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

Thanks for dialing in. For those of you I dont know, Im Cale Smith, the managing partner of Islamorada Investment Management down here in the Florida Keys. I dont 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 yearother than having to fly Spirit, I guess. Just a quick heads up - this call is being recorded. Im planning to post a transcript of this call later. There are a number of guys who couldnt make the call but did want to read up or listen to an MP3 afterwards, so at some point early next week, Ill 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 weve had any sort of meeting of the minds regarding Spoke Funds and theres no doubt a ton of stuff to talk about. Im going to try to stick to the agenda in this call, so at this point, anything that comes up that isnt on that agenda but seems worthy of discussion, well 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, its 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 somebodys phone. If you think that might be you and you could mute it, I would appreciate it. If its me, well 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, lets 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. Ive 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 youd rather just lurk and listen. Thats fine, too. Ill 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 dont all step on each other, Ill start and then Im going to ask at least two other guys who I think are also on the call to introduce themselves, and then well go from there. So, again, Im 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 Ill just keep going with it anyway. Retz is really a huge addition to IIM for a lot of reasons. Shes a CFA charterholder. Shes 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, youll 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. Im 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 Ive been running it and Im 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, nows your chance. 2
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Cale:

All right, well, I know there are more than two people on the call, but well just keep rolling. Thats 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. Lets start right in with the rest of the agenda then. Im 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. Theres 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. Theres 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 whove 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 theres 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, Im 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 Ive 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 theres 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, Im not doing that through IIM, Im basically doing that as an independent contractor, so its 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 agois 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 youre 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 its 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 withbut I would summarize all that, I suppose, and say that, all things being equal, Im that much more convinced now that Id 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, Im sure there are differences all across the board on that, but take that, my two cents, for whatever its 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 Im going to intentionally avoid naming names here for just general privacys 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 couldnt really call it an SMA eitherso in his eyes you couldnt call a Spoke Fund separately managed account either, because thats explicitly designed for a client and a Spoke Fund is not. So, theres 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 firms assets, anyway. So, heres 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 firms 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. Thats it, really. Based on the lawyers interpretation of the word fund - and that comes from case law around the 40 Act, because again that word isnt 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 cant 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, Ive been registered in Florida for five years, in Texas for three years, and Im 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 dont see any serious issues with the term, either, but for what its 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, thats 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 Id rather, say, buy a boat than pay that kind of bill, although well just have to see how things develop with this concept over time. In the meantime, take all that for whatever its worth. Number four on my list of recent developments is in regards to plans for 2014. Im 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, Ill tell you that in 2014 Im 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, Id 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. Lets 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 whats been good and whats been bad of late? Im going to pause for a second and grab a slug of coffee, so feel free to please chime in if you do. Gopal: Ill 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. Im still relatively small so I dont have gangbuster success with it, but thats one thing that works well. The other thing, and I dont 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. Ive 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 Ive 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 Ive seen a good friend in a different business, although still financial services related, have some really good results with it. So thats 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 thats kind of hard to quantify, but its kind of the perennial question I ask myself whenever I sit down to write a blog post, at least on the IIM site. Ill put that one up there, open for debate if anybodys 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? Im 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. Ill 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 thats been good for us. We also do a monthly event called Whats 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 cant come. We do it on the second Wednesday of every month at 7:30 in the morning, and so its 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 thats been on the radio for about 26 years now in Kansas. Im 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 thats actually generated a fair amount of interestenough 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 weve 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 Ive got a specific list of people that have actually attended the events, so I give them a certain email. And so, well do it a month out a save the date. We obviously tout it out at the actual event. Well 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, theyll put it on their calendar. Thats basically the way we do it. I do a Linked In post and a Twitter post. I dont know if anybody sees that, to be honest with you, probably a few people on Linked In. But thats how we do it. Okay. Thank you, Mike. Im going to throw this question out there, too, for anybody else to comment on: How about with regards to posting articles on SeekingAlpha? Ive 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 - theres 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 youre 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 theyre just not investing professionals. So, there has been some clear utility to that. My issue, I suppose, is that it hasnt been really sustainable because I feel like the amount of effort I want to put into something thats going to be seen by that many folks, its hard to justify. Its a ton of work, so its 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 havent 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 doesnt 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 didnt work out for me.

Cale:

Gotcha. I think under that same theme, under the category of things that dont 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 Im probably competing at least at a high level with the Merrill-Lynches and the Morgan-Stanleys that are down hereand to be clear, I dont feel I am competing with those guys, but I think investors that dont 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. Id run into them in the Winn-Dixie and theyd comment on it or theyd 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 wasnt 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 its 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 youre 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 its worth I will keep you guys posted on how that works. The last thing Id 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 dont post on VIC, Value Investors Club, at all anymore. SumZero I like much more compared to VIC personally speaking. I just dont care for the anonymity of VIC, but my personal bias aside, SumZero has started to do events, what I think they ended up callinginvest pitches. Ive 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 roomabout 200 people in there. Actually both of the Winkelvii were 9
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there, and if you dont 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 didnt necessarily ring after the fact, but I mean its just good to meet other value managers if nothing else. And I think if SumZero starts to do that this year, theyre going to do it in other locations. Some would be near you guys. And my attitude is, look, it didnt hurt. If youre 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. Im not sure how many people were there at that first event to steal your ideas as opposed to actually invest with you, but if youre not on SumZero, I would consider it based on just that. All right. Lets 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, its not really that easy to work with interns down in the Keysits a little bit of a remote areabut 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. Im 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 Ive got a fairly systematic way to do lots of stuff that Ive 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. Its 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 its 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 Im actually in the process of having some intro phone calls with a firm thats 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 theyve got my attention there. One of the other things Id 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 its software-as-a-service service that will back up your Website for you in real time, so theres a little bit of overlap in what Smarsh does and what PageFreezer can do if youre 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 Im paraphrasing here prove what youve had posted on your Website at any given point in the past, conceivably because its 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 theres probably a lot of overlap between that and the compliance one, too. Theres so much of my own processes are really driven by compliance and vice versa that theyre kind of intertwined. I do again want to underscore and they should be paying me for saying this, I guess. Im really enjoying working with MarketCounsel for reasons I talked about earlier. Its 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 its operational, compliance, anything related to communications or clients, research ideas. Again, Im 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 dont 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 birds 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 dont really endorse anybody but give people a chance to meet those guys. But what are other peoples experiences with that? Is there any bridging of the gap? Or is that kind of what other people do, too? Im sort of throwing that out there... Cale: Yeah, Ill throw my own two cents in there and hopefully some other guys do, too. I think its a great point. Its one of those things again where the average sort of Joe Investor on the street doesnt 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 dont, and if any of my guys need any help that is financial related, then I really dont ever want to tell them, I dont 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 Im comfortable and confident in referring clients to, and by referral I just mean, Heres three guys that I know and trust and heres 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, its 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. Theyre 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 clients 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 theres just nowhere to implement it. Sometimes they dont 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 youre going to start getting the hourly billing specifically like a feeonly financial planner works, I mean, down here, its just a demographic issue. You just cant 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, thats kind of how we do it, and probably how we always will do it, but its 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 therell 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 havent 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 dont 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 isnt in many cases for me. All right. Thank you. Well, lets knock out that last block then, since weve got a lot of introverts on the call. Thats fine. I empathize with you. Lets 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 Ive 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 Ive done in the past the people really like has been the second morning when folks present your best ideas. Just about everybody Ive talked to quite frankly whos interested in being a Spoke Fund guy is a value investor. I think theres just something related to ethos of boththat 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, Im sort of a big Mohnish Pabrai fan because hes willing to admit that he copies a lot of other peoples ideas. Im out there browsing all the time, trying to find good ideas to copy, and if half a dozen guys threw out good ideas, Ive got to think that would get a lot of traffic for everybody involved and it doesnt 13
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Cale:

cost a lot of money, and youve already got the Spoke Fund website maybe to handle that. Cale: Gopal: Yeah, okay. Thats 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. Im 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 lets just kind of circle back to that last and final bullet there, on a regular conference call schedule. Again, I think Im going to make a motion to maybe use a service other than FreeConferenceCall.com next time, whether its 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 Ill 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 youre 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 theres 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, its 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 arent so dependent on me. And the good news is, now theres enough others of you out there doing this that people dont necessarily have to wait for me to get back to give an answer. So yeah, Ive got to be able to tweak the forums more so people can get that info from you guys, too. So, well 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 thats easiest to pronounce, is caleinthekeys@gmail.com. Feel free to fire away with any ideas and stay tuned to the SpokeFund.com blog. Ill try to put some more info and announce some of the things that Ill try to do in the not too distant future on there. Its 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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