Ryan Finnell • Retirement Tax Advisory Group - A "living in the moment" guide to investing by Jerry Wagner - Sell in June and go away? - Market “truths” subject to change by Rob Hanna - Client appreciation: A sound investment (Jim Bowen, LPL Financial)

1. June 4, 2015 | Volume 6 | Issue 9
Active investment management’s weekly magazine
Sell in June & go away?
A “living in
the moment”
guide to
investing
Client appreciation:
A sound investment
Market truths can change
Ryan Finnell
Right place,
right time

3. Advisor perspectives on active investment management
- A custodian that makes your life as an RIA simpler.
Asset protection
without the guesswork
Active management is a different ballgame than
traditional buy-and-hold strategies. As I explain to
clients, their money is managed by experts who
are constantly watching the markets. There is little
guesswork or opinion involved, as these managers
have strict rules-based methodologies and use
quantitative decision-making. Clients with capital
preservation concerns can employ a systematic and
disciplined approach for long-term asset growth.
LOUD & CLEAR
Rich Ralston • Pensacola, FL
WRP Investments Inc. • Parkway Financial Group
3June 4, 2015 | proactiveadvisormagazine.com
LOUD & CLEAR

4. A
“LIVING IN THE
M MENT”
guide to investingBy Jerry Wagner
ecently I was speaking to a friend about
some of the more memorable celebrations
in our lives. I had to put on that list the
year that our family visited New York City’s
Times Square to witness firsthand the famous
ball drop and the overwhelming crowd scene.
But in thinking about it, what impresses
me the most about New Year’s Eve is not the
partying; it’s the hour-by-hour progression of
the celebration, starting at the International
Dateline somewhere east of New Zealand. As
midnight is reached around the world, the
crowds roar and the fireworks explode. An hour
R
later it repeats—Auckland, Sydney, Tokyo,
Bombay, Moscow, Berlin, Paris, London, New
York, Los Angeles, and finally Honolulu.
For the ten-second countdown to midnight,
and maybe a few seconds more, the people in
each time zone are truly living in the moment.
Why’s that important? Since the beginning
of recorded history, living in the moment has
been valued. In Buddhism it’s said that “being
mindful of the present is the key to happiness.”
And according to Matthew 6:34, Christ said,
“So do not worry about tomorrow; for tomor-
row will care for itself.”
4 proactiveadvisormagazine.com | June 4, 2015

5. favorable outcomes and seek each day to profit
from them.
Buy-and-hold investing does not have much
relationship to the here and now. You buy and
wait. You invest and hope. Rather than seeking
to profit from what’s happening in the present,
buy-and-hold investing considers the present—
the moment—irrelevant.
Yet, we know from experience that even if
active strategies do not return more to investors
over a given period, what happens each day
is relevant to even the buy-and-hold investor.
Every financial market goes through peaks and
valleys. Investors get euphoric and they also get
despondent.
2014, corrections will come and go, but there is
no evidence that the bull market is over as yet.
The primary trend remains positive and most
indicators are still pointing to higher prices in the
intermediate term.
While stocks are not undervalued, it is
noteworthy that Price Earnings ratios (the gen-
erally accepted measure of valuation) are about
continue on pg. 13
While active portfolio
management draws upon
history for the basis of
each strategy, it is
continually focused on
what is happening now
Optimism
Excitement
Thrill
Euphoria
Anxiety
Denial
Fear
Depression
Panic
Capitulation
Desperation
Despondency
Hope
Relief
Optimism
When stock prices fall day after day, when
the percentage of the daily decline moves from
decimals to single and then to double digits,
even the most ardent of buy-and-hold investors
has had second thoughts. Many have abandoned
the approach, and their investments, at the very
worst time—near the bottom. They begin to
live in the moment and it becomes very relevant.
When the market puts in a fast 5-10% decline
after several months of bullish action, it’s easy to
understand the fear. Fear comes from our past,
but it can influence our actions in the present and
our plans for the future. It clouds our judgment.
But we can use the power of computers to test
active strategies in advance. And we can use them
to track and carry out high-probability trades in
the present. Fear does not enter the picture or
cloud their view of the present.
History shows that when the market is in a
strong uptrend, it does not pay to try to time
the short-term trends. It is a time when taking
some short-term pain can be profitable in the
intermediate term. Just as we saw periodically in
The Romans had their “carpe diem,” as they
taught their young to “Seize the Day.” Our own
David Thoreau counseled, “Live in the present,
launch yourself on every wave, find eternity in
each moment.” His contemporary historian and
author, Alice Morse Earle, wrote, “The clock is
running. Make the most of today. Time waits
for no man. Yesterday is history. Tomorrow is a
mystery. Today is a gift. That’s why it is called
The Present.”
Recent studies have confirmed that we are
happiest not when our mind is wandering, con-
templating the past or future, but rather when
it is focused on the moment.
Matthew Killingsworth, a Robert Wood
Foundation scholar and Ph.D. in psychology
from Harvard, created a project to measure and
quantify the causes of happiness in real time
using a smartphone app (www.trackyourhap-
piness.org). He has written, “We developed a
smartphone technology to sample people’s on-
going thoughts, feelings, and actions and found
that people are thinking about what is not
happening almost as often as they are thinking
about what is, and found that doing so typically
makes them unhappy.”
I must say that while I agree with all of this,
I’ve lived my life very differently. I’ve tried to
balance my life with a healthy regard for the
lessons of the past, have always planned for
the future, and tried to make the most of the
opportunities of the present. Yet, as I watched
midnight occur across the globe this year, I
realized that one of my lifelong passions was
indeed governed by the philosophy of living in
the moment.
Active management is all about living in the
moment. While it also draws upon history for
the basis of each active strategy, it is continually
focused on what is happening now. Active man-
agement strategies cannot see into the future,
they can only seek to realize what the present
provides. They are based on the probability of
The cycle of market emotions
June 4, 2015 | proactiveadvisormagazine.com 5

7. Last 100 Years Last 50 Years Last 20 Years
3.0
4.0
2.0
1.0
0.0
-1.0
-2.0
JanuaryFebruary
M
arch
April
M
ay
June
July
AugustSeptem
ber
OctoberNovem
berDecem
ber
Source: Bespoke Investment Group
Sell in June
and go away?
hile it is hardly unknown to profes-
sional analysts, many investors may
be unaware that “Sell in May and Go
Away” might be more appropriately phrased as
“Sell in June …”
According to MarketWatch, “No other
month really comes close when it comes to the
poor June performance of the S&P over the
past decade. This is especially true for financials,
which have led all sectors in negative perfor-
mance during this time frame, with the SPDR
Financial Select Sector ETF (XLF) losing on
average about 3% during the month.”
May 2015 saw a fairly respectable market
performance, overcoming many ongoing worry
points—the S&P 500 and Dow Jones Industrial
Average were both up about 1% and the
NASDAQ 100 put in a gain over 2%. Despite
this strength, markets continue to fret over sev-
eral issues: a sluggish economy (with Q1 GDP
coming in at negative year-over-year growth of
-0.7%), interest rate uncertainty from the Federal
Reserve, questions on corporate profitability, and
the Greece situation—to mention just a few.
Some technicians are keeping a close eye on the
DowTransports, which continue to show marked
divergence and weakness in the face of the broad-
er markets probing all-time highs.
Thecorporateprofitabilitysituationmightbe
the most concerning. According to a Commerce
Department release at the end of last week, ad-
justed pretax corporate profits fell 5.9% in the
W
first quarter and declined for the second quarter
in a row for the first time since the middle of
the 2007-09 recession. These results have added
to market fears about realistic company growth
expectations, especially as corporate spending
on capital projects is projected to hit a four-year
low in 2015 (Thomson Reuters estimates).
Historic market performance in June
varies depending on time frame, but no
matter how you look at it, June has been
one of the weaker-performing months of the
year. In the accompanying chart, Bespoke
Investment Group looks at the June perfor-
mance of the DJIA over the last 20, 50, and
100 years, concluding, “June has seen gains
the least often of any month over the last 20
years, down 55% of the time and declining
on average -0.60%.”
How the market fares this June, says USA
Today, “could hinge on whether a slew of in-
coming economic data points show signs that an
economic rebound is in the works. If the weakness
doesn’t prove to be ‘transitory,’ it’s unlikely the
market can stay at near record levels given that val-
uations are on the pricey side relative to history.”
There is a bright spot from Bespoke’s analysis,
however. In years when the broad market has
been positive year-to-date and the month of May
has been up, “the frequency of positive returns
increases substantially” for the June-August period
and for the rest of the year overall. In fact, in such
years, the post-Labor Day period has been up
roughly 75% of the time, averaging an increase of
about 7%. Any early summer market weakness, if
it does occur, might be seen as a potential buying
opportunity.
AVERAGE MONTHLY % CHANGE FOR THE DJIA
7June 4, 2015 | proactiveadvisormagazine.com
TOPPING THE CHARTS

8. Proactive Advisor Magazine: Ryan, what
is your overall view of managing client
portfolios?
My philosophy is pretty straightforward.
In today’s environment, information is almost
instantaneous and there is more of it than ever.
Knowing that, why wouldn’t you use this to
your advantage?
RIGHT
place
RIGHT
time
By David Wismer
Photography by Chris Cone
Applying third-party analytics
and models to help clients
reach their goals
proactiveadvisormagazine.com | June 4, 20158

9. Ryan Finnell
Retirement Tax Advisory Group
Lexington, KY
Ryan Finnell is chief compliance officer at Retirement
Tax Advisory Group based in Lexington, KY. He is also
a Registered Representative with American Equity In-
vestment.
Mr. Finnell has over 15 years of experience in the fi-
nancial advisory field and says, “This is really some-
thing I have known I wanted to do ever since high
school. I have always had a passion for the world of
finance and I enjoy helping average American families
and small businesses reach their financial goals.”
A graduate of Kentucky State University with a B.A. in
business administration, Mr. Finnell began his career
in the banking industry and then had increasing re-
sponsibility at several financial services firms. During
his tenure in the industry, he has served as a trainer,
supervisor, principal, and regional office manager. He
joined Retirement Tax Advisory Group in 2012.
His wife Katherine is an attorney and the Finnells have
two children: an 8-year-old son, Daniel, and a 4-year-
old daughter, Sophie Grace. Mr. Finnell coaches his
son’s baseball and basketball teams, and he and
his wife are very active with youth programs at their
church. The Finnells love to travel with their children
and to share with them the exploration of new and
different places.
Yes, markets do tend to mean-revert over
very long periods, but that does not mean they
will match up on a sequencing basis with the
needs of any particular client. Because of these
important issues, I believe an active manage-
ment strategy has to be the way to go for clients.
Institutional investors have access to active
management and risk mitigation strategies, so
why shouldn’t my clients? Over the last several
years, I have converted 99% of my book of
business to active strategies and my clients have
embraced it wholeheartedly. There is no way
I would go back to the way things used to be
done in terms of portfolio construction and
management.
change, if their comfort level with an approach
changes, or if market conditions change dra-
matically, we can make changes.
What is your process with a new client?
Most of it is formulated through building a
level of trust and mutual understanding. I still
believe in spending a good amount of time in
a basic sit-down across the table with pen and
paper in hand. I will sit with a client for howev-
er long it takes until I have a good understand-
ing of what he or she wants to accomplish and
what is truly important to them.
Only then will I put in place the more
formal process of things like a risk profile or
continue on pg. 10
The old methods, like standardized asset
class diversification and a buy-and-hold
mentality, just don’t work that well. Today there
is too much correlation in the markets to get
true diversification that will offer the kind of
risk management required for a portfolio. And,
frankly, clients often do not have the patience
and lengthy timeframe to wait for a buy-and-
hold strategy to work.
How do you see your role?
The spirit of our mission statement is help-
ing everyday people have access to the most
sophisticated planning tools and investment
strategies out there. I worked for several years
within hierarchal financial company structures
and learned a lot there, but the independent
path better fits my personality and what I feel is
important for clients.
My job is to help clients identify and select
the appropriate financial planning and invest-
ment paths that match well with their overall
life objectives and their resources. Nobody’s
goal is to make more money, even if that is what
they say it is or think it is. Their actual goal is
to retire comfortably, or to send their kids to
college, or to help their family achieve a better
lifestyle.
Navigating them through all of the different
investment choices out there and finding the
correct vehicles to help them accomplish their
goals is critical. By working at an independent
firm, I am not under pressure to put forward
certain products or investment managers. I can
perform the appropriate analysis with a client
and then select from a wide array of alternatives.
And we emphasize with clients that the process
is not carved in stone: If their life circumstances
suitability analysis. That will lead to the con-
sideration of different portfolio approaches and
the money managers that might be appropriate
for that specific client. We will then have an-
other session to discuss the overall investment
approach, to build shared expectations, and to
see if we can reach a level of comfort with a
portfolio direction.
Do you have a specific target market?
My specific focus right now is on working
with employees of the University of Kentucky
on their 403(b) plans. They have a very generous
plan and a large employee group. Going back to
what I said was our overall mission statement,
we try to provide sophisticated investment tools
to people who might have relatively modest ac-
counts, but that money is extremely important
to their future. It is a very receptive audience
once we get to explain our approach.
Where do active money managers fit into
your approach to the 403(b) segment?
First of all, you have to understand the dy-
namics of this group we are working with. Let’s
use healthcare workers at UK as an example.
They are a very hard-working group, with not a
Client portfolios are being managed according to the
strategies appropriate to their needs—and with an
eye to current market conditions.
June 4, 2015 | proactiveadvisormagazine.com 9

10. Retirement Tax Advisory Group Inc. (RTAG) is a Kentucky-based Registered Investment Advisory firm. Securities offered through American Equity Investments, member FINRA and SIPC.
lot of time for anything much beyond their jobs
and their families.
When I meet with some clients for the first
time, it is not an exaggeration that they might
hand me a stack of unopened statements from
their 403(b) account—I am talking years of
unopened statements in some cases. It just moti-
vates me when I see individuals who are either 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.
The 403(b) account is essentially the
non-profit version of a 401(k) plan. In most
cases, plan providers allow us to arrange for
discretionary management of client accounts,
obviously with the client’s full understanding
and authorization. Then we usually choose a
third-party active manager who has an array
of portfolio or strategy options, based on
suitability profiles.
When clients are told that they will be
getting world-class investment professionals
managing their money with an emphasis on
risk management, there is almost universal
excitement. I explain that their accounts are no
longer just taking whatever the market throws
at them; they are being managed according to
the strategies appropriate to their needs with an
eye to current market conditions.
The bottom line is that we have the analytics
and models of these managers helping us to try
and be in the right place at the right time, and
more importantly, staying out of the wrong
place during bad times. We may not always
see the highest returns every year, but clients
come to see the significant value of this active
approach, especially when the markets are
headed south.
We are pleased that our 403(b) clients are
spreading the word about our services to their
friends and associates. I think that reflects our
commitment to service, our understanding of
client needs, and the model of money manage-
ment that we are using.
continued from pg. 9
Ryan Finnell
10 proactiveadvisormagazine.com | June 4, 2015

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The economist who
realized how crazy we are
Michael Lewis reviews the “funny and personal”
memoir of Richard Thaler, one of the “disruptive”
pioneers of behavioral economics.
Marketing matters to firms
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Making business development a priority is critical
for sustainable growth—even if advisory firm
principals don’t see the immediate need.
L NKS WEEK
June 4, 2015 | proactiveadvisormagazine.com 11

12. Market “truths” subject to change
Rob Hanna is president of Hanna Capital Management LLC and founder of Quantifiable Edges. In 2012, he founded Overnight Edges, which in 2014 merged with
Master the Gap to become InvestiQuant, where he serves as vice president of Research. A Boston College alum, Mr. Hanna lives and works in Massachusetts.
www.quantifiableedges.com, www.InvestiQuant.com
here are many tools traders can utilize to
gain an edge and identify opportunities:
fundamentals, technical indicators,
sentiment, and seasonality. All of them can
provide value. And with regard to the tools,
there are many “truths” traders learn about the
markets as they go through their careers. But
these truths are subject to change. Let’s use a
seasonality example to demonstrate change in
the market.
Starting in the late 1980s and early 1990s,
the stock market began to show unusual
strength on the first trading day of each month
relative to other days. This was not noticed by
many market observers for several years, but
eventually became fairly common knowledge.
The most common explanation was that 401(k)
plans began to gain popularity around that
time. And since many people got paid at the
end of the month, there tended to be mass
inflows into mutual funds right around the first
of the month. Fund managers would put that
money to work and the increased liquidity flow
would often help elevate the market on the first.
But first-of-the-month strength has not
persisted in recent years. The charts here show
just how drastic the change in market character
has been. These charts compare the “first of the
month” versus “all other days.” They show SPX
(S&P 500) points gained (or lost) for two time
periods: 2000-10 and 2011-present.
The stock market generally struggled during
the 2000-10 period. Looking at the chart you
can see that while the S&P 500 spent much of
the time enduring two large bear markets, the
first-of-the-month chart looks pretty bullish for
most of the duration. Nearly 420 points were
gained on the first of the month, while all other
days combined to lose over 630 points.
T
That changed drastically around the begin-
ning of 2011 (see Figure 2). Over the last 4.5
years the market has been in a bull market for
much of the time—gains have been exception-
ally strong. But almost none of those gains were
thanks to first-of-the-month action.
I have no good explanation for “why”
the market has changed. Maybe the unusual
strength was noticed by so many that the edge
was traded out of the market. Regardless, strat-
egies that looked to take advantage of it have
likely faltered.
It will be interesting to see how this plays
out in the months and years to come. If the
former “strongest day” cannot manage gains in
a bull market, how badly might it fare when
the next bear market arrives? Is it a permanent
change or is it temporary? Will “first of the
month” devolve into “worst of the month?”
At this point, it is too soon to tell.
What is clear is that this particular market
trend has not acted the same in recent years.
Changes like this are not always obvious, but they
are constant. For traders to be successful over the
long term, they must identify changes that impact
theirstrategiesandadaptasmarket“truths”evolve.
The bad news is that adapting to change can
be difficult. The good news is that changing
market dynamics ensure there will always be
more to learn, the market will always be inter-
esting, and there will always be new opportuni-
ties to explore.
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: QuantifiableEdges.com
proactiveadvisormagazine.com | June 4, 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 same today as they were a year ago, even
though the S&P 500 grew by over 10% in 2014.
Why? Because earnings have been growing at
similar double-digit rates, keeping P/E multiples
in check. As the chart indicates, the S&P 500’s
trailing 12-month P/E ratio is only slightly higher
than the average for the last 24 years.
Living in the present may promote happiness,
but it does not guarantee it in the short term.
Responsiveness is an advantage that active man-
agement has over the buy-and-hold approach in
most markets, but when a bull market is identi-
fied, it usually pays to give the primary trend the
benefit of the doubt until proven otherwise.
Investors utilizing active strategies for the
first time have got to shrug off the buy-and-hold
mindset. I know you have seen your buy-and-hold
investments in the past rise to new heights and
then be dashed when a major bear market arrives
on the scene. And in the past you have had to
simply hold and hope for a recovery.
But as active investors know, each strategy
has high-probability trading parameters that
can move your investments to safety when the
historically tested sell parameters are met, rather
than when fear is at a maximum. It’s all about
living in the present and not fearing the actions
of the past or worrying about the future.
Guide to investing
S&P trailing 12-month P/E ratio: 1990-2015 (YTD)
Source: Bespoke Investment Group/Bloomberg
Jerry C. Wagner is founder and president of Flexible Plan Investments Ltd.
Formerly a tax and securities attorney, Mr. Wagner recognized early on that
technology and hedge fund techniques could be applied to help individu-
als successfully invest while managing their downside risk. After spending
time pioneering new techniques in market analysis, designing quantitative
methodologies, and managing investment portfolios, Mr. Wagner founded
Flexible Plan Investments in February 1981. www.flexibleplan.com
13June 4, 2015 | proactiveadvisormagazine.com

14. Advertising
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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
Rob Hanna
Jerry Wagner
David Wismer
Graphic Designer
Travis Bramble
Contributing Photographer
Chris Cone
June 4, 2015
Volume 6 | Issue 9
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.
Client appreciation:
A sound investment
Jim Bowen
Indialantic, FL
LPL Financial
President, JD Bowen Financial Group
Jim Bowen is a Registered Representative with and Securities
and Advisory services offered through LPL Financial, a registered
investment advisor. Member FINRA & SIPC. Investing involves
risk, including potential loss of principal. No strategy ensures
success or protects against a loss. JD Bowen Financial Group is
a separate unaffiliated entity from LPL Financial.
about all of our interests, our families, and
our lives. The topic of investments or finan-
cial planning does not come up, unless the
prospect wants to bring it up. But they can
make a decision whether they are comfort-
able talking to me and can relate to me as
a person. If they then want to take the next
step, it is up to them, totally on their own
timetable.
We have found these types of events rep-
resent the best way to spend our marketing
money. They not only strengthen current
client relationships, they open the door in a
positive way for bringing in new clients.
ur firm has tried a number of ways
to solicit new prospects: direct mail,
seminars, appearing on local radio,
and other tactics. Each has its benefits, but
the bottom line always comes back to how
cost-effective or time-effective a marketing
program really is.
We have found that we get the best
return on our investment through referrals
directly from current clients. We are located
on the Space Coast in Florida, which has
a fairly high concentration of technology
and aerospace companies. A number of our
clients have come from these industries and
a good percentage of those are engineers who
are close to retirement or are already retired.
They have had successful careers but
most do not qualify as high-net-worth. They
are concerned about retirement income. We
have built our practice around providing
a high level of service and specializing in
income-producing investments and preser-
vation of principal. It seems like a natural
extension of our message to use our current
client base to help us reach out to new
prospects.
We do not do that in an overt sales-pitch
way, but keep it low-key, and hopefully fun,
through a number of events that are directed
to clients. We host a semi-annual market
review, which might include something
like an ice cream social on a hot summer
day. And in February, we have a Valentine’s
luncheon specifically for our female clients.
Lunch-and-learn informal discussions are
popular on a current topic of interest, like
preventing identity theft or enhancing com-
puter security.
One technique that has worked particu-
larly well for us is to arrange a client lunch
and ask the client to bring a friend or rela-
tive. We will have an informal conversation
O
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
101
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.)