TWST: Please tell us about Destination Wealth Management. Why did you choose the name?

Dr. Yoshikami: Destination Wealth Management is an advisory firm that provides financial advice combined with investment advice. Our firm currently manages more than $1 billion in assets, and I'm pleased to have been recognized by Barron's as one of the top 100 independent financial advisers in the United States in 2009, 2010 and 2011. It's quite an honor.

Regarding our name, our view is that there is a specific path for every client, which is a combination of financial strategy and portfolio investment strategy. Our name clearly reflects what we do for our clients, helping them move toward their destination. Our name reflects our belief that investing should be part of an overall plan.

TWST: Why did you start Destination Wealth Management?

Dr. Yoshikami: I started Destination Wealth Management, quite simply, because I believed then - as I do now - that the financial services industry sometimes forgets to put client interests first. I wanted to do things differently. I wanted to create a firm that focused on open, honest dialogue with clients. I wanted to have a firm where personal relationships based on a true understanding of clients' needs with mutual respect and empathy were the rule rather than the exception.

I also believed that I could build a firm with world-class professionals that were likeminded in their pursuit of advancing the goals of our clients by providing each client with the best investment management and financial advisory services money can buy. That remains one of the driving forces of our firm to this day.

TWST: It sounds like client focus is a central theme for your firm. How do you make sure Destination's clients always receive great service, especially as the firm continues to grow?

Dr. Yoshikami: Good question - and one we hear regularly from prospective clients. It is true that the services we provide are in high demand in the market. However, our client-first priorities are absolute. We simply will not compromise our standards.

In order to do this, we start with a talented team of employees that have joined Destination after spending many years in the industry and come to us looking for a role in a firm which has a strong client-oriented culture. These professionals then specialize at Destination in a role that enables them to focus on the things that they do best.

We have a team of skilled financial advisers - many holding the prestigious CFP designation - that serve as the relationship managers for each of our clients. In this capacity, this team insures that clients have access to the full complement of Destination's advisory services. They also provide comprehensive financial planning services to our clients and communicate how we invest portfolios.
Our investment analysts are a separate team of investment professionals dedicated to conducting security research and developing client portfolios. We conduct original research and our clients benefit from this proprietary research.

In addition, we have a team of trading professionals that focus on making sure each client account accurately reflects the latest portfolio strategies from the research team. They are also responsible to see that portfolios reflect the specific needs of each client based on discussions with their dedicated investment adviser.

Lastly, we have a team of operations professionals that work to provide client support, handle miscellaneous paperwork, offer scheduling help and prepare client reports.

TWST: It sounds as if the firm has a relatively large work force.

Dr. Yoshikami: Well, I suppose we have received our share of criticism from others in our business about the number of employees we have. I further suppose that if one is willing to take shortcuts with the client experience and the level of services one wants to provide to the market, then the criticism might be warranted. However, we are not and never will be interested in those shortcuts. By designing the firm in this way, we know we will never have to.

TWST: So each of your clients receives not only investment management, but also receives financial planning?

Dr. Yoshikami: We believe that the best way to produce an optimal portfolio strategy for a client is to develop a comprehensive financial plan, which clearly identifies each client's realistic, achievable financial goals. Once the plan is in place, we can implement a portfolio strategy that takes only as much risk as is necessary to realize the goals of the client.

TWST: Do your clients pay more for this service?

Dr. Yoshikami: Absolutely not. Our clients pay us an annual fee based on the total assets that we manage for them. All of the financial planning services we offer to our clients are provided on a complimentary basis. Furthermore, we revise our financial plans as necessary for the length of the relationship and those services are always free of charge to our clients.

TWST: Sounds as if you are giving away a valuable service. Why?

Dr. Yoshikami: We believe it is our responsibility to help each and every one of our clients reach - and remain at - their financial destination. We believe it is critical to do all we can to help; a planning strategy helps in moving toward this goal.

TWST: You are extremely client focused, and you said part of the reason you started the firm was you wanted to make sure you're meeting the needs of the client. But what does that mean to you in terms of the way you run the company and the services you provide the clients?

Dr. Yoshikami: It means that we are willing to provide a level of service, a level of planning and advice, personal attention, that many other firms are not able to provide, that do not have the resources that we do or the commitment to this level of service that I believe investors in the long run will demand. They aren't demanding it yet, but they will in 10 years. We have designed a firm that is going to provide the intensity of experience with the financial adviser who really gets to know a client's situation and makes sure that the portfolio is appropriate for them in a way that the competition will adopt to the future, but we're providing today.

TWST: When you say resources, do you mean, specifically, people?

Dr. Yoshikami: I mean people, technology. Our Web site allows for people to look at their portfolio balances, understand our thinking about portfolio strategy. Additionally, we spend quite a bit of time in media and publications, writing and appearing, discussing how we invest portfolios. It allows us not only to communicate to the world, but also to interface with other leading analysts and investment strategists. The information that I have the benefit of gaining in my interaction with these other professionals has brought to bear directly to client portfolios and out of the unique differentiation that other firms simply do not have.

I have the opportunity, whether I'm in London or Singapore or New York, to talk with the leading strategists in the world. And having this direct interaction with these strategists has actually helped in constructing portfolio strategy. That's a huge benefit to our clients.

TWST: What do you believe are the advantages of Destination Wealth Management for your clients?

Dr. Yoshikami: We have an incredible research offering. It allows us to understand what's happening in a global environment and adjust our portfolio strategy for our clients. Combined with this, we're providing credible financial planning that realistically helps clients move toward their goals, combining our world-class investment offering with our planning strategy.

We also communicate on a regular basis, do regular updates through the media and through white papers, and my opinions are well known throughout the investment community on a global basis. Our exposure to interfacing with leading investor professionals around the world in all regions, not just the United States, allows us to develop global conclusions and global solutions for clients.

We try to provide an incredible level of connected personal service to our clients, which is why we have a significant number of staff, all hired with one focus in mind, to provide service to our clients. We provide an offering that is better than what we think is very compelling in the marketplace, which is why we continue to grow at such a strong pace.
Perhaps of greatest importance, we realize investing is not a game but of real consequence to the long-term welfare of our clients. We take our clients' success personally. Their objectives are what we are all about. And our efforts every day are focused on one basic theme - to make a positive impact on our clients' lives. That's what it's all about for us - making a difference in a world filled with uncertainty.

TWST: Sounds as if communication is important to Destination Wealth Management.

Dr. Yoshikami: We are very client centric in all that we do. We are comfortable answering questions - and yes, even the hard questions - from our clients and prospective clients. We are comfortable with client skepticism, which we believe is healthy and keeps us performing at our best. We are comfortable with clients wanting to know how we think and why we think what we think. We believe our clients deserve this level of transparency and access; and frankly, we must be doing something right as our clients repeatedly tell us how our openness is very unique in this industry.

TWST: Let's switch gears to the investment management side of your business, if we may. How would you describe your investment philosophy?

Dr. Yoshikami: Our investment philosophy is one of tactical allocation. We have multiple tiers of how we assess portfolio strategy and investment. For example, we very carefully assess trends in the global economy, and we use this information as an input as we invest client's portfolios. We think it's very important to look at individual assets, but also to take into account the bigger picture and adjust investment strategy accordingly.

As part of our process, we continually ask ourselves which themes we think are likely to play out over the course of the next five years, and those themes guide us when we adjust portfolios. For example, if we think we are likely to remain in a low interest rate environment for an extended period of time, we integrate that conclusion into our analysis as we do our individual security selections.

TWST: So you don't necessarily focus on any specific security type or type of investment or specific sectors. You also are guided by major economic themes?

Dr. Yoshikami: That's right. We tend to be fairly conservative in how we invest, but we are not rigid in our perspective, which means that we don't have only one particular viewpoint. We look at a variety of viewpoints, and we invest based on our assessment of what is appropriate at the time for our clients with consideration given to risk factors and each client's level of comfort.

TWST: Would you talk about the investment process? After you identify themes, what do you do in terms of looking at the specific companies or stocks?

Dr. Yoshikami: We assess the attractiveness of individual stocks in a number of ways. First, we conduct our own fundamental investment analysis of each company we invest in. We analyze the quality of the company's management, the sustainable advantages the company enjoys, the competitive environment of the company, and then we make our own projections of the company's ability to generate free cash flow.

We determine our own estimate of what we believe a stock is worth and then evaluate what might happen if our analysis is wrong. We like to have a solid appreciation for both the potential return as well as the potential loss in a company's stock before we first invest.

We will also seek out the opinions of other market participants - such as Wall Street analysts and buy-side investors - but these opinions supplement rather than supplant our own research. We may also evaluate the recent trading activity of a stock to understand the technical trends that may be affecting a stock price. At the end of the day, Destination's investment committee makes the final determination if a particular security is appropriate for client portfolios.

TWST: Do you use qualitative and quantitative analyses at your firm?

Dr. Yoshikami: We do. We think it's important to have a combination of both. Different types of analyses work well in different situations, and we believe it is advantageous to be flexible on the techniques that one uses. We have found that we make our best decisions when we reach the same conclusion using a variety of valuation approaches.

TWST: What about diversification? Is that important to you?

Dr. Yoshikami: Diversification is very, very important. In particular, given the fact that the global economy is so interconnected, we think it's critical to have diversification not just by asset class, but by geography, capitalization size, as well as types of positions. We don't just buy equities, but we also buy fixed income and commodity assets depending on a client's goals. We think it's important that investors acknowledge that given the global nature of financial markets, correlations among assets, and even asset classes, have moved higher than they have been in the past.

TWST: In general, how many holdings do you like to have in a portfolio?

Dr. Yoshikami: Typically, we hold between 30 and 50 assets in a combination of individual securities, ETF assets and other diversified assets. We believe the diversified positions in our portfolio strategy allow us to introduce very targeted portfolio tilts in a cost-effective and measured way. Typically, our turnover ratio is about 25%, so we tend to manage more to a long-term strategy and we try to consider the tax consequences of our decisions for our clients as well.

TWST: What makes you sell or turnover a portfolio?

Dr. Yoshikami: Portfolio decisions that cause turnover are either an asset has reached its targeted sell price, or something changes in our investment outlook that requires us to allocate money elsewhere. Basically, when we make a change, it's because we think the opportunity is greater for the replacement asset.

TWST: How do you manage risk in a portfolio?

Dr. Yoshikami: Risk is an important part of our overall portfolio management philosophy. We have a belief that there are always events that can happen that one can't anticipate. For that reason, we tend to look at the risk of our portfolios in a number of different ways. While we monitor traditional metrics, such as beta and standard deviation, we also try to avoid having too many investments in a portfolio geared to the same themes, markets, etc. By buying more cash-flow-generating names as part of the portfolio, it can also help to mitigate volatility.

TWST: One major focus for you when you're selecting a portfolio is the macroeconomy. What are the major themes that are impacting your stock selection process right now?

Dr. Yoshikami: An important global theme right now is the current state of the U.S. economy, which is in our view in a slow growth mode. It's going to be a very selective recovery. From an investment standpoint, from a domestic equity standpoint, one needs to be very careful where you invest.

Interest rate scenarios require careful monitoring. Interest rates are at historically low levels, but they are likely to start to rise as economic activity picks up. That impacts the type of fixed income we buy, as well as our investment in commodities, which do well when inflation reappears.

The problems in Europe, which continue to be systemic and will negatively affect European growth for years, impacts our willingness and interest in investing in Europe. We're not terribly enamored with Europe as an investment location at present.

Emerging markets in Latin America as well as Asia, have very high growth rates relative to the United States and Europe, and we think investors need to invest in these locations, which means that one cannot invest how you've invested in the last 30 years because the geographic footprint in terms of economic wealth is changing and investment strategy needs to embrace the changing environment.

TWST: You said your outlook for the U.S. economy is slow growth.

Dr. Yoshikami: Yes, we have a positive view on growth. It will likely be between 2% and 3%, which is a little bit lower than average GDP growth. We think GDP growth is going to be slightly below average over the course of the next several years as the deleverage effect from excess real estate, as well as high credit card debt gets washed out of the system. So GDP growth is going to recover in a positive way, but it is simply going to be a slower growth recovery than we have seen in the past, particularly, relative to recovery.

If you look at GDP growth, it likely will be slightly lower than average. But compared to the average recovery GDP growth, it will be significantly slower because they have such a headwind because of unemployment.

TWST: What about the situation in Europe? How is that impacting your investments?

Dr. Yoshikami: The situation in Europe is going to continue to be very problematic. I think that Europe is probably in for stagnation for years to come. EU leaders are trying to come to grips with all of the weaker nations in the EU, and this will likely reduce the economic growth of the historically stronger nations that have to come up with funds to essentially subsidize their neighbors. So we are not terribly optimistic about Europe's prospect on the midterm simply because there are so many structural problems there.

TWST: Recently, you commented on how Warren Buffett is looking at China as an important part of his opportunity moving forward. Is China important for other investors as well?

Dr. Yoshikami: China is important, but it should not be the only focus in Asia for investors. Too often investors focus on Asia and only think of China, not recognizing there are other countries with different profiles and each of those countries may have a benefit from a portfolio standpoint. So China is, in fact, important.
Warren Buffett is looking at China. We are investing in China, but we're also investing in places like Thailand and Singapore, countries that we think will benefit from emerging market expansion in Asia that are not necessarily export economies, which is, essentially, what China is.

TWST: And what about the U.S.? What are the big pressures there?

Dr. Yoshikami: The U.S. is going to have to deal with high inflation, high unemployment, a lower economic growth rate and a structural transition of the economy as you have people out of work that will likely be out of work for a significant period of time. We think the natural unemployment rate of the United States will be closer to 7% or 8% in the future.

If this plays out, the United States is going to go through an extended period of time during which U.S. GDP growth will fall well inside the historic norm of 2.5% to 3% GDP growth. As this occurs, we believe that companies that have a global footprint, companies that generate high levels of free cash flow and can reward shareholders through high dividend yields, and companies that are in faster-growing sectors of the economy, such as technology, are poised to outperform.

TWST: Are there other sectors you believe provide opportunities given the global economy right now?

Dr. Yoshikami: We think prominent consumer staples companies in all likelihood will do well, particularly those that can maintain their high level of free cash flow and therefore pay attractive dividends to their shareholders. Health care, with its attractive dividend rate, will likely do well.

We also think trade-down names, names that do well in a tough economy where consumers are more frugal, where they are going to shop at more discount stores rather than full price stores, will do well. We think that is going to be a natural consequence of the slowdown in U.S. growth. And technology names on a selective basis make sense.

Energy is an interesting story given the price of oil. Energy is a sector that will likely do well as GDP growth accelerates, as will commodities. Commodities are really the consumables the companies use to manufacture products, whether it's copper or tin or iron. These types of commodity products will likely do well in the long term as GDP growth accelerates.

As emerging market consumption continues to accelerate, they will need to consume these materials. Another area that's of particular interest is gold. Gold has had a significant rally over the last several years. We expect that to continue because of the fear in the market, number one, and because governments are increasingly concerned about investing in U.S. dollars and in euro, given the high level of debt in these countries. For that reason, countries are investing part of their reserves into gold rather than its currency. Likewise again, it's a tangible asset, and tangible assets tend to do well when inflation increases.

TWST: How is the technology sector as a whole doing right now?

Dr. Yoshikami: I think technology is actually going to be a growth area, simply because technology is a sector that helps companies be more efficient. Any sector that will help a company be more efficient in an environment where there will likely be higher unemployment for the long term, in our view, is likely going to be key. So a company like Qualcomm (QCOM) that helps Apple (AAPL) provide faster processors in the wireless space, helps people be more efficient if they're able to access wireless on a more efficient basis. Technology is a sector that helps other companies make money, and that's why technology will do well in a more slow-growth global environment.

TWST: In closing, what's the best advice you would give investors right now?

Dr. Yoshikami: Make sure that you are careful when you allocate your portfolio. Analyze the risks and know exactly what is in your portfolio. I believe that the United States is going to go through an extended period of subpar economic growth, and it is, therefore, prudent to design an investment strategy accordingly.

TWST: Thank you. (LMR)

Michael Yoshikami

CEO, Founder & Chairman

Destination Wealth Management

1255 Treat Blvd.

Suite 900

Walnut Creek, CA 94597

(925) 935-2900

(925) 935-1808 - FAX

(800) 947-3864 - TOLL FREE

(877) 935-1808 - TOLL FREE FAX