An Introduction to Maendel Wealth Management
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An Introduction to Maendel Wealth Management An Introduction to Maendel Wealth Management Presentation Transcript

  • Investment Presentation Prepared exclusively for AN INTRODUCTION TO MAENDEL WEALTH MANAGEMENT November 26, 2011 Prepared by: James D. MaendelContents MAENDEL WEALTH MANAGEMENT1 Firm and Mission 31700 Middlebelt Road, Ste 1452 LPL Financial: The Organization Farmington Hills, MI 483343      Investment Principles Phone: (248) 626 2000 X2344 Client Discovery http://maendelwealthmanagement.com5 Ongoing Consulting and CommunicationSecurities, advisory services & insurance product offered through LPL Financial and its affiliates, Member FINRA/SIPC.Not FDIC/NCUA Insured  Not Bank/Credit Union Guaranteed  May Lose Value   Not Guaranteed by any Government Agency  Not a Bank/Credit Union DepositTracking # 429093
  • Firm and Mission
  • The importance of of financial guidance The importance financial guidance Building an investment portfolio designed to address your unique long-term goals and financial dreams is a complex process that requires knowledge, skill, dedication and expertise. For investors in today’s ever-changing financial markets, a professional financial advisor can provide expert advice to help you pursue your financial goals. n Analysis of needs and goals n Asset allocation strategies n Manager selection needs and goals retirement n Retirement income income n Investment strategies n Ongoing monitoring and maintenance of investments n Ongoing education n Tax management n Long-term capital appreciation n Wealth structuring n Trust services tax n Education savings programs management n Wealth transfers n Socially responsible issues portfolio constructionFIRM & MISSIONFIrm & mIssIOn
  • The investment consulting processThe investment consulting process As your investment partner, we are committed to helping you accomplish your unique financial goals and objectives. After developing a thorough understanding of your risk tolerance and short- and long-term goals, we will work together to create a customized investment portfolio designed for you. In order to accomplish this, we will take you through the investment consulting process, which is designed to help us determine how to best address your financial goals and dreams. Review Discover n Quarterly performance reports n What are your hopes and dreams? 1D n Ongoing due diligence of ew is n Do you have a high or low tolerance for risk? investment managers vi n Do you have any specific tax co e 4R n Periodic reviews considerations? ve Investment newsletters What is your investment objective? r n n n Tax harvesting Designed For You n What is your time horizon? n Portfolio rebalancing 3 Im d Implement en Recommend em pl Account opening paperwork en m n m n Investment portfolio recommendations t o n Funding 2 Rec n Customized asset allocation strategies n Wealth management services n DiversificationFIRM & MISSIONFIrm & mIssIOn
  • Define, Advance & ProtectYOU, YOUR FAMILY, YOUR DREAMSTHATS WHAT MATTERS & THAT IS OUR SOLE FOCUS AT MAENDEL WEALTH MANAGEMENT.OUR GOAL IS TO BE YOUR MOST TRUSTED ADVISOR THROUGH OUR PROFESSIONAL KNOWLEDGE, OUR INTEGRITY AND OURPERSONALIZED SERVICE. WE HAVE ALWAYS BELIEVED that in an increasingly complex world of investments, pursuing your financial goals depends on solid, unbiasedadvice; meaningful timely information and research; and access to the investments and services that best fit your specific circumstances. Beingindependent means we are free to recommend only those financial strategies that fit our clients unique needs & goals, allowing us to provide trulyindependent and objective investment advice.NOT ALL FINANCIAL ADVISORS CHARGE COMMISSIONS. The advisors at Maendel Wealth Management offer you an alternative choice tocommission-based investing: a fee-based relationship enhancing communication for both the client & the advisor. A fee-based relationship canhelp to foster your financial success by inspiring real teamwork & providing the kind of freedom & flexibility youve always wanted when investing forthe future.WE WELCOME YOU TO STOP BY OUR NEW OFFICE, call us anytime with questions, or, if youre not quite ready to say "Hello" visit our website at www.maendelwealthmanagement.com.  At Maendel Wealth Management, there are no "products", only strategies. Each client has unique financial circumstances and challenges, and we tailor our recommendations & process to meet your precise requirements.At Maendel Wealth Management, we know that the stresses and challenges facing you today are unique, and may have made your financial goalsseem unobtainable.  We believe those goals -a financial future without worries, a future where your loved ones are secure, a level of financialsecurity that will give you the freedom to live, travel, work and play on your own terms, are still achievable. We have a passion for the markets, and for helping people understand them and benefit from them, and we believe we can help you not only tosurvive, but to thrive in this ongoing global economic storm. THE MWM TEAM IS HERE TO WORRY ABOUT THE MARKETS AND YOUR ASSETS SO THAT YOU DONT HAVE TO. It is an honor for us to serve you and your family.
  • Define, Advance & Protect
  • Who We Are: James D. Maendel, Wealth Advisor at Maendel Wealth Management Maendel Wealth Management provides professional asset management and comprehensive financial, retirement and estate planning to select families and business owners. Were located in Farmington Hills, Michigan but we serve families and businesses throughout the U.S. using state of the art client contact and secure interface technologies. Our mission is to combine the personalized service and "small town" feel of a family office model with the global scope, regulatory oversight, capabilities and execution platform of the nations largest independent broker/dealer, LPL Financial. James D. Maendel is co-owner and Chief Investment Strategist at Maendel Wealth Management. An alumnus of the State University of NY at New Paltz and Cortland University, Jim obtained a BA in childhood education, with minors in psychology and Russian language. He holds Series 7, 63 and 65 securities licenses, as well as accident, health, life and long-term care insurance licenses & has earned the Accredited Asset Management Specialist designation in addition to the Accredited Wealth Management Advisor (AWMA) professional designation.  A native of Hastings, England, Jim has lived in the United States, Europe and the Middle East and brings an inquisitive, globally informed approach to wealth management and investing. Jim made Michigan his home in 1995 and lives  in the Lakes Area of Oakland County with his wife Nicole, & three children.
  • Your total wealth management solutionYour total wealth management solution [ INSERT ADVISOR NAME HERE ] Comprehensive Wealth Management Services College Planning Retirement Planning Investment Planning Financial Planning Estate Planning 529 Plans Defined Contribution Plans Asset Allocation CPA/Accounting Services Will Planning* Education IRAs Defined Benefit Plans Diversification Asset Protection Trust Planning* UGMAs Executive Compensation Risk Assessment Long-term Care Wealth Transfers Financial Aid Planning Annuities Tax Consequences Insurance Charitable Giving Coverdell ESAs IRAs Portfolio Strategies Business Succession Plan Family Limited Partnerships* *Please consult a qualified tax or legal advisor.FIRM & MISSIONFIRM & MISS ION
  • LPL Financial: The Organization
  • Providing you with advice for lifeProviding you with advice for life n Largest independent broker/dealer in the country* About LPL Financial LPL Financial registers and supports more than 12,000 independent n More than $280 billion in assets under management financial advisors in over 7,000 offices nationwide. LPL Financial was built and 2.7 million client accounts on the premise that achieving your financial goals depends on unbiased financial advice, timely research and easy access to the investments and services that best fit your specific needs. n 20 years of consecutive earnings growth, in both With over 40 years of industry leadership and innovation, LPL Financial up and down markets serves the growing needs of independent financial advisors and their clients. LPL Financial was formed in 1989 through the merger of two n No capital markets, trading, investment bank brokerage firms—Linsco (established in 1968) and Private Ledger (founded in 1973). or proprietary products Today the firm is a leading diversified financial services company and the nation’s largest independent broker/dealer* with headquarters in Boston, Charlotte and San Diego. * As reported in Financial Planning magazine 1996 - 2009, based on total revenue.LPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • Account Protection and OversightAccount protection and oversight Account protections Oversight n Securities Investor Protection Corporation (SIPC) Insurance applies in the n The Private Trust Company, NA an affiliate of LPL Financial is a nondepository event that an SIPC member firm fails financially and is unable to meet national banking association, which is regulated and reviewed by the Office obligations to securities clients, but it does not protect against losses of the Controller of the Currency (OCC). from the rise and fall in the market value of investments. LPL Financial’s SIPC membership provides account protection up to a maximum of $500,000 per customer, of which $100,000 may be in cash. For an explanatory brochure, visit www.sipc.org. n Additionally, through Lloyds of London, LPL Financial accounts have securities protection to cover the net equity of customer accounts up to an overall aggregate firm limit of $750 million, subject to conditions and limitations. n Balances invested in the Insured Cash Account are protected by Federal Deposit Insurance Corporation (FDIC) up to a maximum of $1 million for a single account holder, $2 million for a joint account.LPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • LPL Financial servicesLPL Financial Services Advisory Financial Wealth Consulting Planning Management Services Group Services LPL The Private LPL Financial Trust Company Insurance Research Associates Client Advisor Alternative Structured Lending Investments Investments CapabilitiesLPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • Advisory Consulting ServicesAdvisory Consulting Services Keeping up with increasingly complex financial markets demands a high level of expertise and extensive resources. Experienced team of professionals Partners with LPL Financial Research — n■ Members average more than a decade in the investment industry Design and assistance with: n■ Assists with designing asset allocation strategies and implementing n■ Asset allocation strategies the ongoing consulting process n■ Portfolio construction and manager selection n■ Provides tools and resources to enhance the client investing n■ Analysis on the markets experience n■ Tax management services Innovative investment platforms — Building and maintaining investment strategies to address your goals: n■ Strategic Asset Management n■ Optimum Market Portfolios* n■ Model Wealth Portfolios n■ Personal Wealth Portfolios n■ Manager Select * The Optimum Market Portfolios advisory accounts utilize the Optimum Funds, a sub-advised family of funds from Delaware Management Holdings, Inc. ands its subsidiaries. Delaware Management Company, a series of Delaware Management Business Trust, is the manager and Delaware Distributors, LPL Financial is the distributor of the Optimum Funds.LPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • LPL Financial Planning GroupLPL Financial Planning Group We have access to the LPL Financial Planning Group, a dedicated team devoted to helping us structure your investments, answer financial planning questions and implement tax-efficient strategies. The LPL Financial Planning Group has the expertise, tools and resources to help us suc- ceed, including access to a powerful financial planning software called WealthVision. The team routinely designs cases and devises unique planning solutions based on your specific situation. About WealthVision WealthVision is a powerful, Web-based wealth-planning tool that offers account aggregation, modular and comprehensive financial goal planning, and an online document storage facility that helps you store and keep track of your valuable files, all accessible through your own personalized website.LPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • LPLLPL Financial Wealth ManagementServices Financial Wealth Management Services LPL Financial offers a wide range of products and services that are specifically designed to address the goals and needs of affluent clients. Legacy and philanthropic planning— Financial and estate planning— Design and assistance with: Effective and long-term wealth management, ■ Donor advised funds preservation/enhancement and asset transfer: ■ Endowment funds ■ Wealth protection ■ Pooled income funds ■ Tax reduction and potential deferral ■ Family foundations ■ Customized estate and inheritance planning ■ Fiduciary custody services ■ Legacy and business succession planning ■ Charitable remainder trusts Management of concentrated stock positions— Insurance planning— Offering options for liquidity, diversification, Design and case analysis for sophisticated preservation of capital: strategies from a combination of internal ■ Hedging, option strategies resources and industry experts. ■ Monetization ■ Diversification, exchange funds Lending— Margin lending and collateralized loan capabilities. LPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • LPL Financial ResearchLPL Financial Research About LPL Financial Research The LPL Financial Research team LPL Financial Research works continuously to help your financial advisor The LPL Financial Research team consists of seasoned and accomplished interpret and adjust to the latest developments in the world’s capital markets. industry veterans, comprising one of the largest and most experienced As the industry’s leading independent brokerage firm*, LPL Financial has research groups among independent brokerage firms. no proprietary products to sell, no investment banking relationships to The goal of LPL Financial Research is to be your advisor’s trusted partner. In promote, nor any other business conflicts to get in the way of providing order to be successful, it is critical that all LPL Financial advisors have access unbiased recommendations. The breadth of LPL Financial research superior unbiased investing ideas, timely market perspective, and ongoing coverage—mutual funds, separate accounts, fixed income, exchange support. The delivery of timely, in-depth, unbiased research on varying traded funds, alternative investments, variable annuity sub-accounts and investment products, asset allocation strategies, and the financial markets is more—reflects a focus on helping meet the needs of clients, rather than designed to provide your financial advisor with a powerful tool that is a distinct “pushing product” or moving inventories of securities. advantage in helping them achieve your financial objectives. * As reported in Financial Planning magazine, June 1996 - 2009, based on total revenue. LPL Financial Research Research Organization Portfolio Strategy expertise truly sets LPL Financial Research apart from its competitors. LPL Financial Research Analysts determine the asset allocation models based on investment objectives and the strong relationship between risk and return in the Portfolio Strategy portfolios and then select the models and combinations of managers for each portfolio based on a variety of characteristics and corresponding performance in over 300 different market conditions using their proprietary statistical SAT tool. Investment manager selection and due diligence efforts for mutual funds, money managers, and alternative investment strategies is based on a strong and thorough investment discipline. LPL Financial Researchs recommendations are unbiased. As Investment Manager an independent firm, you and your advisor can be confident LPL Financial Research is making decisions based solely on Recommendations recommending the best investment option for a specific purpose. The research process combines quantitative and qualitative screening factors and analysis that do not include or consider in any way any financial arrangements or business relationships that may or may not exist between LPL Financial and the manager. The function of the Research Analytic Group is to perform quantitative analysis, performance measurement, attribution, and Quantitative Analysis appraisal of LPL Financial Research’s recommendations and platforms, while managing the underlying data and application usage of products and services within the team. The Investment Strategy Group is focused on delivering timely, efficient, and accurate communication of the teams Investment and Market investment advice to help you and your advisor stay informed. The ASK Research service desk, a dedicated team of research Communications professionals, is ready to address your financial advisor’s market and investment advice questions.LPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • LPL Financial Research teamLPL Financial Research team Areas of expertise: Burt White, n Asset allocation Managing Director and n Asset class and sector research Chief Investment Officer n Capital markets analysis n Provides strategic guidance for the LPL Financial Research group, directs n Economic analysis team of analysts and investment professionals providing in-depth n Investment manager evaluation, recommendations research on the global economy and markets, portfolio optimization and construction, mutual funds, separate accounts, fixed income, alternative n Overlay services investments and exchange traded funds n Portfolio construction n Served as the Chairman of the Manager Strategy Group Investment n Mutual funds Committee at Wachovia n Separate accounts n Responsible for all due diligence of third-party investment managers and mutual funds, including more than 1,200 company n Fixed income meetings and on-site reviews n Alternative investments n Exchange traded funds n Variable annuity subaccounts Jeffrey Kleintop, CFA, Chief Market Strategist n Leads the development and articulation of LPL Financial Research’s market and investment strategies, leveraging his expertise in the analysis of global financial markets and asset allocation strategy n Former chief investment strategist at PNC Wealth Management n Recognized economic strategist n One of “Wall Street’s Best and Brightest”—Wall Street JournalLPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • The Private Trust CompanyThe Private Trust Company The Private Trust Company N.A. (PTC) is an affiliate of LPL Financial. PTC manages trusts and family assets for high net worth clients and is licensed in all 50 states under its 1995 national banking charter to administer the trusts and implement the estate plans of affluent families. The bank does not engage in lending or deposit taking; it specializes solely in providing fiduciary solutions. As its primary mission, PTC provides trust services to clients of LPL Financial advisors as well as to local clients in Cleveland, Ohio, where it is headquartered. PTC is also the custodian of all of the LPL Financial IRA accounts. Key trust facts A trust is a legal entity that holds assets, such as securities or mutual n Ensuring accurate records and accounting for all transactions funds, for the benefit of a person, family, or organization. n Complying with tax reporting regulations When establishing a trust, you designate one or more trustees. n Good planning will prompt the designation of a successor trustee—one A trustee can be an individual, often including yourself, or a bank who assumes responsibilities for an individual trustee who becomes with a trust charter. By law, your trustee is responsible for: disabled or dies. n Managing and protecting the trust’s assets and seeing they are n Unlike a relative, friend or business associate, a professional trustee diversified appropriately fields a team of experts that operates your trust with care and objectivity n Assuring your wishes are followed and all of your beneficiaries are for as long as you desire. treated fairly For more information, visit www.theprivatetrustcompany.comLPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • LPL Insurance AssociatesLPL Insurance Associates LPL Financial offers full-service insurance solutions and dedicated support through its life insurance agency, LPL Insurance Associates, Inc. It is able to offer our firm the carriers and products to fulfill all of your fixed and variable life insurance needs with more than 24 quality, name brand companies on its platform. The full suite of life insurance solutions includes: Irrevocable Life Insurance Trusts (ILITs) Using insurance inside a trust can have a powerful impact on your n Term life estate planning strategy. Common client goals achieved by using an ILIT include: n Helping to avoid forced liquidation to pay estate taxes on an asset a n Whole life family wants to retain, such as a family business or real estate n Helping to provide a safety net for potential long-term care n Universal life needs in later years n Helping to minimizing estate tax liability at the time assets n Variable universal life transfer to heirs n Helping to offer an opportunity to enhance charitable contributions, in addition to providing for heirs n Helping to ensuring an equitable distribution of assets to heirs n Helping to provide for greater control of assets LPL Insurance and The Private Trust Company work together to help us implement this powerful planning tool for you.LPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • Alternative investmentsAlternative investments As investors’ needs become increasingly complex and sophisticated, a growing number of alternative investment products have been introduced. LPL Financial has responded to this need with a range of innovative products designed for formulating, supporting or supplementing specific strategies. Alternative investments n Managed futures Complex tax and regulatory requirements can make sorting through and selecting the right investments difficult. We are committed to helping you n Fund of hedge funds navigate the world of alternative investments. n Private equity LPL Financial provides information and educational materials from key n Real estate (REITS, limited partnerships) resources, including a dedicated team of consultants, the LPL Financial n 1031 exchange programs Research department and product sponsors, to help us determine which alternative investments are the most appropriate options for you. n Concentrated equity solutions (Exchange funds, Collars, Pre-paid forwards) n Oil and gas partnerships n Equipment leasing n Structured products Investing in alternative investments may not be suitable for all investors and involves special risks such as the risk associated with leveraging the investment, potential adverse market forces, regulatory changes and potential illiquidity. There is no assurance that the investment objectives will be attained.LPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • Fixed Income TradingFixed Income Trading The LPL Financial Fixed Income Trading Team is compromised of professional traders who  Build xed income investment strategies speci c to your goals  O er unique solutions  Conduct buy and sell orders on a best e orts basis Products and Services Best E orts Execution  U.S. Treasuries  Fixed Income Trading’s online execution system shows  Government Agencies the combined inventories of dozens of rst tier broker dealers, wire houses, middle market and boutique bond  Mortgage Backed Securities and CMOs shops ensuring that a competitive market place is  Municipals maintained.  Corporates  Before a bond is bought or sold a team of more than 40  Structured Products xed income professionals works to make sure best execution Customized reports include standards are met. We work hard to provide the best prices  Portfolio diversi cation available whether a client is buying or selling bonds.  Strategies to achieve income goals  Bond maturity and income schedule proposalsFIXED INCOME TRADING 1FIxed IncOme tradIng
  • Structured investmentsStructured investments Structured investment products are complicated investments that help provide investment exposure that cannot be accessed through traditional assets, and some protection from downside risk in exchange for the investor’s forgoing some upside potential to achieve that protection. Structured products typically have two components, a note and derivative and have a fixed maturity. Structured products combine traditional investments, such as bonds, stocks and commodities, with financial instruments, including options and swap agreements. The most common structured products are used to gain exposure to an asset class while providing protection at maturity. Principal protection may vary from partial to 100%. If the option (derivative) turns out to be valuable, investors can gain exposure to the upside of the asset class. Structured investments with tailored terms and a risk/reward profile are designed to help clients: n Optimize returns and diversify portfolio holdings n Provide leverage n Derive tax efficiencies n Minimize volatility and provide downside protection JPMorgan, DWS Scudder, HSBC, and Credit Suisse provide new monthly offerings, which may include principal protection, equity indexed notes and more. An investment in structured products involves significant risks. Investing in structured notes is not equivalent to investing directly in the underlying indices. No assurance can be given that the investment strategy used to construct any return enhanced structured note will be successful or that the structured notes will outperform any alternative basket that might be constructed from the constituent sub indices. Investment value prior to maturity will be influenced by many economic and market factors that may either offset or magnify each other, including interest rates, the level of the underlying, implied volatility and the time remaining to maturity. Investors should carefully review the risks in the offering documents. Structured products are intended as “buy and hold” investments and may not be liquid instruments prior to maturity.LPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • Lending capabilitiesLending capabilities Through LPL Financial, we can offer you access to banking and lending products, including credit cards margin lending and collateralized loans. LPL Financial Collateralized Lending Program LPL Financial credit card program LPL Financial has partnered with Nationwide Bank to offer LPL Financial offers clients an exclusive credit card program, which Collateralized Lines of Credit to retail clients. includes a choice from the following card options with low or no  Revolving line of credit annual fees:  Line amounts from $100,000 to $5 million*  LPL Financial Rewards American Express Card and Platinum Plus© MasterCard© with WorldPointsSM Rewards for consumers  30 day London Interbank Offered Rate (LIBOR) based pricing starting at LIBOR plus 2.50%.  LPL Financial Business MasterCard© with WorldPointsSM Rewards  Line amount based on 60% of the value of the for business owners marketable securities  Redeem points for WorldPointsSM Rewards, including cash back into your ®  Line of credit checks for easy access LPL Account with as little as 2,500 points, travel with no blackout dates, brand-name merchandise, and more *Lines above $5 million will be considered and priced individually.LPL FINANCIAL: THE ORGANIZATIONlPl FInancIal: the OrganIzatIOn
  • Investment Principles
  • Cycle of of Investor Emotions Cycle investor emotions “Behavioral finance scientists have studied investor behavior and concluded investors go through a multi-phase internal process before they decide to react to bad news. * ” Euphoria Anxiety Thrill Prices High Denial Excitement Fear Optimism Desperation Optimism Panic Prices Relief Low Hope Capitulation Depression Despondency *Source: Ken Kivenko, 7/29/05, The Fund Library. Investor Emotion Chart. Source: Index Funds: The 12-Step Program, M.T. Hebner, 2004. Graph courtesy of Goldman Sachs.INVESTMENT PRINCIPLESInvestment PrIncIPles
  • Common investor challengesCommon investor challenges Not having a clearly defined investment objective Not investing globally Whether building a new house or an investment portfolio, you first need to A well-diversified portfolio should include assets with low correlation establish a solid foundation. Gaining an in-depth understanding of your to each other. Some American investors may tend to lean toward unique financial goals is key to this process. Your personal portfolio domestic securities and avoid global investing opportunities altogether. By investment objective will take into account your risk tolerance and time investing only in U.S. stocks, you could miss out when foreign stocks horizon. Specific strategies can be created to address a single objective or perform well. a combination of objectives simultaneously. Being led by your emotions Improperly judging risk Every day you hear new theories or speculation about the direction of In general, the longer the time horizon of your investments, the more risk the stock market from the media, friends, family and coworkers. It can you can take on. Many investors, fearing even a little amount of risk, focus be challenging to sort through differing opinions, filter out the noise only on investments that address short-term volatility even though their and stay focused on your long-term investing goals. Many investors time horizon may be 20 years or more. The result is a poorly performing find themselves preoccupied with the fear of investment losses and portfolio in relation to their investing goals and time horizon. mistakenly make costly investment decisions. Being overconfident in a single stock or sector Paying too much in taxes Relying solely on your intuition or creating attachments to specific stocks Structuring your investments properly by mitigating the effect of taxes or sectors without reading impartial analyses and reports can lead to poor on your portfolio can help preserve and ultimately grow more of your investing decisions. For example, employees of a firm will often make investments over time. Not using tax-efficient money managers or excessively large allocations to their employer’s stock, believing they can strategies where appropriate may cause you to pay taxes unnecessarily. better predict the stock price because of their intimate knowledge of their firm. This is not always true, as demonstrated by cases such as Enron. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.INVESTMENT PRINCIPLESInvestment PrIncIPles
  • Why does the average investor underperform? Why does the average investor underperform? Markets have performed well Individual investors have underperformed – Wrong decisions, wrong time Annualized total returns for 20 years 10% 9.14% 8% S&P 500 6% 3-Month Treasury bills 3.83% Inflation 4% 2.57% Average equity fund investor 2% 1.01% 0% Sources: Dalbar 2010 Quantitative Analysis of Investor Behavior Study, S&P 500, Consumer Price Index, Citigroup BIG Treasury Bill (3M). Average stock investor, average bond investor and average asset allocation investor performance results are calculated using data supplied by the Investment Company Institute. Investor returns are represented by the change in total mutual fund assets after excluding sales, redemptions and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses and any other costs. After calculating investor returns in dollar terms, two percentages are calculated for the period examined: total investor return rate and annualized investor return rate. Total return rate is determined by calculating the investor return dollars as a percentage of the net of the sales, redemptions and exchanges for the period. Indices are unmanaged and cannot be invested into directly. Past performance is not a guarantee of future results.INVESTMENT PRINCIPLESInvestment PrIncIPles
  • Underperformance is a result of investorsUnderperfomance is low who buy high/sell a result of investors who buy high/sell low n Investors chase returns – Wrong decisions, wrong time 50 80 40 60 30 40 Equity Mutual Fund Flow ($ billions 20 MSCI World Index (%) 10 20 0 0 -10 MSCI World Index (%) -20 Source: Investment Company Institute and Equity Mutual Fund Flows ($ billions) -20 Morgan Stanley Capital International 2010. 1 The return on equities is measured as the -40 year-over-year change in the MSCI All Country -30 World Index. 2 Net new cash flow to equity funds is plotted as -40 -60 a six-month moving average. Past performance Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 is no guarantee of future results. 3 MSCI World Index is an unmanaged index which cannot be invested into directly. Past performance is no guarantee of future results.INVESTMENT PRINCIPLESInvestment PrIncIPles
  • Your losses hurt more than your gainsYour losses hurt more than your gains n Constructing a portfolio that helps minimize losses can significantly affect your portfolio value over time. n To bring a portfolio back to its initial value after a loss takes a return greater than the loss. n For example—a 15% loss would take an appreciation of over a year of 17.6% to break even. Assuming an 8% annual return, the break even would take 2 years and 1 month. % Loss % Appreciation Years to break even to break even at 8% annual return 15% 17.6% 2 years, 1 month 25% 33.3% 3 years, 9 months 35% 53.8% 5 years, 7 months 45% 81.8% 7 years, 9 months past performance is no guarantee of future results. this is a hypothetical example. Your results will vary. the assumed 8% annual return used does not reflect the deduction of the fees and charges inherent to investing in securities.investment principlesInvestment PrIncIPles
  • The Emotional RollercoasterThe emotional rollercoaster Headline buzz words detail the emotional rollercoaster that is a market downturn and upswing 7850 6/20/97 Level of the Dow Jones Industrial Average 7650 Optimistic Emotion Says to Buy Here 7450 “Euphoria” (3/12/97 - 6/20/97) 7250 7050 3/12/97 “Excitement” 6850 “Anxiety” 6650 “Fear” 6450 Emotion Tells Investors to Sell Here “Panic” 4/11/97 6250 source: Zephyr, lpl Financial research past performance is no guarantee of future results. the Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. the Dow Jones is an unmanaged index which cannot be invested into directly. stock investing involves risk including loss of principal.Investment prIncIplesInvestment PrIncIPles
  • To invest or not to invest?To invest or not to invest? Every year has a reason to say "no." 1953 Russia Detonates H-Bomb 1972 Largest U.S. Trade Deficit Ever 1992 Global Recession Even through 1954 Dow Drops 300, Mkt Too High 1973 Energy Crisis 1993 Health Care Reform many market 1955 Eisenhower Heart Attack 1974 Steepest Mkt Drop in four decades 1994 Fed Raises Interest Rates Six Times conditions, 1956 Suez Canal Crisis 1975 Clouded Economic Prospects 1995 Dow Tops 5000 $10,000 invested 1957 Russia Launches Sputnik 1976 Russia Launches Sputnik 1996 Dow Tops 6400 in the S&P 1958 Recession 1977 Market Slumps 1997 Dow Drops 554 Points in One Day 500 Index in 1959 Castro Seizes Power in Cuba 1978 Interest Rates Rise 1998 Russia Long-Term Capital December 1933 would have 1960 Russia Down U-2 Plane 1979 Oil Prices Skyrocket 1999 Y2K been worth 1961 Berlin Wall Erected 1980 Interest Rates at All Time High 2000 Tech Bubble Bursts $1,272,910 by 1962 Cuban Missile Crisis 1981 Steep Recession Begins 2001 Weak Corporate Earnings December 2008. 1963 Kennedy Assassination 1982 Worst Recession in 40 Years Terrorist Attacks 1964 Gulf of Tonkin 1983 Market Hits New Highs 2002 Corporate Accounting Scandals 1965 Civil Right Marches 1984 Record Federal Deficits 2003 War in Iraq 1966 Vietnam War Escalates 1985 Economic Growth Slows 2004 Fed Begins to Raise Rates 1967 Newark Race Riots 1986 Dow Nears 2000, Mkt Too High 2005 High Commodities Prices 1968 USS Pueblo Seized 1987 October “Mini-Crash” 2006 Dow Hits Highest Level at 11,727 1969 Money Tightens, Mkts Fall 1988 Economic Growth Slows 2007 Subprime Mortgage Meltdown 1970 U.S. Bombs Cambodia 1989 Invasion of Kuwait 2008 Lehman Brothers Collapses 1971 Wage and Price Freeze 1990 Gulf War 2009 National unemployment rate exceeds Communism Tumbles with 10% 1991 2010 The Bail out of Greece Source: Factset as of 12/31/10 Berlin Wall Note: This is a hypothetical example and is not representative of any specific situation. Your results will vary. The S&P 500 Composite Index is an unmanaged index and cannot be invested into directly. Investing in stocks involves risk including loss of principal. The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500INVESTMENT PRINCIPLES stocks representing all major industries. The S&P 500 is an unmanaged index which cannot be invested into directly. Stock investing involves risk including loss of principal. Past performance is no guarantee of future results.INVESTMENT PR INCIPLES
  • Why patience is a virtueWhy patience is a virtue Percent of time stocks have provided positive returns (1977 – 2010) 78% 83% 86% 91% Over a one-year Over a three-year Over a ve-year Over a ten-year time period time period time period time period  Negative Returns  Positive Returns Source: Fact Set, LPL Financial Research Note: Based on S&P 500 Monthly Total Return. Average Annual Rolling period returns 1978 - 2010. Past performance is no guarantee of future results. The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The S&P 500 is an unmanaged index which cannot be invested into directly. Stock investing involves risk including loss of principal.INVESTMENT PRINCIP LESInvestment PrIncIPles
  • The worse we feel, thethe Better the Gains The Worse We Feel, better the gains Consumers feel the worst prior to large gains in the markets S&P 500 Price Gain Over Consumer Sentiment Next Twelve Months Less than 60 +23.1% Less than 70 +18.5% Less than 80 +13.1% 87 (average) +10.8% Greater than 90 +10.8% Greater than 100 +8.1% Greater than 110 -1.2% source: Bloomberg, lpl Financial past performance is no guarantee of future results. note: In interpreting the consumer sentiment survey, the lower the number, the worse consumer sentiment is. the standard & poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. the s&p 500 is an unmanaged index which cannot be invested into directly. stock investing involves risk including loss of principal.Investment prIncIplesInvestment PrIncIPles
  • Market comebacksMarket comebacks Often when times are bleak, years that follow show significant total market returns. 200% 150% 148% 100% 100% 67% 57% 50% 39% 0% -17% -50% -38% -42% -40% -100% -78% 1929-32 / 1933-36 1940-41 / 1942-45 1973-74 / 1975-76 2003-02 / 2003-07 2008 / 2009-10 The Great World War II Oil crisis Internet bubble/ The Great Recession Depression War on terrorism Source: JPMorgan Asset Management, Standard & Poor’s. The market returns are represented by the S&P 500 Index return (price only). Returns reflect calendar year returns and not peak to trough. The example is for illustrative purposes only. Past performance is not a guarantee of future returns. Updated as of 12/31/10. S&P 500 is an unmanaged index which cannot be invested into directly. Past performance is no guarantee of future results.INVESTMENT PRINCIPLESInvestment PrIncIPles
  • Benefits of of patience Benefits patience Despite starting at the “worst times, markets reward investors ” Portfolio Begins Portfolio Gets Portfolio Value with $100,000 on: as Low as: as of April 2010: Dec 1972 $58,173 (Sept 1974) $3,316,940 Nov 1980 $83,479 (July 1982) $1,911,915 Sept 1987 $70,419 (Nov 1987) $603,270 Feb 1990 $92,129 (Oct 1990) $555,762 Oct 2008 $58,827 (March 2009) $105,674 Source: Zephyr, LPL Financial Research Note: Past performance is no guarantee of future results The hypothetical portfolio is assumed to be invested in the S&P 500 and does not reflect the deduction of the fees and charges inherent to investing in securities. The S&P 500 index is an unmanaged index and cannot be invested into directly. Your results will vary. Stock investing involves risk including loss of principal. The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The S&P 500 is an unmanaged index which cannot be invested into directly.INVESTMENT PRINCIPLESInvestment PrIncIPles
  • Good news about bear marketsGood news about bear markets The median bear market price decline of 21% has been followed by a 33% price gain within the next 12 months Post War Period Duration S&P Price Gain Peak Trough (Months) Price Decline 12 Months Later 05/29/1946 05/19/1947 12 -28% 19% 02/02/1953 09/14/1953 7 -14% 38% 07/15/1957 10/22/1957 3 -21% 31% 12/12/1961 06/26/1962 6 -28% 33% 02/09/1966 10/07/1966 8 -22% 33% 11/29/1968 05/26/1970 18 -36% 44% 01/11/1973 10/03/1974 21 -48% 38% 06/30/1975 09/16/1975 3 -14% 28% 12/31/1976 03/06/1978 14 -19% 13% 09/11/1978 11/14/1978 2 -14% 12% 02/13/1980 03/27/1980 1 -17% 37% 11/28/1980 08/12/1982 21 -27% 47% 10/10/1983 07/24/1984 9 -14% 30% 08/25/1987 12/04/1987 4 -34% 26% Source: Zephyr, LPL Financial Research 07/16/1990 10/11/1990 3 -20% 34% Past performance is no guarantee of future results. 07/17/1998 08/31/1998 3 -19% 40% The Standard & Poor’s 500 Index is a capitalization-weighted 03/24/2000 10/09/2002 30 -47% 36% index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value Median 7 -21% 33% of 500 stocks representing all major industries. The S&P 500 is an unmanaged index which cannot be invested into directly. 10/09/2007 03/10/2008 5 -19% Stock investing involves risk including loss of principal.INVESTMENT PRINCIPLESInvestment PrIncIPles
  • Market resilienceMarket resilience When markets rebound following a bear market, gains are captured quickly. Not being invested when these rebounds begin can lead to not recouping all possible gains. 45% 40% 03/09/2009 03/11/2003 35% 10/08/1998 10/11/1998 S&P 500 percentage gain 30% 25% 20% 15% 10% Source: Bloomberg, LPL Financial Research 5% Note: Past performance is no guarantee of future results Stock investing involves risk including loss of principal. 0% The Standard & Poor’s 500 Index is a capitalization- 0 10 20 30 40 50 60 70 80 90 weighted index of 500 stocks designed to measure performance of the broad domestic economy through Trading Days From End of Bear Market changes in the aggregate market value of 500 stocks representing all major industries. The S&P 500 is an unmanaged index which cannot be invested into directly.INVESTMENT PRINCIPLESInvestment PrIncIPles
  • Missing the best days of the market can significantly reduce Missing the best days of the market your returnssignificantly reduce your returns $10,000 invested in the Dow Jones Industrial Average (9/30/87–9/30/07) For example: By staying fully invested over the past 20 years, you would have earned almost twice as much as someone who missed only 10 of the market’s best days. Source: Putnam Investments. Data is historical. The example is for illustrative purposes only. Past performance is not a guarantee of future results. There can be no assurance with respect to predicting market lows. Dow Jones Industrial Average is an unmanaged index which cannot be invested into directly.INVESTMENT PRINCIPLESInvestment PrIncIPles
  • The case for style diversificationThe case for style diversification ■ Some investors fall into the trap of chasing what is hot. ■ Returns fluctuate in the various asset classes from year to year. ■ By diversifying and rebalancing regularly, you will be managing your risk and return, without sacrificing potential return. 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Best Small Small Large Small Growth Value Inter- national Inter- national Large Value Large Growth Large Value Large Growth HFRI 44.2% Small Value Small Value Bonds 10.3% Small Growth Small Value Inter- national Inter- national Large Growth Bonds Growth Growth Sources 51.2% 29.1% 33.0% 8.1% 38.3% 23.1% 35.2% 38.7% 22.8% 14.0% 48.5% 22.3% 14.0% 26.9% 11.8% 5.2% 37.2% 29.1% ■ Bonds: Small HFRI HFRI Large S&P S&P S&P S&P Small Bonds Bonds HFRI Small Inter- HFRI Small Inter- Small Small Barclays Aggregate Bond Index Value 21.3% 27.9% Growth 500 500 500 500 Growth 11.6% 8.4% -4.7% Value national 10.6% Value national HFRI Growth Value 41.7% 2.7% 37.6% 22.9% 33.4% 28.8% 43.1% 46.0% 20.7% 23.5% 11.6% -27.7% 34.5% 24.5% ■ Large Growth: Large Large Small HFRI Large HFRI Small Inter- Large HFRI HFRI Small Inter- Large Large Large HFRI Small Inter- Large Growth Value Value 2.6% Growth 21.7% Value national Growth 9.1% 0.4% Value naitonal Value Value Value 10.7% Value national Growth Russell 1000 Growth Index Large 41.2% 13.8% 23.9% 37.2% 31.8% 20.3% 33.1% -11.4% 39.2% 16.5% 7.1% 22.3% -28.9% 32.5% 16.7% Growth 37.21% ■ Large Value: HFRI Small Large S&P Small Large Large HFRI Inter- Large Large Large Large Small Large S&P Small Large S&P Large 40.1% Growth Value 500 Growth Value Growth 16.0% national Value Value Value Value Growth Growth 500 Growth Value 500 Value Russell 1000 Value Index 7.8% 18.1% 1.3% 31.0% 21.6% 30.5% 27.3% 7.0% -5.6% -15.5% 30.0% 14.3% 5.3% 15.8% 7.1% -36.9% 26.5% 15.5% S&P ■ Small Growth: S&P S&P Small Small HFRI Small HFRI Large S&P S&P Small Inter- Large S&P S&P Small Bonds HFRI S&P 500 500 30.5% 500 7.6% Growth 13.4% Value -1.5% 31.0% Value 21.4% 23.4% Value 15.6% 500 21.0% 500 -9.1% Growth -9.2% national -15.7% Growth 29.8% 500 10.9% 500 4.9% Growth 13.4% 7.0% -37.0% 24.5% 500 15.1% Russell 2000 Growth Index Large Bonds S&P Large Small Small Small Bonds Large Inter- S&P S&P S&P Large Small HFRI S&P Large Small ■ Small Value: HFRI Growth Value Value 24.6% 7.4% 500 10.1% Value -2.0% Value 25.8% Growth 11.3% Growth 13.0% 8.7% Value 7.3% national -14.0% 500 -11.9% 500 -22.1% 500 28.7% Growth 6.3% Value 4.7% 11.7% 500 5.5% -38.4% 20.6% 10.5% Russell 2000 Value Index Bonds Large Bonds Small Bonds Inter- Bonds Small Bonds Small Large Large HFRI Bonds Small Large Large Small Large Inter- ■ International: 16.0% Growth 9.8% Growth 18.5% national 9.7% Growth -0.8% Growth Growth Growth 20.9% 4.3% Growth Growth Value Growth Value national 5.0% -2.4% 6.4% 1.2% -22.4% -20.4% -27.9% 4.2% 9.1% -0.2% -38.5% 19.7% 8.2% MSCI EAFE Index Inter- Inter- Large Bonds Inter- Bonds Inter- Small Small Large Inter- Small Bonds HFRI Bonds Bonds Small Inter- Bonds Bonds ■ HFRI: 5.9% Worst national national Growth -2.9% national 3.6% national Value Value Growth national Growth 4.1% 2.2% 2.4% 4.3% Value national 6.5% 12.5% -11.8% 2.9% 11.6% 2.1% -6.4% -1.5% -22.4% -21.2% -30.4% -9.8% -43.1% HFRI Equity Hedge Index ■ S&P 500: The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged index generally representative of the The Barclays Aggregate Bond Index is composed of securities from Barclays Standard and Poors 500 U.S. Stock Market, without regard to company size. Government/Credit Bond Index, Mortgage-Backed Securities Index and Asset-Backed Securities Index. Stock Index The Russell 2000 Growth Index is an unmanaged index comprised of those Russell 2000 companies with The Russell 1000 Growth Index is an unmanaged index comprised of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. higher price-to-book ratios and higher forecasted growth values. Russell 2000 Value Index measures the performance of those Russell 2000 companies with lower price- Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price- to-book ratios and lower forecasted growth values. to-book ratios and lower forecasted growth values. The Morgan Stanley Capital International (“MSCI”) Europe, Australasia, Far East Index (“EAFE”) is an Small-cap stocks may be subject to higher degree of risk than more established companies’ securities. unmanaged index of over 900 companies, and is a generally accepted benchmark for major overseas The illiquidity of the small-cap market may adversely affect the value of these investments. markets. Index weightings represent the relative capitalizations of the major overseas makers included International investing involves special risks such as currency fluctuation and political instability and may in the index on a U.S. dollar adjusted basis. The index is calculated separately; without dividends, with not be suitable for all investors. gross dividends reinvested and estimated tax withheld, and with gross dividends reinvested, in both U.S. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non- Dollars and local currency. diversified portfolio. Diversification does not ensure against market risk.INVESTMENT PRINCIPLESInvestment PrIncIPles
  • Importance of of rebalancing Importance rebalancing As a result of the market fluctuations of one asset class versus another over a given period, all portfolios drift over time from their original asset allocation. Rebalancing is an essential component of any comprehensive investment strategy and will help you avoid undue shifts in your portfolio due to financial market trends resulting in risk outside of your desired investment objective. This example is intended to demonstrate the effects of rebalancing and is not intended to project performance. No strategy assures success or protects against loss. Such strategy may involve tax consequences. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price. Stock investing involves risk including loss of principle.INVESTMENT PRINCIPLESInvestment PrIncIPles
  • Fund of of Hedge funds Fund hedge funds What is a fund of hedge funds? A fund of hedge funds invests in a portfolio of different hedge funds Potential benefits include: to provide broad exposure to the hedge fund industry and to ■ Accessibility to professional hedge fund managers whose funds diversify the risks associated with a single investment fund. Funds are hard to access of hedge funds managers select hedge funds and construct portfolios based upon their selections. ■ Reduced correlation to stocks/bonds They are actively managed portfolios of investments that uses ■ Attractive risk-adjusted returns advanced investment strategies, such as leveraged, long, short ■ Diversification and derivative positions, in both domestic and international ■ Multiple investment styles markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Potential risks include: ■ Lack of transparency ■ Additional layer of fees (above hedge fund manager fees) ■ Fund of hedge funds can be illiquid ■ May employ leverage ■ May employ aggressive tax strategies that may pose tax risks for investors and require filing extensions alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. the strategies employed in the management of alternative investments may accelerate the velocity of potential losses. long positions may decline as short positions rise, thereby accelerating potential losses to the investor. derivatives/options are not suitable for all investors and certain options strategies may expose investors to significant potential losses such as losing entire amount paid for the option.Investment strategy and ProPosalInvestment strategy and proposal
  • Fund of of Hedge funds Fund hedge funds The value of fund of hedge funds Fund of hedge funds show low correlation to traditional investments You might consider a fund of hedge funds if you are: and may offer the potential for capital preservation in down ■ Not concerned with liquidity of investment markets, thereby improving the portfolio’s risk/return profile and reducing its overall volatility. ■ Seeking diversification, rebalancing or reduction of volatility in their portfolios ■ Looking for professional money management Fund of hedge funds strategy If you are a long-term investor with no immediate need for liquidity, investing a portion of your portfolio in a fund of hedge funds may be a suitable investment choice for you. With a fund of hedge funds, you will have access to quality hedge fund managers and you can benefit from an investment that has low correlation to the equity and fixed income market, with the potential for capital appreciation. alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. the strategies employed in the management of alternative investments may accelerate the velocity of potential losses. long positions may decline as short positions rise, thereby accelerating potential losses to the investor. derivatives/options are not suitable for all investors and certain options strategies may expose investors to significant potential losses such as losing entire amount paid for the option.Investment strategy and ProPosalInvestment strategy and proposal
  • Managed futures fundsManaged futures funds What is a managed futures fund? A managed futures fund is a pool of money from various investors. Potential benefits include: Professional managers, known as commodity trading advisors, ■ Professional management specialize in trading futures and forward contracts, and invest the money pool using a proprietary trading system, or a discretionary ■ Lack of historical correlation with almost all other investment classes method, that may involve going long or short in futures contracts in ■ Potential to profit in advancing markets and declining markets, since they areas such as metals (gold, silver), grains (soybeans, corn, wheat), can hold both long and short positions equity indexes (S&P futures, Dow futures, NASDAQ 100 ■ A way to increase portfolio diversification beyond what other common futures), soft commodities (cotton, cocoa, coffee, sugar), foreign stocks and fixed income securities can offer by themselves currency and U.S government bond futures. ■ Exposure to broad, global markets Potential risks include: ■ Futures and forward trading is speculative and leveraged, and can be volatile ■ Trading occurs on foreign exchanges which could mean higher risk ■ Futures and forward markets can be illiquid or disrupted ■ Diversification does not assure a profit or guarantee against loss in a declining market ■ Limited ability to liquidate investment units (monthly) Alternative investments may not be suitable for all investors and should be con- sidered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.INVESTMENT STRATEGY AND PROPOSALInvestment strategy and proposal
  • Managed futures fundsManaged futures funds The value of managed futures funds Managed futures funds show negative correlation to other asset You might consider a managed futures fund if you are: classes, meaning that its investment performance is independent of ■ Not concerned with liquidity of investment other investments. ■ Seeking diversification, rebalancing or reduction of volatility in their portfolios Managed futures strategy ■ Looking for exposure to a wide range of global markets Investing a portion of your portfolio in a managed futures fund may be a suitable investment for you if you are a long-term investor with little need for liquidity. Managed futures funds are an investment that has low-correlation to the equity and fixed income market, with potential for capital appreciation and exposure to broad, global markets. Alternative investments may not be suitable for all investors and should be con- sidered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.INVESTMENT STRATEGY AND PROPOSALInvestment strategy and proposal
  • What is a non-traded REIT?What is a non-traded REIT? A Real Estate Investment Potential benefits include: Trust (REIT) is an ■ Professional management alternative to direct ■ Dividend yields typically higher than other equities Long-term capital appreciation ownership of real estate. ■ Diversification from common stocks and fixed income An investment in a REIT ■ ■ Flexible tax treatment by claiming depreciation allows small investors to share in the many benefits associated with real estate while reducing the overall risks that accompany property ownership. Investing in real estate/reIts involves special risks such as potential illiquidity and may not be suitable for all investors. there is no assurance that the investment objectives of this program will be attained.Investment strategy and ProPosalInvestment strategy and proposal
  • The value of of non-traded REITs The value non-traded REITs LPL Financial offers access You might consider a non-traded REIT if you are: to a broad non-traded REIT ■ Long-term investor (investment horizon of 10-15 years or more) Not concerned with the liquidity of an investment platform that includes ■ Seeking income and/or capital appreciation some of the highest quality ■ ■ Seeking diversification, rebalancing, or reduction of volatility in your portfolio sponsors in the market. Benefits of diversification* (low correlation) Non-traded REITs show a low or negative correlation to other asset classes over long periods, meaning that the investment performance is independent of other investments. This low correlation means that when other investments are down, non-traded REITs may continue to perform. Simply put, low correlation can help contribute to less volatility in an investment portfolio. Investing in real estate/reIts involves special risks such as potential illiquidity and may not be suitable for all investors. there is no assurance that the investment objectives of this program will be attained. * there is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. diversification does not ensure against market risk.Investment strategy and ProPosalInvestment strategy and proposal
  • Risks with non-traded REITsRisks with non-traded REITs n■ Shares in a non-traded REIT are generally considered illiquid until the REIT’s exit strategy either returns investors’ principle or lists on a public exchange. No public market exists for shares of common stock of a non-traded REIT. Even if investors can sell their shares through a secondary market, it is likely that they will have to sell them at a significant discount from the public offering price. n■ The REIT may not achieve its desired diversification or investment objectives, or be able to pay dividends. n■ The shares may be worth more or less than the offering price. n■ If the value of the assets in which the fund invests declines, investors’ shares may lose value. n■ The REIT could be vulnerable to economic and geopolitical conditions. For example, a REIT that invests in the office sector may be negatively affected by an economic downturn that leads to tenant defaults or vacancies.INVESTMENT STRATEGY AND PROPOSALInvestment strategy and proposal
  • Client Discovery
  • Defining your needs and goalsDefining your needs and goals The first and most important step in the investment consulting process is Discovery. We will help you clearly identify your short- and long-term investing goals, tolerance for risk and wealth management needs. Perhaps you have always wanted to purchase a second home, start a new business or establish a charitable foundation. Whatever your needs may be, we can help you get there by defining your investment objectives and then customizing a portfolio designed to address your unique situation. Discovery About You What are your hopes and dreams? 1D ew is Are there investments you’d like to avoid as a vi co matter of principle? e 4R ve What are your income needs? r Do you have any specific tax considerations? Designed For You What sort of risk and return characteristics are 3 Im you looking for? d en em pl Do you have any short-term cash needs? m en o m What other investments do you have? t 2 Rec What has your experience been with other financial advisors?CLIENT DISCOVERYclIent dIscOvery
  • Your investment objectiveYour investment objective Your investment objective is based on many factors, including your financial situation, income needs, time horizon and tolerance for risk. Common investment objectives are Aggressive Growth, Growth, Growth with Income, Income with Moderate Growth and Income with Capital Preservation. Risk Aggressive Growth Growth Growth with Income Income with Moderate Income with Growth Capital Preservation Return n Need for capital preservation n Need for current income n Equal focus on growth and n No need for current income and current income current income n No focus on growth n Moderate focus on growth n Moderate tolerance for risk n Focus on aggressive growth n Lowest tolerance for risk n Low tolerance for risk n Intermediate investment n Highest tolerance for risk horizon n Shortest investment n Short/intermediate n Long investment horizon horizon investment horizonCLIENT DISCOVERYclIent dIscOvery
  • Investor ProfileQuestionnaire Name Address Day phone Evening phone Email Financial advisor
  • Investor Profile QuestionnaireBuilding Your Financial FoundationThe Investor Profile Questionnaire is designed to help you gain an in-depthunderstanding of your investment objective, which serves as the foundationof your portfolio and guides us in making investment recommendations. Yourinvestment objective is based on many factors, including your time horizon,financial goals and risk tolerance. To build your portfolio, you must clearlydefine your financial goals. Short-term goals may include buying a house orfinancing a dream vacation. Long-term goals may include saving for your child’seducation or planning for your retirement.Your time horizon defines when you want to achieve a goal. It could be 1-5years, 5-10 years, 15 years, 30 years or more.Risk is an unavoidable part of investing. Historically, investments with higherreturns have required a higher tolerance for risk. Therefore, by clearly definingyour risk tolerance, we will be better prepared to choose the most appropriateinvestments for your portfolio.Over time, your goals and financial situation may change. It’s important for usto discuss any changes, as your original investment objective may need tobe reevaluated.Determining Your Investment ObjectiveThis self-scoring questionnaire will help us determine your investment objective.Answer each question by writing the corresponding number in the box to theright of each question. Then total the numbers for each section. Fill in thescorecard on the last page to determine your investment objective.
  • Time HorizonQUESTION 1 YourWhat is your age? score56 and over ...................................................................................................................................................................146-55.............................................................................................................................................................................236-45.............................................................................................................................................................................320-35.............................................................................................................................................................................4QUESTION 2What is your primary financial goal?Wealth preservation .....................................................................................................................................................1Retirement planning .....................................................................................................................................................2Wealth accumulation ....................................................................................................................................................3QUESTION 3What is the time frame for you to achieve your financial goals?0-5 years .......................................................................................................................................................................15-10 years .....................................................................................................................................................................210 years or longer .........................................................................................................................................................3 Time Horizon TotalFinancial GoalsQUESTION 4Which of the following best describes your financial goals?Preserving principal and earning a moderate amount of current income .....................................................................1Generating a high amount of current income ...............................................................................................................2Generating some current income and growing assets over an extended time frame .................................................3Growing assets substantially over an extended time frame.........................................................................................4QUESTION 5How do you expect your standard of living five years from now to compare to your standard of living today?Less than it is today ......................................................................................................................................................1The same as it is today .................................................................................................................................................2Somewhat higher than it is today .................................................................................................................................3Substantially greater than it is today.............................................................................................................................4QUESTION 6Five years from today, you expect your portfolio value to be:Portfolio value is not my primary concern; I am more concerned with current income ...............................................1The same as or slightly more than it is today ...............................................................................................................2Greater than it is today .................................................................................................................................................3Substantially greater than it is today.............................................................................................................................4QUESTION 7Generating current income from your portfolio is:A primary concern (only if you are about to retire) .......................................................................................................1Not important ...............................................................................................................................................................2QUESTION 8With the income generated from your portfolio, you plan to:Use it for living expenses .............................................................................................................................................1Use some and reinvest some .......................................................................................................................................2Reinvest all income.......................................................................................................................................................3 Financial Goals Total
  • Risk ToleranceQUESTION 9 Your scoreYou have just received a large amount of money. How would you invest it?I would invest in something that offered moderate current income and was very conservative .................................1I would invest in something that offered high current income with a moderate amount of risk ..................................2I would invest in something that offered high total return (current income plus capital appreciation) with a moderately high amount of risk ................................................................................................3I would invest in something that offered substantial capital appreciation even though it has a high amount of risk ................................................................................................................................................4QUESTION 10Which of the following statements would best describe your reaction if the value of your portfolio were tosuddenly decline by 15%?I would be very concerned because I cannot accept fluctuations in the value of my portfolio ....................................1If the amount of income I receive was unaffected, it would not bother me.................................................................2I invest for long-term growth, so I would be concerned about even a temporary decline ...........................................3Because I invest for long-term growth, I would accept temporary fluctuations due to market influences ..................4QUESTION 11Which of the following investments would you feel most comfortable owning?Certificates of deposit ..................................................................................................................................................1U.S. Government securities ..........................................................................................................................................2Blue-chip stocks ............................................................................................................................................................3Stocks of new growth companies ................................................................................................................................4QUESTION 12Which of the following investments would you least like to own?Stocks of new growth companies ................................................................................................................................1Blue-chip stocks ............................................................................................................................................................2U.S. Government securities ..........................................................................................................................................3Certificates of deposit ..................................................................................................................................................4QUESTION 13Which of the following investments do you feel are the most ideal for your portfolio?Certificates of deposit ..................................................................................................................................................1U.S. Government securities ..........................................................................................................................................2Blue-chip stocks ............................................................................................................................................................3Stocks of new growth companies ................................................................................................................................4QUESTION 14How optimistic are you about the long-term prospects for the economy?Very pessimistic ...........................................................................................................................................................1Unsure ..........................................................................................................................................................................2Somewhat optimistic....................................................................................................................................................3Very optimistic ..............................................................................................................................................................4QUESTION 15Which of the following best describes your attitude about investments outside the U.S.?Unsure ..........................................................................................................................................................................1I believe the U.S. economy and foreign markets are interdependent...........................................................................2I believe overseas markets provide attractive investment opportunities ......................................................................3 Risk Tolerance Total
  • Investor ScorecardTime Horizon Total ............................................................................... x1=Financial Goals Total ............................................................................ x2=Risk Tolerance Total ............................................................................. x3=The total for each section is multiplied by a number that represents the overallimportance of that section when determining your investment objectives. TOTAL SCOREMatch your total score with one of the investment objectives listed below. If your score is near the top or bottom ofan Adjusted Total Range, you may want to examine the next or previous objective to determine which represents yourneeds more accurately. Adjusted Total Range Investment Objective 34-57 Income with Capital Preservation 58-83 Income with Moderate Growth 84-99 Growth with Income 100-114 Growth 115-125 Aggressive GrowthThe investment objectives shown are for illustrative purposes only. Your investment objective is based on many factorsincluding your financial situation, tolerance for risk, time horizon and other financial needs. Consult your financial advisorif you have any questions. Income with Capital Income with Growth with Income Growth Aggressive Growth Preservation Moderate Growth INCREASING RISk, VOLATILITY ANd RETURN ExPECTATIONS „„Need for capital „„Need for current „„Equal focus on growth „„Little need for „„No need for preservation and income and current income current income current income current income „„Moderate focus „„Moderate tolerance „„Focus on growth „„Focus on aggressive „„No focus on growth on growth for risk growth „„High tolerance „„Lowest tolerance „„Low tolerance „„Intermediate for risk „„Highest tolerance for risk for risk investment horizon for risk „„Intermediate/long „„Shortest investment „„Short/intermediate investment horizon „„Long investment horizon investment horizon horizon
  • The LPL Financial family of affiliated companies includes LPL Financial, UVEST Financial Services Group, Inc., IFMG Securities, Inc., Mutual Service Corporation, Waterstone Financial Group, Inc., and Associated Securities Corp., each of which is a member of FINRA/SIPC. Not FDIC or NCUA Insured | No Bank/Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union DepositMember FINRA/SIPC www.lpl.com A Registered Investment Advisor ACS-02889-0508 Tracking # 415997 (Exp. 5/10)
  • Ongoing Consulting and Communication
  • Ongoing consulting and commitmentOngoing consulting and commitment Personalized client service Personalized client service ■ Investment education ■ In-person reviews/meetings ■ Your financial partner Ongoing communication Designed ■ Periodic performance reporting for you ■ Quarterly performance reports ■ Monthly statement of holdings Monitoring, Ongoing reviewing, communication Monitoring, reviewing, rebalancing rebalancing ■ Ongoing monitoring of accounts ■ Review for tax-harvesting opportunties ■ Rebalancing/reallocation considerations ■ Ongoing tax managementONGOING CONSULTING AND COMMUNICATIONOngOIng cOnsultIng and cOmmunIcatIOn
  • Ongoing consulting and communicationOngoing consulting and communication Once your assets are invested, the process of monitoring and managing your portfolio begins. We will continue to review and evaluate your investment strategy to ensure it remains aligned with your goals. We will provide investment education, guidance and expertise through regular meetings and discussions. As your needs change, we will reevaluate your investment strategy and discuss alternatives. Reviews Ongoing communication ■ Evaluate your current situation and alignment of goals with ■ Quarterly performance reports investment strategy ■ Monthly statement of holdings ■ Discuss your needs/concerns ■ Online account access ■ Provide market update/outlook ■ Newsletters ■ Educate about investment needs ■ Investment/educational seminars ■ Update on performance ■ Discuss tax harvesting opportunities ■ Other relevant topicsONGOING CONSULTING AND COMMUNICATIONOngOIng cOnsultIng and cOmmunIcatIOn