June 11, 2015 | Volume 6 | Issue 10

Active investment management’s weekly magazine

Debate over valuations heats up

2015 NAAIM annual conference

Marketing the unrealized potential of 403(b) plans

Fundamentalists vs. technical analysts

Gaining the peer-to-peer advantage

Matthew Gaude

Goodbye, status quo

Advisor perspectives on active investment management

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Investing across the risk spectrum

Actively managed portfolios are appropriate across all risk spectrums. Even the most conservative clients can allocate some of their money to work in equity markets in a very risk-controlled fashion. For the aggressive investor, there are strategies that may be leveraged while still staying in tune with market conditions. For all clients, we look for the right balance that meets their overall planning needs.

LOUD & CLEARJames Franke • Milwaukee, WI Harbour Investments Inc. • Franke Martens Group

3June 11, 2015 | proactiveadvisormagazine.com

LOUD & CLEAR

Gaining thepeer-to-peeradvantage

By Linda Ferentchak

The 2015 NAAIM annual conference highlighted the importance of collaboration

proactiveadvisormagazine.com | June 11, 20154

he investment advisory industry can be a very challenging environment for established advisors, let alone

new entrants. By taking an active management approach, financial advisors potentially step outside the protection of the herd. With a buy-and-hold approach, there’s always the easy scapegoat of “the market”—while the active manager takes the battle to the market. In times of uncertainty, particularly with a market that many believe is at the mercy of global central banks and financial engineering, the sharing of knowledge among peers is critical.

The National Association of Active Investment Managers (NAAIM) Uncommon Knowledge 2015 National Conference provid-ed that insight to more than 100 RIA attendees during three days of presentations and net-working. Held on May 3-6 in Newport Beach, California, the conference offered attendees extended, interactive sessions that promoted peer-to-peer exchanges, complemented by pre-sentations of interest to the active investment community.

explaining their thoughts and frustrations, what they have found works and doesn’t work, and where they were still looking for answers. But the interaction of the audience transformed the sessions from presentations to a networking exchange of ideas designed to change lives and businesses.

The conference also saw the conclusion of the 2015 NAAIM Shark Tank/Manager Showcase with John McClure of ProfitScore Capital Management taking top honors with a long-short government bond strategy. Ken Graves, of Capital Research Advisors LLC, captured second place with a short-term equity index model, followed by Potomac Advisors’ Rich Paul with his EVO-Evolution Market Timing System.

There were also many insights from thought leaders in the financial industry. Anne Mathias, senior macro strategist with Guggenheim Investments, presented the case for continued strength in the U.S. equity market. While weather is often blamed for the unexpectedly

management of ERISA retirement accounts. As currently proposed, she said, the rule will make the brokerage model obsolete and impact invest-ment advisors more than they realize. The core of the DOL’s concern is related to rollovers from company retirement plans to IRAs and the belief that individuals are better provided for within the constraints of the company plan.

The effect of the rule will be to reduce guidance in the management of retirement accounts. Ironically, guidance requests have skyrocketed at Fidelity, with people looking for more help, not less.

Asbury Research’s John Kosar, CMT, pre-sented “A Technical Look at Stocks, Market Sectors, Interest Rates, and Gold,” offering a number of investable ideas and analytical wisdom. Mr. Kosar’s near-term forecast is for vulnerability in Q2 for the U.S. stock market. For the bigger picture, however, he views a potential summer correction, amid the right conditions, as a potential longer-term buying opportunity. Mr. Kosar said it is usually wise to follow some fundamental technical guidelines:

Asset flows matterAsset flows provide the horsepower for market moves and signal that when every-body is getting out of the pool, it would be wise to follow. Simple is betterThe more moving parts, the more chances of surprise and of something breaking down in an investment model.

Look for confirmationYou don’t want to be “the first one in a good idea.” Does price trend correlate to what is happening in asset flows?

Watch the VIX 50-day moving average It has identified every near-term market bottom.

Frank Barbera, CMT, executive vice president of Sierra Investment Management Inc., took the prize for the most worrisome, if not downright scary, set of charts and graphs.

continue on pg. 13

T

As active managers step outside the protection of the buy-and-hold herd and into the market battle, insight

from one,s friends is welcome

“There’s a lot going on in the investment advi-sor space and no better time to reach out to peers in the industry for new ideas and directions,” said Jason Wilder, outgoing NAAIM president. “For all attendees, this was a great opportunity to build relationships with other managers who face the same challenges. As individuals, we are the experts when it comes to providing active in-vestment management through an RIA format. We have a lot to offer each other.”

Three extended sessions focused on the busi-ness development plan, building a collaborative trading model, and succession planning. In each session, NAAIM members led the discussion,

low growth in Q1 GDP, Ms. Mathias believes the West Coast dock workers’ dispute had a sig-nificant impact. With 40% of U.S. exports and imports moving through the West Coast ports, the labor slowdown had widespread economic repercussions. With the renewed movement of imports and exports, she anticipates the econo-my will return to higher growth rates, driving equity values.

Shahira Knight, vice president of govern-ment relations and public policy at Fidelity Investments, offered a view from Capitol Hill of the Department of Labor’s proposed fidu-ciary requirement for financial advisors in the

June 11, 2015 | proactiveadvisormagazine.com 5

Debate over valuations heats up

anet Yellen, Federal Reserve chair, recently set in motion another round of debate on market valuations in this long-in-the-tooth

bull market.On May 6th at an economic forum in

Washington, she commented, “I would highlight that equity market valuations at this point gener-ally are quite high.” Yellen tempered her remarks, saying there were few “hallmarks of a bubble,” but rather a situation to “watch closely.” This opened up the floodgates to comments from all corners on whether or not Yellen was correct in her assessment.

At least one of the Fed chair’s colleagues dis-agreed. Federal Reserve Bank of Atlanta President Dennis Lockhart told a Bloomberg reporter, “I don’t at this moment have reason to be in-tensely concerned about the valuation level of the equity markets.” Wharton finance professor and oft-quoted bull Jeremy Siegel would not be surprised by a market correction this summer, but maintains, “With low interest rates, 20,000 is still fair market value on the Dow (about 13% higher).”

Against this backdrop, equity market valu-ations on the S&P 500 have been running at a trailing P/E level between 18.0 and 18.7—around the average of 18.2 for the past 25 years, but hitting a five-year high. However, many analysts are predicting corporate profits will slow in 2015, leading to a lower “E” in the equation and a potential significant drop in equity prices. With

J

Source: Bespoke Investment Group, May 2015

the S&P 500 backing off recent record levels and, as of this writing, barely in the green for the year, everyone from Dow Theorists to proponents of Elliot Wave analysis seem to be calling for further market declines.

One notable voice in support of Yellen’s assessment comes from Yale economics professor Dr. Robert Shiller. He said Yellen was right in pointing out possible market distortions: “It’s part of their job to disturb the tranquility and I praise Janet Yellen for doing that. On the other hand, she was also right not to be alarmist about it.”

Shiller, a Nobel Laureate, co-created the Cyclically Adjusted Price-Earnings (CAPE) ratio. The CAPE ratio (also known as the P/E 10 ratio) is basically defined as “price divided by the average of ten years of earnings (moving average), adjusted for inflation.” As such, it is principally used to assess likely future returns from equities over time frames

of 10 to 20 years, with higher-than-average CAPE values implying lower-than-average long-term annual average returns.

Doug Short recently published an exhaustive analysis at Advisor Perspectives comparing tradi-tional trailing P/E measures to the P/E 10, which he much prefers. He believes the P/E 10 is sending up some strong warning signals: 1) at a current level of 26.9, it resides in its highest historical quintile (going back to the 19th century); 2) it is at levels not seen since 2007; and 3) it is well above its historical average of 16.6.

Short concludes: “The prevailing question is whether or not March 2009 was the beginning of a secular bull market. Perhaps, and certainly the new all-time highs repeatedly set over the past several months are conspicuous tick marks for the optimists. But the history of market valuations suggests a cautious perspective.”

S&P 500 TRAILING 12-MONTH P/E RATIO: SINCE 1998

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TOPPING THE CHARTS

Goodbye, status quoBy David WismerPhotography by Chris Hamilton

Delivering the risk management that investors wantrequires new strategies that can respond to changing markets

8 proactiveadvisormagazine.com | June 11, 2015

Matthew Gaude is a Registered Financial Advisor with FSC Securities in Atlanta, GA and co-president of Clarus Financial Group. Mr. Gaude is deeply involved with setting Clarus Financial Group’s investment policy, formulating investment strategies, and conducting due diligence on money managers.

Mr. Gaude started his professional career as a commodities broker and then worked with indepen-dent financial advisors as a business development manager in the Mid-Atlantic region for a national broker-dealer.

He is an avid student of the markets and global economic conditions and says, “It is equally import-ant to preserve wealth as it is to grow it. Managing risk is a prime mission for our clients in a world that has many unstable factors and the possibility of domestic and global economic turmoil more often than anyone would like to see.”

Mr. Gaude is a native of the Knoxville, TN area and attended the University of Tennessee, Knoxville. He graduated with a B.S. in Finance and credits a col-lege internship with a major financial services firm as “motivating me to pursue a career in the industry.” He currently resides in Cumming, GA with his wife, Cyndee, and sons, Miles & Gavin. His family stays very busy with youth baseball and they also enjoy swimming, fishing, and tubing at Lake Lanier.

Matthew Gaude FSC SecuritiesAtlanta, GA Co-president, Clarus Financial Group

The old investment pie chart is no longer a good tool for planning or implementing investment strategy

Proactive Advisor Magazine: Matthew, what have you taken from your different roles in the business?

Starting out as a commodities broker for about four years taught me the supply and demand equation of the markets. It is a chal-lenging side of the business and one where you constantly have to be aware of risk, a lesson important for any role in this industry.

On the broker-dealer side, I was working with advisors across the Mid-Atlantic region. I was a supervisor, helping advisors in all aspects of their business, including marketing, recruit-ing, and managing human capital. I worked with about 50 different advisors on best practic-es for their client relationships and implement-ing a sound investment methodology for client money: What part of the investment process did they feel they could handle themselves and when would they think it appropriate to outsource to a third-party money manager? I acquired some valuable insights on that process and also what types of investment strategies worked well in different market environments.

How did you approach the investigation of third-party money managers?

It really started with the mindset of a particu-lar advisor: Were they were more of a static asset allocator or were they more active or tactical in the methodology that they wanted to employ with their clients. We would point them in the right direction or bring them a handful of differ-ent managers to choose from. They could then dig down deep, do their own due diligence, and determine which manager, or maybe multiple managers, would be best suited for their method-ology and their clients.

What about your own investment philosophy?

We have an article on our website that is titled, “The status quo no longer works,” and I firmly believe that. When the economy went into reces-sion and the market dropped in 2008, it became clear that what used to work does not work anymore. New strategies were not only needed to help clients in preserving what they have, but also to help grow their wealth. These two things can be achieved in combination, unlike what many advisors have thought for the past 30 or so years.

Research shows that more people approaching retirement want peace of mind than they do accu-mulating as much wealth as possible, or beating the market. This is what we also see with our client

base. It is not all about trying to get the highest returns; it is about risk management, preserving assets, and having more modest and consistent long-term financial strategies.

We believe that active investment manage-ment can really pay dividends for our clients. The purpose of active management is to help reduce risk to a level where a client can stay with their investment plan with a relatively high degree of confidence. We know from investor behavior research, such as DALBAR, all of the behavioral issues that can get in the way of investors being successful.

Active management helps in that process—versus a passive approach where clients might literally not have the time, and often not the patience, to wait years and years for investments to recover from the steep losses of bear markets.

continue on pg. 10

One of the biggest things that we can help them with is managing their emotions. We want to see that they participate in market increases, but at the same time are trying to make sure that they’re taking the level of appropriate risk to be able to achieve that.

How do you work with third-party money managers?

My partner and I are hands-on in formulating investment strategies that meet client needs and are constantly attuned to what is happening in the investment environment. For example, for many of the clients that we work with in consultative fashion on their 401(k) plans, we develop and send out a quarterly video that gets very granular on current economic and market conditions.

June 11, 2015 | proactiveadvisormagazine.com 9

Securities and advisory services offered through FSC Securities Corporation, member FINRA, SIPC, and a Registered Investment Adviser. Clarus Financial Group is not affiliated with FSC Securities Corporation or registered as a broker/dealer or investment advisor.

We are also very involved in conducting due diligence on money managers that we think can add appropriate value for our clients. We focus on those third-party money managers that have the same basic investment philosophy that we have. They are very sophisticated by nature, but that plays out in a practical, commonsense approach: If the market situation arises where they need to raise cash, they’re going to raise cash. They’re not going to stay in the markets just because they have a charter that says they have to.

In planning for the next inevitable bear market, we have found that it is critical to un-derstand the money managers’ sell strategies, not just their buying parameters. They need to be able to employ their models to identify what the prevailing trends are today, and to also be very adaptive as the trends may change tomorrow.

The old investment pie chart is no longer a good tool for planning or implementing invest-ment strategy. In a general sense, we are believ-ers in a core and satellite approach, employing some more traditional passive strategies, while

also using active and tactical managers in their areas of specific expertise.

In our opinion, clients can have the best of both worlds where part of a portfolio is in a core that will take advantage of the broad increases in the markets and then take advantage of those sectors of the market that are trending signifi-cantly higher, or cutting exposure to sectors that are performing poorly.

The difference in our approach is that every part of the portfolio is managed with an eye to risk. We can cut exposure levels throughout the portfolio if market conditions call for that. The real key is setting shared expectations with clients so they understand upfront how we are going to formulate an investment plan that can help them meet their broad financial goals. We explain our total wealth management process thoroughly, and maintain consistent communications with our clients according to their wants and needs. It is very gratifying that they are comfortable with our approach and the relationship.

continued from pg. 9Matthew Gaude

10 proactiveadvisormagazine.com | June 11, 2015

- A custodian that makes your life as an RIA simpler.

The best of summer reading for advisorsBook suggestions cover everything from practice/sales management to how to teach children to be responsible with money.

Market crashes haunt investors for decades“Post-traumatic crash disorder” is the tendency to obsess over the past and project it forward as the most likely future outcome.

The sum of advisor-created valueIs it possible to quantify the incremental economic value advisors can bring to clients?

L NKS WEEK

June 11, 2015 | proactiveadvisormagazine.com 11

Fundamentalists vs. technical analysts

Martha Stokes, CMT, is the co-founder and CEO of TechniTrader® and a former buy-side technical analyst. Since 1998, she has developed over 40 TechniTrader® stock and option courses. She specializes in Relational Analysis™ for stocks and options and Market Condition Analysis. An industry speaker and writer, Ms. Stokes is a member of the Market Technicians Association and earned the Chartered Market Technician designation with her thesis, “Cycle Evolution Theory.” www.TechniTrader.com

undamentalists and technical analysts have been at odds with each other for more than 100 years. Part of the reason

is the continuing myth that technical analysis is a means of predicting price action—it is not. During the early years of the Dow Theory, which is one of the original foundations of technical analysis, “Random Walk” theorists discarded Dow Theory entirely.

Later, as cycle theories about the stock market emerged during the 1930s, the goal was to prove that the stock market actually did have cycles. These early theorists attempted to predict the stock market trend and direction over extended periods of time.

Most of those predictions failed dismally, just as most predictions about the stock market today do not predict accurately. This forti-fies the assumption of fundamentalists that technical analysis is worthless, a bogus school of thought that has no value to professional fundamentalists.

Technical analysis should not be used as a predictive tool; rather, its worth and value comes from the relational analysis it has provided that extrapolates fundamentals into a graphical form. This can provide more understanding and insights into the price action of both short- and long-term trends, enabling fundamentalists to confirm their quantitative fundamental interpretations with the reactionary response of price to those fundamentals.

The market now comprises nine distinctly different market participant groups, each trad-ing and investing with their own unique agenda, tools, venues, fundamental data access, process for transactions, and the business of portfolio management and trade management.

F

When technical analysis is viewed as a graphical representation of the market participant cycle and fundamentals of a company, the patterns become relevant even to fundamentalists who have never used technical analysis.

Professional funds managers can see aspects of how the leadership of the market, which generally is represented by the giant buy-side and sell-side institutions, has interpreted and responded to the fundamentals in chart format. Confirmation of the expected reaction to fundamentals, financial reports, and earnings reports is also clearly reflected in price and trend.

As an example, the accompanying chart of the S&P 500 shows the response and reaction of the major institutions to the past two earnings seasons.

In December, the chart shows volatile value action, yet lows that hold and remain

stable. Fundamentalists know that the earnings picture started to decline at that time, oil commodity prices were plummeting, and that prices for most S&P 500 stocks had exceeded underlying value.

The most recent Q1 earnings season in 2015 shows a sideways pattern this spring as giant funds quietly rotated to lower their held positions and many smaller-lot investors were convinced to “buy on the dip.” The recent higher lows within the sideways pattern con-firm that redemption demands are very low, that smaller funds are buying, and that money is continuing to flow into the S&P 500.

Technical patterns reveal how different market participant groups react to earnings seasons. This can be invaluable information for the professional investor.

Proactive Advisor Magazine presents weekly commentary provided by well-known market analysts, financial authors, investment newsletter publishers, and economists. The opinions expressed each week represent their personal perspectives and not necessarily those of the magazine.

Source: TechniTrader.com

proactiveadvisormagazine.com | June 11, 201512

HOW I SEE IT

There can be no assurance that any investment product will achieve its investment objective(s). There are risks associated with investing, including the entire loss of principal invested. Investing involves market risk. The investment return and principal value of any investment product will fluctuate with changes in market conditions. Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC. Securities offered through Guggenheim Funds Distributors, LLC. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim Partners, LLC. x0516 #17180

Explore how a tactical approach may help maintain diversification.

How diversified are investor portfolios? The answer is that, when diversification is needed most, portfolios may not be as diversified as investors assume. In this paper, we will explore the concept of portfolio diversification, the impact of evolving financial markets, and why we believe tactical management is playing an increasingly pivotal role.

Call 800.258.4332 or visit guggenheiminvestments.com/dilemma

The Diversi� cation DilemmaTactical Management and Today’s Evolving MarketsBy Douglas C. Mangini, J.D., Senior Managing Director

Chicago | New York City | Santa Monica

DOWNLOAD THE WHITE PAPER NOW

continued from pg. 5

The current Zero Interest Rate Policy (ZIRP) has not helped anyone but the banks, he maintained, resulting in a $7 trillion transfer from individ-ual savings to financial institutions since 2001 and taking discretionary spending out of the economy. With growth now the scarcest global commodity, he maintains the prospect for global deflation is very real.

NAAIM member, technical analyst, and consultant Greg Morris asked attendees, “How many things about investing and finance do you believe but have never questioned?” He proceed-ed to knock the pins out from under a multitude of investing truisms—from the wisdom of dollar cost averaging to the illusions of forecasting. Mr. Morris is the author of “Investing with the Trend: A Rules-based Approach to Money Management,” which makes a strong case for trend-following and critiques some of the funda-mental tenets of buy-and-hold investing.

Cyber security expert Jeffery Ingalsbe, who recently joined Flexible Plan Investments, stressed that the first priority of Internet secu-rity is to avoid providing unwanted access to IT resources. For example, too many financial firms make it relatively easy for security breaches to happen by failing to follow the most basic

security protocols around filters, apps, security patches, and wireless systems. When it comes to protecting data, Mr. Ingalsbe recommended that investment advisors first identify, “What is your treasure? Draw a picture of it, know how it moves, and make certain it is protected at rest and in motion.”

The final takeaway from three days of discus-sion came down to the growing importance of active investment management of client assets. Volatility and political uncertainty, slowing global economic growth, a bull market of over six years, and many indicators reaching extremes, all have made for a cautious NAAIM crowd. The positive counterpoint—voiced by many attendees—was

that with active management, they have a plan firmly in place to manage risk.

Mr. Wilder perhaps said it best: “It is more important than ever that managers maintain their awareness and discipline and stick to their plan. There is always going to be an opportunity to make money in the future as long as the investor’s principal is preserved. I know of no better way to have one’s belief in the wisdom of active manage-ment confirmed than to meet and talk with peers in this business.”

Peer-to-peer advantage

Linda Ferentchak is the president of Financial Communications Associates Inc.  Ms. Ferentchak has worked in financial industry communications since 1979 and has an extensive background in investment and money manage-ment philosophies and strategies.

“There is no betterway to confirm the wisdom of active management than to talk with peers in this business.”

13June 11, 2015 | proactiveadvisormagazine.com

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EditorDavid Wismer

Associate EditorElizabeth Whitley

Contributing WritersLinda Ferentchak

Martha StokesDavid Wismer

Graphic DesignerTravis Bramble

Contributing PhotographerChris Hamilton

June 11, 2015Volume 6 | Issue 10

Proactive Advisor Magazine is dedicated to promoting and educating on active investment management. Distribution reaches a wide audience of financial professionals who advise clients on investments and portfolio management. Each issue features an experienced investment advisor who offers insights on active money management, client service, and investment approaches. Additionally, Proactive Advisor Magazine offers an up-close look at a topic with current relevance to the field of active management.

The opinions and forecasts expressed herein are those of the author and may not actually come to pass. Any opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. The analysis and information in this edition and on our website is for informational purposes only. No part of the material presented in this edition or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any portfolio constitutes a solicitation to purchase or sell securities or any investment program.

Marketing the unrealized potential of 403(b) plans

Ryan FinnellLexington, KY

Retirement Tax Advisory Group

Retirement Tax Advisory Group Inc. (RTAG) is a Kentucky-based Registered Investment Advisory Firm. Securities offered through American Equity Investments, member FINRA and SIPC.

This has paid off in many requests for first-time consultations. The vast majority of new prospects I meet with have called our firm requesting a meeting; these are not people we have directly solicited. It is not unusual to receive a call out of the blue where they say, “I saw you at a meeting or I know you work with a co-worker and they are very happy.” That is a great situation to be in.

urrently over 90% of our book of business is working with 403(b) plan participants. Many of these

clients work at the University of Kentucky, which has a very generous matching plan.

Our challenge—and opportunity—is getting the word out from an education perspective that plan participants have a way to incorporate world-class active money man-agement for their plans. A lot of our prospects are in the healthcare field at UK and put in long hours. They have little time for anything beyond their jobs and their families.

In many cases, these people have paid little attention to their 403(b) plan and few are aware that options exist beyond just having passive, unmanaged investments. When I meet with some prospects for the first time, it is not an exaggeration that they might hand me a stack of unopened state-ments from their 403(b) account—years of unopened statements in some cases. It just motivates me to see individuals who are so time-stressed, so unaware of their options, or so intimidated by financial matters that they are not taking charge of their personal financial situation.

Therefore, we have to tackle education as our first marketing priority. We do this in a number of ways. We have a website specifically dedicated to delivering basic information about 403(b) plans and what participants should know about them. Within the guidelines of the UK plan, we attempt to be invited to as many group educational presentations to their employee base that we can. And we ask current clients to spread the word about our services to their friends and colleagues.

C

14

TIPS & TOOLS

Active ManagementThere is a great deal of confusion surrounding the term “active

management” created by the business press. When one reads a headline in any given year that “active managers” are underperforming or overper-forming their benchmarks, this typically is referring to “active” managers of a mutual fund—who are being measured against a specific index or competing funds within that style.

Within the field of true active portfolio management, this narrow and misleading definition really has little significance.

Active investment management is not about exceeding a specific benchmark or “beating the market.” Active management seeks favorable risk-adjusted returns in any market environment, generally employing sophisticated algorithms and models to capture gains and protect against losses in a wide variety of sectors, asset classes, and geographies.

It is about controlling risk in the markets, finding new ways to dynamically diversify, and smoothing out the long-term volatility typically found in any asset class. Active managers tend to rely on quantitative approaches for asset allocation, exposure to the market, and adjustments to portfolios based on current market conditions. When it comes to evaluating returns, they generally will not compare to the S&P 500 or global total market indexes, but are far more interested in risk-adjusted returns and in meeting their portfolio objectives.

In theory, it is fundamentally about a long-term approach to portfolio management that is diametrically opposed to “buy-and-hold.”

Fee-based revenues remain strong among advisors

101

DynamicStrategic

Diversification

Tools Models

Strategies

5 reasons to consider active management

Buy-and-hold is dead(ly)—While bull market runs are impressive, history shows it is not a matter of “if” but more a matter of

“when” for the next bear market. Investment expert Kenneth Solow sums it up: “Patiently waiting for stocks to deliver historical average returns does not rise to the level of an investment strategy.”

Bear market math is daunting—It takes longer than most in-vestors think to recover from bear markets—a gain of 50% is

needed to overcome a 33% portfolio loss.

Risk first: Always—As one prominent active manager has said, “No one would ever jump into a car without brakes, so why

would investors even consider having an investment strategy that did not have a strong defense?”

Active management aligns with investor psychology—Behavioral finance studies have documented the tendencies of investors to

operate on the destructive principles of “fear and greed.” Disciplined active management takes emotion out of the equation.

Does “set it and forget it” really make sense?—For retirees or those approaching it, the “sequence of returns” dilemma can

have a devastating effect on future income needs. Active management offers a prudent path to achieving the twin goals of asset preservation and compounded capital growth.

Resources for AdvisorsWebsitesProactive Advisor Magazine: Active investment management’s weekly magazine, providing advisor perspectives, topical issues in active management and commentary on strategy and tactical tools. www.proactiveadvisormagazine.com

National Association of Active Investment Managers (NAAIM): Peer-to-peer networking in the active investment management community, providing best practices among successful advisors and advisory firms. www.naaim.org

Market Technicians Association (MTA): Leading national organization of investment analysts, stock market analysis professionals and certified market technicians. www.mta.org

Advisor Perspectives: Audience-generated and vendor-neutral forum where fund companies, wealth managers and financial advisors share their views on the market, the economy and investment strategy. www.advisorperspectives.com

Whitepapers“Bucket Investing with Dynamic Risk-Managed Portfolios,” Flexible Plan Investmentsgoto.flexibleplan.com/download/whitepaper-bucket-investing.pdf

“Comparison of ETFs and Mutual Funds—The True Cost of Investing,” Guggenheim Investments guggenheiminvestments.com/rydex

“Understanding Leveraged Exchange Traded Funds,” Direxion Investmentswww.direxioninvestments.com

“Small Accounts, Big Opportunities,” Trust Company of America www.trustamerica.com/resources

“Why Gold? Seven Enduring Reasons,” Flexible Plan Investments goldbullionstrategyfund.com

“The State of Retail Wealth Management, 5th Annual Report,” PriceMetrixwww.pricemetrix.com

2012 2013 2014

Fee-Based Assets (% of Total Assets) 28% 31% 35%

Fee-Based Revenue (% of Total Revenue) 45% 47% 53%

Average Fee Accounts per Advisor ($000s) $258 $293 $293

Average Assets of New Client HHs ($000s) $475 $477 $538

Source: PriceMetrix Insights – The State of Retail Wealth Management 2014 – 5th Annual Report (Aggregated data representing 7 million retail investors and over $3.5 trillion in investment assets.)