VIC personally speaking. I just don’t care for the anonymity of VIC, but my personal bias aside, SumZero has started to do events, what I think they ended up calling“invest pitches.” I’ve posted a couple of things on SumZero last year. The guys seemed to like them. I got invited last November by the SumZero folks to what was really the inaugural Invest Pitch event. That was at Columbia University up in New York City, and they basically gave you three minutes. They packed the room…about 200 people in there. Actually both of the Winkelvii were 9
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there, and if you don’t know SumZero, the guy who runs SumZero, Divya Narenda, was the third guy in that Social Network movie that Zuckerberg screwed, essentially. Those guys were there and long story short, it was a good experience. The phone didn’t necessarily ring after the fact, but I mean it’s just good to meet other value managers if nothing else. And I think if SumZero starts to do that this year, they’re going to do it in other locations. Some would be near you guys. And my attitude is, look, it didn’t hurt. If you’re doing the work anyways, post it and just kind of see where it goes. And they may have more success in finding investors for the funds that present in areas than Manhattan. I’m not sure how many people were there at that first event to steal your ideas as opposed to actually invest with you, but if you’re not on SumZero, I would consider it based on just that. All right. Let’s go to that next bullet… operations in terms of tools and best practices for operations. I would open that up to whoever wants to contribute. In the meantime, I would also say that if anybody has a need for interns, either currently or feel like you will in the summer, please shoot me an email offline or let me know, because I get a pretty steady stream of resumes from guys in their senior year of college - or some of them may even be in MBA programs - that are just dying to do an internship with a value fund somewhere, or with a firm that really kind of puts its money where its mouth is in terms of investing in its own funds. So, please let me know. For logistics reasons, it’s not really that easy to work with interns down in the Keys…it’s a little bit of a remote area…but some of these are really good caliber interns. So if you want to talk to them or at least consider working with them, let me know. I’m happy to pass those resumes on. Anything specifically on operations? Any comments, thoughts, or complaints about anything on the operational side? One of the big things that we all probably will struggle with or have struggled with in terms of launching a Spoke is just the sheer volume of work that needs to be done independent of researching securities. So, at this point I’ve got a fairly systematic way to do lots of stuff that I’ve talked about in the past, and happy to rehash some of that here if needed. Does anybody have any pressing issues? Gopal or Dustin, do you want to discuss anything under the operational heading? Gopal: Compliance is one of those things. Most of the tools I use have been outlined in the startup presentation that you give. The only thing I have changed recently is for choosing maybe a backup service for like Facebook, Linked In, Twitter. I have been using Smarsh. It’s a data service I used to use to backup files, but then they used to support certain things, and they stopped supporting three of them, so it’s just getting difficult. So I need something like Smarsh, but that does a cleaner job of keeping track of all those social media interactions. 10
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Cale:

Yeah, gotcha. I used Smarsh, too, Gopal, but as we speak I’m actually in the process of having some intro phone calls with a firm that’s called Global Relay. They were actually introduced to me by MarketCounsel, and at this point what it seems like is they can provide all that same functionality on the compliance side that Smarsh did and specifically providing that third-party access to email as needed, backing up the Linked In and Twitter accounts, and even the Web archiving service. They can do similar things but just at a cheaper price point. So, right away they’ve got my attention there. One of the other things I’d throw out there for consideration, and I have not looked at these guys closely yet is a company called PageFreezer.com, and they specialize in web archiving… it’s software-as-a-service service that will back up your Website for you in real time, so there’s a little bit of overlap in what Smarsh does and what PageFreezer can do if you’re using them for Web archiving specifically. And let me just pause for a sec: one of the requirements is that as an RIA we need to be able to… and I’m paraphrasing here… prove what you’ve had posted on your Website at any given point in the past, conceivably because it’s considered advertising. You can use services like Smarsh or PageFreezer and subscribe to a Website archiving service that has lots of bells and whistles, i.e., you can log in and really figure out any date/time stamp a regulator or auditor might want to check. You can go right there and say, well, this is actually what we had on the Website at the time. Also, under that operational bullet, I think there’s probably a lot of overlap between that and the compliance one, too. There’s so much of my own processes are really driven by compliance and vice versa that they’re kind of intertwined. I do again want to underscore… and they should be paying me for saying this, I guess. I’m really enjoying working with MarketCounsel for reasons I talked about earlier. It’s far more expensive than RIA in a Box, but to the extent I can help pass on the best nuggets to you guys at a cost that resembles zero, then you can buy me a beer at the next conference or something. But that has been a good thing for me for sure. Let me just open it up at this point to anything else on this agenda in those remaining three or four categories, whether it’s operational, compliance, anything related to communications or clients, research ideas. Again, I’m going to get another slug of coffee if anybody wants to get into any of those things.

Dustin: Cale: Dustin:

Hey, Cale, this is Dustin. Hey, Dustin. How are you? Good, good. Hey, I appreciate you putting the call on. Great to hear from you and Gopal and any of the other fellows out there. Nice to be in contact. One thing I had just kind of wondering when it comes to the difference between an overall financial planner versus a fund manager, what are other people experiencing? Because I find 11
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most of my marketing and people I meet is word of mouth with current investors and friends. And a lot of the people I meet with, they really don’t have a lot of familiarity with financial planning, but I find that they need it. And where I can fill a niche for them certainly and manage a portion of their money with the Spoke Fund®, they really need that additional help. So just as kind of doing my job, I really need to fill them in and say, “You need to meet with a planner, and make sure you have your overall bird’s eye view kind of taken care of as well.” The way I handle that now is just that I kind of have a pool of friends and guys that I trust that do that and kind of pass the names along. I don’t really endorse anybody but give people a chance to meet those guys. But what are other people’s experiences with that? Is there any bridging of the gap? Or is that kind of what other people do, too? I’m sort of throwing that out there... Cale: Yeah, I’ll throw my own two cents in there and hopefully some other guys do, too. I think it’s a great point. It’s one of those things again where the average sort of Joe Investor on the street doesn’t know what a fiduciary does. They may think that I compete with a Morgan Stanley or the Merrill Lynches of the world, but the reality is that I don’t, and if any of my guys need any help that is financial related, then I really don’t ever want to tell them, “I don’t know where you should go.” So over the course of the last year, basically, I have a couple of sort of go-to fee-only planners that I’m comfortable and confident in referring clients to, and by referral I just mean, “Here’s three guys that I know and trust and here’s a little background on each. Feel free to reach out to any one of them.” But, yeah, not endorsing them. And it has worked well with those planners. They will go as far as doing a full-blown asset allocation, but then the client will come back to us to actually implement it. So, I do now have a couple of what I just call private accounts. Some of that money is in Spoke Funds, but for some of these people, it’s just not the right profile, so that “get your plan done by one of these guys, and implement it here” appears to work well. Again, these are fee-only planners. They’re not selling my guys anything, but they are coming up with comprehensive plans, specific asset allocations, and then the client just comes back to me to start implementing. And also when you think about it, it solves a problem from the client’s perspective, because a lot of times my sense of it is, even if they go find a fee-only planner to do a plan, they can get the plan and it could be 15 pages long and there’s just nowhere to implement it. Sometimes they don’t know any better and they take that plan and they go walk into Merrill Lynch, but the Merrill guy has other ideas. So, that seems to working well. If you’re going to start getting the hourly billing specifically like a feeonly financial planner works, I mean, down here, it’s just a demographic issue. You just can’t possibly build a business around hourly planning rates unless you just charge something absolutely ridiculous, which is just contrary to being a fiduciary, in addition to a poor business decision.

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So, that’s kind of how we do it, and probably how we always will do it, but it’s not to say in other areas, bigger cities, up where you are, maybe it makes sense to sort of more formally bring a planner in-house for just that sort of reason. I expect there’ll be a lot of different answers, depending on where you are. Dustin: Cale: Gopal: Yeah, okay, right. And Gopal, has that been an issue for you all? Do you get approached for that or get inquiries about more financial planning related questions? Actually, I haven’t run into many such cases, but again, my practice is pretty small right now. A few cases that have come in, I just told them that I don’t do the financial planning part and they have to do that planning at some other planner and the equity portion I can take care. So it isn’t in many cases for me. All right. Thank you. Well, let’s knock out that last block then, since we’ve got a lot of introverts on the call. That’s fine. I empathize with you. Let’s jump down to that bullet point about things that improve and/or help spread the word. Specifically with regards to website changes, standardized literature, those are two areas in particular where I feel like I’ve probably been talking about long enough that shame on me for not actually making some tweaks to the website and kind of building out the library and stuff that Spoke Fund® managers can then share with their clients on the marketing side. If you have specific ideas you can surface them now, or follow up offline - either way. My sense of it, too, is that the part of the FundLaunch conference that I’ve done in the past the people really like has been the second morning when folks present your best ideas. Just about everybody I’ve talked to quite frankly who’s interested in being a Spoke Fund® guy is a value investor. I think there’s just something related to ethos of both…that Venn diagram you can kind of color in the middle of both circles. But we could, for instance, do that more frequently online on calls like this, or with better sounding lines and some real presentation material. More broadly, does anybody have any specific burning ideas about things that we should improve or other ideas in general along those lines? Any of those things? New tools that we might need to roll out? Dustin: I really loved the conference with the best ideas, the portion that we did, and just as much for me to help round up some of my own ideas as much as anything. If on the actual Spoke Fund® website, if you are able to get half a dozen of us maybe to kind of throw out an investment pitch and just post it there, that would be great and easy to implement. To be honest, I’m sort of a big Mohnish Pabrai fan because he’s willing to admit that he copies a lot of other people’s ideas. I’m out there browsing all the time, trying to find good ideas to copy, and if half a dozen guys threw out good ideas, I’ve got to think that would get a lot of traffic for everybody involved and it doesn’t 13
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Cale:

cost a lot of money, and you’ve already got the Spoke Fund® website maybe to handle that. Cale: Gopal: Yeah, okay. That’s easy enough to do. Appreciate that. This is Gopal. I would also say the same thing. I think the best ideas conference, probably you can do it online the virtual way probably and that could be a good idea to keep us connected, as well as bounce off ideas off each other. The only other thing, I think you mentioned already. Some kind of literature, I was thinking, like: What is Spoke Fund®? I know we can tell people go to the Website, but if we can create some one-page or two-page brochure kind of thing, which everybody can use, that can be another useful thing. Roger that. Yeah, yeah. Bump that up on the list. Okay. I think those two things are the main things I was thinking. Okay, gotcha. I’m still scribbling some notes down. Yeah, good. All right. Both those seem pretty straightforward and easy to implement, so I should be able to do that. How about… let’s just kind of circle back to that last and final bullet there, on a regular conference call schedule. Again, I think I’m going to make a motion to maybe use a service other than FreeConferenceCall.com next time, whether it’s Webex or something a bit more formal. I know, Gopal, you mentioned the Google Hangout thing. Just in terms of general frequency though, if anyone has an opinion about how often they would like to do similar things like this, let me know. And obviously, the agenda would change every time. Is monthly too much? Quarterly sound about right? What do you guys think? And Dustin and Gopal, I guess I’ll pick your brains because you seem to be stepping forward most here. Gopal: Cale: Dustin: Yeah, I was thinking probably quarterly would be a good idea. Okay. Yeah, I think quarterly sounds about right, and maybe if you’re going to do the conference in the fall, maybe you only have three conference calls and then the inperson conference. Sort of plan that out and not get too much on your plate in one area of the year.

Dustin: Cale: Dustin: Cale: Gopal: Cale:

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Cale:

Gotcha, okay. I do think there’s value in doing this. Having the message board on the Spoke Fund® site was partially to be able to kind of kick me out of the loop and let you guys talk directly to each other, but again, it’s suffered from just a general lack of attention on my part. But between all of us and the in-person conference, if we do three conference calls a year and maybe try to reinvigorate that message board, maybe things aren’t so dependent on me. And the good news is, now there’s enough others of you out there doing this that people don’t necessarily have to wait for me to get back to give an answer. So yeah, I’ve got to be able to tweak the forums more so people can get that info from you guys, too. So, we’ll figure that out. Cool. Okay. Anything else? Anybody else have anything burning they want to discuss? Any ideas? Anything at all before we wrap up? All right. I will take that as a no. If you do and you want to reach out to me offline, the easiest email address to reach me at, or at least the one that’s easiest to pronounce, is caleinthekeys@gmail.com. Feel free to fire away with any ideas and stay tuned to the SpokeFund.com blog. I’ll try to put some more info and announce some of the things that I’ll try to do in the not too distant future on there. It’s been good to reconnect here even if somewhat superficially, and please let me know if I can be of help to any of you guys. Until next time, thanks again for dialing in. (END)

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