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General: References to “Morgan Stanley” throughout refers to Morgan Stanley Smith Barney LLC. Morgan Stanley is both a registered broker-dealer and investment adviser.
Your Morgan Stanley Access Investing (“ MORGAN STANLEY ACCESS INVESTING”) account is a discretionary investment advisory account. Morgan Stanley is responsible for implementing the model portfolio asset allocations in your MORGAN STANLEY ACCESS INVESTING account, as well as any reasonable restrictions you may impose.
This material is provided for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or to participate in any trading strategy.
Morgan Stanley is a member of SIPC. It is not a bank. Where appropriate, Morgan Stanley Smith Barney LLC has entered into arrangements with banks and other third parties to assist in offering certain banking related products and services.
Morgan Stanley Smith Barney LLC is a registered Broker/Dealer, Member SIPC, and not a bank. Where appropriate, Morgan Stanley Smith Barney LLC has entered into arrangements with banks and other third parties to assist in offering certain banking related products and services.
Investment, insurance and annuity products offered through Morgan Stanley Smith Barney LLC are: NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED | NOT A BANK DEPOSIT | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Differences between a brokerage and an investment advisory relationship:
You should understand the differences between a brokerage and advisory relationship. When providing you brokerage services, our legal obligations to you are governed by the Securities Act of 1933, the Securities Exchange Act of 1934, the rules of self-regulatory organizations such as the Financial Industry Regulatory Authority (FINRA), and state securities laws, where applicable. When providing you advisory services, our legal obligations to you are governed by the Investment Advisers Act and applicable state securities laws. These latter advisory obligations govern our conduct and disclosure requirements, creating a legal standard which is referred to as a “fiduciary” duty to you. Please call the help desk if you have questions about your rights and our obligations to you, including the extent of our obligations to disclose conflicts of interest and to act in your best interest. For additional answers to questions about the differences between our advisory and brokerage services, please visit our web site at http://www.morganstanley.com/ourcommitment/ or contact us at 866-866-7426.
Morgan Stanley’s Global Investment Committee:
Morgan Stanley Wealth Management's Global Investment Committee provides guidance on asset allocation recommendations through the creation and maintenance of the model portfolios called the GIC Asset Allocation Models. The GIC Asset Allocation Models have both strategic allocations (seeking to maximize returns in the long run) and tactical allocations (seeking to maximize returns over a shorter period). The asset allocation recommendations in the GIC Asset Allocation Models are then implemented by us in your separately managed MORGAN STANLEY ACCESS INVESTING Program account, tailored to your specific financial needs and situation, your risk tolerance and subject to any reasonable investment restrictions imposed by you.
The GIC has formed in August 2009 and is currently made up of senior professionals from Morgan Stanley and its affiliate, Morgan Stanley & Co. LLC.
The GIC Asset Allocation Models are not available to be directly implemented as part of an investment advisory service and should not be regarded as a recommendation of any Morgan Stanley investment advisory service. The GIC Asset Allocation Models do not represent actual trading or any type of account or any type of investment strategies and none of the fees or other expenses (e.g. commissions, mark-ups, mark-downs, advisory fees, fund expenses) associated with actual trading or accounts are reflected in the GIC Asset Allocation Models which, when compounded over a period of years, would decrease returns. Performance of the GIC Asset Allocation Models should not be taken as a reflection of the performance of accounts managed by Morgan Stanley, and because the GIC Asset Allocation Models are not themselves investable, among other factors, the performance of your MORGAN STANLEY ACCESS INVESTING Program account may differ materially.
Information used by us:
Our calculation of projected hypothetical performance is based in part on information provided by you, including related to assets held in one or more of your Morgan Stanley accounts as well as your accounts custodied elsewhere, as well as certain third party sources which Morgan Stanley believes to be reliable. However, Morgan Stanley makes no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data such third party sources provided and shall not have liability for any damages of any kind relating to such data.
Morgan Stanley will not verify any external holdings or account information. The information contained herein is subject to, and does not supersede the confirmations and account statements you receive from us and/or your external custodian. Values shown in your official account statement may differ from the values reflected due to, among other things, different reporting methods, delays, market conditions and interruptions. If there are discrepancies between your official account statement and this document, rely on your official account statement.
The external account information used to produce this analysis has been provided by you. This information as well as your Morgan Stanley account information in this analysis, is approximate and subject to updating, correction and other changes. We are not obligated to notify you if information changes.
How we calculate your MORGAN STANLEY ACCESS INVESTING Program account actual performance returns:
In addition to projected hypothetical performance, actual performance returns for your MORGAN STANLEY ACCESS INVESTING Program account will be available to be viewed by you. The actual performance returns include all cash and cash equivalents, are time weighted, annualized for time periods greater than one year and include realized and unrealized capital gains and losses and reinvestment of dividends, interest and income.
The actual performance shown is gross of fees – meaning it does not take into account the fees that would be charged to the account. However, your account will be charged an investment advisory fee, so your returns would differ from - and be lower than - those shown. The impact of investment advisory fees can be material. These investment advisory fees are deducted quarterly and have a compounding effect on performance, which can be material. For example, for an account with an annual fee of 1%, if the gross performance is 5%, the compounding effect of the fees will result in a new annual compound rate of return of approximately 3.95%. After a three-year period with an initial investment of $100,000, the total value of the client’s portfolio would be approximately $115,763 without the fee and $112.337 with the fee. Your account may also be charged other fees and expenses. Please refer to the MORGAN STANLEY ACCESS INVESTING Program ADV Brochure for further information about applicable fees. Past performance is not an indication or a guarantee of future results.
Investment Earnings refers to a combination of the income received and total portfolio value increase or decrease, excluding net contributions and withdrawals, over the reporting period.
Net Contributions/Withdrawals refers to the net value of cash and securities contributed to or withdrawn from the account(s) during the reporting period. Net contributions and withdrawals may include advisory fees for advisory accounts.
Time Weighted Return means a return calculation that measures the investment performance of a portfolio over the reporting period. Time weighted returns do not include the impact of client contributions and withdrawals and therefore, may not reflect the actual rate of return the client received. Time weighted returns isolate investment actions and can be compared to benchmarks and used to evaluate the performance of a manager.
Projected Performance Results using a Monte Carlo Simulation:
IMPORTANT: The projections or other information generated by Morgan Stanley Access Investing regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results.
The Monte Carlo simulation provides projected, hypothetical performance of the investment model you have selected. It does not reflect the performance of an actual portfolio, investment or account. It reflects actual historical performance of selected indices on a real-time basis over a specified period of time representing the GIC current strategic allocations. The calculation of the performance of these current strategic allocations assumes reinvestment of dividends and interest at net asset value without taxes and also assumes the annual “rebalancing” of the weighting of the asset class benchmarks back to the current strategic allocation. This hypothetical model portfolio performance is likely to differ from your actual investments in your account.
The historical risk-and-return information used in the Monte Carlo simulation includes estimated asset class returns based upon the weighted average of the actual returns of the respective indexes that are representative of each such asset class.
The forward-looking capital market assumptions used in the Monte Carlo simulation are set by Morgan Stanley’s Global Investment Committee (GIC). The projected performance results reflect the deduction of annual advisory fee of 1%. Other fees and expenses, including ones related to your investments in mutual funds and exchange traded funds, are not reflected in these projected performance results or other expense. Had the results reflected these costs, the hypothetical projected performance would have been lower.
Monte Carlo simulations are used to show how variations in rates of return each year can affect your results. A Monte Carlo simulation calculates the results of your strategy by running it many times, each time using a different sequence of returns. Some sequences of returns will give you better results, and some will give you worse results. These multiple trials provide a range of possible results, some successful (you would have met all your goals) and some unsuccessful (you would not have met all your goals). The percentage of trials that were successful is shown as the probability that your strategy, with all its underlying assumptions, could be successful. The Results Using Monte Carlo Simulations indicate the likelihood that an event may occur as well as the likelihood that it may not occur. In analyzing this information, please note that the analysis does not take into account actual market conditions, which may severely affect the outcome of your goals over the long-term.
No investment strategy or allocation can eliminate risk or guarantee investment results. It is important to remember that future rates of return can't be predicted with certainty and that investments that may provide higher rates of return are generally subject to higher risk and volatility.
The actual rate of return on investments can vary widely over time. This includes the potential loss of principal on your investment. You should carefully consider several important factors when making asset allocation decisions using projected investment performance data based on assumed rates of return of indices: Indices illustrate the investment performance of instruments that have certain similar characteristics and are intended to reflect broad segments of an asset class. Indices do not represent the actual or hypothetical performance of any specific investment, including any individual security within an index.
Although some indices can be replicated, it is not possible to directly invest in an index. It is important to remember the investment performance of an index does not reflect deductions for investment charges, expenses, or fees that may apply when investing in securities and financial instruments such as commissions, investment advisory fees, sales loads, fund expenses, or other applicable fees.
Another important factor to keep in mind when considering the historical and projected returns of indices is that the risk of loss in value of a specific asset, such as a stock, a bond or a share of a mutual fund, is not the same as, and does not match, the risk of loss in a broad asset class index. As a result, the investment performance of an index will not be the same as the investment performance of a specific instrument, including one that is contained in the index. Such a possible lack of “investment performance correlation” may also apply to the future of a specific instrument relative to an index. For these reasons, the ultimate decision to invest in specific instruments should not be premised on expectations that the historical or projected returns of indices will be the same as those for specific investments made.
Morgan Stanley Access Investing – Assumptions and Limitations:
The information you provided about your assets, financial goals, and personal situation are key assumptions for the calculations and projections in this material. Every individual’s financial circumstances, needs and risk tolerances are different. The hypothetical projected returns or income produced by Morgan Stanley Access Investing is based on the information you provided to us, the assumptions you have provided and the other assumptions made by Morgan Stanley indicated herein. Please review all the information thoroughly to ensure that it is correct and complete before accepting the recommended investment model. Even small changes in assumptions can have a substantial impact on the results shown in this material. The information provided by you should be reviewed periodically and updated when either the information or your circumstances change. Morgan Stanley has no responsibility and is under no obligation to monitor or update this material in the future unless expressly engaged by you to do so at that time.
Financial forecasts, rates of return, risk, inflation, and other assumptions may be used as the basis for illustrations in Morgan Stanley Access Investing. They should not be considered a guarantee of future performance or a guarantee of achieving overall financial objectives. All results use simplifying estimates and assumptions. No tool has the ability to accurately predict the future, eliminate risk or guarantee investment results. As investment returns, inflation, taxes, and other economic conditions vary from the assumptions used by the Morgan Stanley Access Investing investment analysis tool, your actual results will vary (perhaps significantly) from those presented herein.
The assumed return rates utilized in Morgan Stanley Access Investing are not reflective of any specific investment and do not include any fees or expenses that may be incurred by investing in specific products. The actual returns of a specific investment may be more or less than the returns used in Morgan Stanley Access Investing. The return assumptions are partially based on historic rates of return of securities indices which serve as proxies for the broad asset classes. It is not possible to directly invest in an index. Moreover, different forecasts may choose different indices as a proxy for the same asset class, thus influencing the return of the asset class. Morgan Stanley Access Investing results may vary with each use and over time.
Hypothetical, Projected Performance and Its Limitations:
Any projected returns or income referenced is based upon certain market projections effective as at today’s date only and can change at any time. Such projected returns and income are hypothetical, do not reflect actual investment results, and are not guarantees of future results. They are referenced for illustrative purposes only. Morgan Stanley does not represent or guarantee that the projected returns or income referenced will or can be attained.
Hypothetical performance results have inherent limitations. There are frequently large differences between hypothetical performance and actual performance results subsequently achieved by any particular asset allocation or trading strategy. Hypothetical performance results do not represent the investment performance of actual portfolios trading in a certain strategy and are generally designed with the benefit of hindsight and are created on the basis of certain assumptions about short- and long-term risk and return forecasts of asset classes and global economic outlooks.
We make no representation or warranty as to the reasonableness of the assumptions made, or that all assumptions used to construct this projected performance have been stated or fully considered. To the extent that the assumptions made do not reflect actual conditions, the illustrative value of the hypothetical projected performance will decrease. The projected performance shown may under or over compensate for the impact of actual market conditions and other factors, such as expenses. It cannot account for all factors associated with risk, including the impact of financial risk in actual trading or the ability to withstand losses or to adhere to a particular trading strategy in the face of trading losses. There are numerous other factors related to the markets in general or to the implementation of any specific trading strategy that cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. For example, the risk of loss in value of a specific security, such as a stock or bond, is not the same as, and does not match, the risk of loss in a broad-market index. As such, this projected returns or income may not be a meaningful tool in determining how a strategy will actually perform. Similarly, trading certain types of securities, such as international and emerging market, high yield and derivatives may have unique trading risks. As a result, the historical returns of an index will not be the same as a historical return of a specific security, including one that is contained in the index. This lack of “volatility correlation” will likely continue to apply in future returns of a specific security relative to an index.
General Risks of Investing:
Return and principal value of investments will fluctuate and, when redeemed, may be worth more or less than their original cost. Investments are not FDIC insured or bank guaranteed, and investors may lose money. There is no guarantee that past performance or information relating to return, volatility, style reliability and other attributes will be predictive of future results. The value of an investor's shares of any fund will fluctuate and, when redeemed, may be worth more or less than the investor’s cost.
Return and principal value of investments will fluctuate and, when redeemed, may be worth more or less than their original cost. Investments are not FDIC insured or bank guaranteed, and investors may lose money. There is no guarantee that past performance or information relating to return, volatility, style reliability and other attributes will be predictive of future results. The value of an investor's shares of any fund will fluctuate and, when redeemed, may be worth more or less than the investor’s cost. Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.
You should note that investing in financial instruments carries with it the possibility of losses and that a focus on above-market returns exposes the portfolio to above-average risk. Performance aspirations are not guaranteed and are subject to market conditions. High volatility investments may be subject to sudden and large falls in value, and there could be a large loss on realization which could be equal to the amount invested.
Asset allocation, diversification and rebalancing do not assure a profit or protect against loss. There may be a potential tax implication with a rebalancing strategy. Please consult your tax advisor before implementing such a strategy.
Non diversification is attributed to a portfolio that holds a concentrated or limited number of securities, a decline in the value of these investments would cause the portfolio’s overall value to decline to a greater degree than a less concentrated portfolio. Portfolios that invest a large percentage of assets in only one industry sector (or in only a few sectors) are more vulnerable to price fluctuation than those that diversify among a broad range of sectors.
Value and growth investing also carry risks. Value investing involves the risk that the market may not recognize that securities are undervalued and they may not appreciate as anticipated. Growth investing does not guarantee a profit or eliminate risk. The stocks of these companies can have relatively high valuations. Because of these high valuations, an investment in a growth stock can be more risky than an investment in a company with more modest growth expectations.
Risks related to investing in Mutual Funds and Exchange Traded Funds (ETFs):
Please refer to the MORGAN STANLEY ACCESS INVESTING Program Form ADV Brochure for an explanation of the fees and charges that will apply to your investments in mutual funds and ETFs.
All funds are sold by prospectus, which contains more complete information about the fund. As with any fund investment, you should consider the investment objectives, risks and charges and expenses of the funds carefully before investing. Additionally, the prospectus of each fund contains such information and other information about the fund. Prospectuses and current performance data are available on our website at www.morganstanley.com.
There is no assurance that a mutual fund will achieve its investment objective. Funds are subject to market risk, which is the possibility that the market values of securities owned by the fund will decline and that the value of fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in a mutual fund. Each fund's ability to achieve its investment objective depends upon the accuracy of the fund manager’s analysis of macroeconomic trends and asset class valuations and its ability to select the appropriate mix of underlying securities. There is risk that the fund manager’s evaluations and assumptions regarding macroeconomic trends, asset class valuations and selected underlying securities may be incorrect in view of actual market conditions.
An investment in an exchange-traded fund (ETF) involves risks similar to those of investing in a broadly based portfolio of equity securities traded on exchange in the relevant securities market, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in stock prices. Investing in an international ETF also involves certain risks and considerations not typically associated with investing in an ETF that invests in the securities of U.S. issues, such as political, currency, economic and market risks. These risks are magnified in countries with emerging markets, since these countries may have relatively unstable governments and less established markets and economics. For specifics and a greater explanation of possible risks with ETFs, please consult a copy of the ETFs prospectus. Investing in sectors may be more volatile than diversifying across many industries. The investment return and principal value of ETF investments will fluctuate, so an investor’s ETF shares (Creation Units), if or when sold, may be worth more or less than the original cost. ETFs are redeemable only in Creation Unit size through an Authorized Participant and are not individually redeemable for a Fund.
An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Individual retirement accounts and other retirement plan clients that participate in Morgan Stanley advisory programs may be prohibited from purchasing investment products managed by affiliates of Morgan Stanley.
Tax-Qualified and Tax-Deferred Assets:
If your current portfolio contains assets which are tax-qualified or tax-deferred under the Internal Revenue Code, you should consider the tax effects of any portfolio withdrawal from such amounts, as opposed to from fully taxable accounts, with your tax and/or legal advisor(s). Generally speaking, the withdrawal of tax-qualified or tax-deferred amounts can result in income tax liability where no such liability would exist if the amounts had been withdrawn from a taxable account. Furthermore, (a) tax penalties can occur when such assets are withdrawn prior to age 59½, (b) such withdrawals can have detrimental effects on specific tax planning strategies (e.g., “72(t) payments”), and (c) certain qualified or tax-deferred assets are eligible for or receive special treatment upon withdrawal (e.g., net unrealized appreciation treatment, eligibility for rollover). The performance of tax-managed accounts is likely to vary from that of non-taxed managed accounts.
Tax laws are complex and subject to change. Morgan Stanley, its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “fiduciaries” (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Morgan Stanley. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account.
We monitor your account:
After you have accepted the investment model we have recommended and your account assets are invested, we will periodically monitor your account's performance. We believe that an investment management program does not end with the initial selection of a strategy. Periodic evaluation and monitoring of your account and your long-term investment objectives help you to make periodic adjustments. Morgan Stanley will also provide you with periodic reports showing your account performance.
Asset Allocation and Rebalancing:
Asset Allocation refers to how your investments are diversified across different asset classes, such as stocks, bonds, cash and alternative investments.
Rebalancing describes the discipline of selling assets and buying others to match the target weightings of an asset allocation model. Because assets increase and decrease in value over time, the percentage amounts of assets invested in each class will tend to vary from their original target weightings.
Performance of an asset class within a portfolio is dependent upon the allocation of securities within the asset class and the weighting or the percentage of the asset class within that portfolio. Potential for a portfolio’s loss is exacerbated in a downward trending market. A well-diversified portfolio is less vulnerable in a falling market.
The asset class hypothetical return assumptions leveraged in the Morgan Stanley Access Investing are based on what Morgan Stanley’s GIC believes are reasoned estimates of drivers of capital market returns and historical relationships. As with any forecasting discipline, the assumptions and inputs underlying Morgan Stanley GIC’s forecasting process may or may not reconcile with, or reflect, each investor’s individual investment horizon, risk tolerance, capital markets outlook, and world view. For these reasons, and because forecasting methods are complicated, investors should keep in mind that asset allocation, diversification, and rebalancing do not assure a profit or protect against loss in a declining market.
Bank Deposit Program:
Under the Bank Deposit Program, cash balances held in account(s) at Morgan Stanley are automatically deposited into an interest bearing FDIC‐insured deposit account(s), at Morgan Stanley Bank, N.A. and/or Morgan Stanley Private Bank, National Association, each a national bank, Member FDIC, and an affiliate of Morgan Stanley Smith Barney LLC. Detailed information on federal deposit insurance coverage is available on the FDIC’s website (https://www.fdic.gov/deposit/deposits/). Cash balances generally include the uninvested cash in a client’s account(s) minus certain items such as purchase transactions due to settle within a specified time period, other charges to a client’s account(s), and cash balances that are designated as collateral for a client’s obligations.
Investment, insurance and annuity products offered through Morgan Stanley Smith Barney LLC are: NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED | NOT A BANK DEPOSIT | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
This is not a financial plan:
This material is not a financial plan. A financial plan generally seeks to address a wide spectrum of your long-term financial needs, and can include recommendations about insurance, savings, tax and estate planning, and investments, taking into consideration your goals and situation, including anticipated retirement or other employee benefits. Morgan Stanley will only prepare a financial plan at your specific request using Morgan Stanley approved financial planning software where you will enter into a written agreement with a Financial Advisor. If you would like to have a financial plan prepared for you, please consult with a Morgan Stanley Financial Advisor.
This material provides a snapshot of your current financial position and can help you to focus on your financial resources and goals, and to create a strategy designed to get you closer toward meeting your goal. Because the hypothetical results are calculated over many years, small changes can create large differences in potential future results. You should use this material to help you focus on the factors that are most important to you.
Morgan Stanley Access Investing ® is a registered service mark of Morgan Stanley Smith Barney LLC.
©2017 Morgan Stanley Smith Barney LLC. Member SIPC.
CRC 2066103 3/18.