Matthew Gaude • FSC Securities - Gaining the peer-to-peer advantage: The 2015 NAAIM annual conference highlighted the importance of collaboration by Linda Ferentchak - Debate over valuations heats up - Fundamentalists vs. technical analysts by Martha Stokes, CMT - Marketing the unrealized potential of 403(b) plans (Ryan Finnell, Retirement Tax Advisory Group)

1. 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

3. Advisor perspectives on active investment management
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3June 11, 2015 | proactiveadvisormagazine.com
LOUD & CLEAR

4. Gaining the
peer-to-peer
advantage
By Linda Ferentchak
The 2015 NAAIM annual conference
highlighted the importance of collaboration
proactiveadvisormagazine.com | June 11, 20154

5. 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 matter
Asset 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 better
The more moving parts, the more chances
of surprise and of something breaking
down in an investment model.
Look for confirmation
You 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

7. 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
whetherornotYellenwascorrectinherassessment.
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
7June 11, 2015 | proactiveadvisormagazine.com
TOPPING THE CHARTS

8. Goodbye, status quo
By David Wismer
Photography by Chris Hamilton
Delivering the risk management that investors want
requires new strategies that can respond to changing markets
8 proactiveadvisormagazine.com | June 11, 2015

9. 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 Securities
Atlanta, 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

10. 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. 9
Matthew Gaude
10 proactiveadvisormagazine.com | June 11, 2015

11. - A custodian that makes your life as an RIA simpler.
The best of summer
reading for advisors
Book 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
value
Is it possible to quantify the incremental economic
value advisors can bring to clients?
L NKS WEEK
June 11, 2015 | proactiveadvisormagazine.com 11

12. 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
Whentechnicalanalysisisviewedasagraphical
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

13. Therecanbenoassurancethatanyinvestmentproductwillachieveitsinvestmentobjective(s).Therearerisksassociatedwithinvesting,includingtheentirelossofprincipalinvested.Investinginvolvesmarketrisk.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
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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 better
way to confirm the wisdom of
active management than to talk
with peers in this business.”
13June 11, 2015 | proactiveadvisormagazine.com

14. Advertising
proactiveadvisormagazine.com/advertising
Reprints
proactiveadvisormagazine.com/reprints
Contact
info@proactiveadvisormagazine.com
Copyright 2015© Dynamic Performance Publishing
Inc. All rights reserved. Reproduction of printed form,
whole or in part, without permission is prohibited.
Editor
David Wismer
Associate Editor
Elizabeth Whitley
Contributing Writers
Linda Ferentchak
Martha Stokes
David Wismer
Graphic Designer
Travis Bramble
Contributing Photographer
Chris Hamilton
June 11, 2015
Volume 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 Finnell
Lexington, 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

15. Active Management
There 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
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Dynamic
Strategic
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 Advisors
Websites
Proactive 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 Investments
goto.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 Investments
www.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,” PriceMetrix
www.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.)