Joe Wirbick • J.W. Cole Financial, Inc. - Diversification and the active manager by Linda Ferentchak - Germany 2-year bond yield falls to negative territory - Balancing active and passive investment strategies (Gary Ziegler, Transamerica Financial Advisors, Inc.)

1. German bond
yield falls pg. 7
Balancing strategies
Passive and active pg. 3
Multiple levels
of diversificationpg. 4
Asset
protection
CALLS FOR
active
management
Joe Wirbick
August 21, 2014 | Volume 3 | Issue 8
First magazine focused on active investment management
pg.8

3. Our firm has selected some of the
top companies in the active man-
agement industry to serve our cli-
ents and help navigate the ups and
downs of the market.
While there are no guarantees with
any investment approach, my belief
is that a blend of tactical and passive
strategies can better manage market
cycles than a passive approach alone.
And depending on the client’s risk
profile and overall investment ob-
jectives, the tactical strategy element
can be dialed up or dialed down to
best fit a specific client’s needs.”
nvestment management for
clients is not an all-or-nothing
proposition when it comes to build-
ing the proper allocations within a
financial plan.
My work with clients always
starts with a big-picture view of their
needs. Do they have in place the
basics such as life insurance, long-
term care, college planning, etc.?
What will their income needs be in
retirement and how can we allocate
between income-oriented invest-
ment products and looking for asset
growth in a portfolio?
For investment portfolio growth,
I find that a blend of tactical and
more traditional passive strategies
can often provide an excellent level
of diversification. While I have not
believed in strictly “buy-and-hope”
since 2008, broad indexed mutual
funds can provide a good foundation
for a portfolio. There is still a role for
passive investments in terms of beat-
ing inflation over a longer horizon
and leaning toward the fundamental
market bias toward the upside.
But I think every investment
portfolio has to have the capabili-
ty to play both offense and defense.
Over the last five years, I have in-
troduced a higher level of tactical
money management for most clients.
Balancing active and passive
investment strategies
Gary Ziegler
Madison, WI
Transamerica Financial Advisors, Inc.
I“
Last week’s results
VIEWER RESPONSE
In Q2 2014, what
concerned advisors
the most?
This week’s poll
How many third-party
managers do you use?
Answer: Managing risk
Fidelity Advisor’s Q2 2014 Investment
Pulse Survey found that advisors were
increasingly focused on market volatil-
ity. Many advisors surveyed cited the
challenge of ensuring that their clients
continue to benefit from the bull market,
while also protecting them against the
downside.
28%
43%
29%
Portfolio management
Fixed income
Managing risk
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VOTE
0
1-3
4 or more
Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA), Transamerica Financial Group
Division - Member FINRA, SIPC, and Registered Investment Advisor. Non-Securities products and services are not offered through TFA.
Vote to see results
August 21, 2014 | proactiveadvisormagazine.com 3
TIPS & TOOLSPOLLS

4. By Linda Ferentchak
iversification may well be the oldest
risk management strategy in the
world and is certainly the most widely
advocated investment approach. While it is
overwhelmingly supported by most investment
theorists, one can still find a few detractors.
Warren Buffett has jokingly said
“Diversification is protection against ignorance.
It makes little sense if you know what you are
doing.” But for many investors, advisors, and
fund managers who freely admit that they
do not know where the market will be next
month, let alone next year, diversification cre-
ates a wider range of opportunities for profit,
minimizes exposure to risk in any one area, and
ideally reduces volatility in the portfolio.
Active investment strategies—which strive
to adapt to market conditions while limiting
portfolio risk—do not need to rely solely on
the static diversification among asset classes
common to passive allocations. But diversi-
fication still plays a strong role in the actively
managed portfolio. The difference is that active
managers are also increasingly diversifying by
strategies and managers.
In a traditional passive portfolio, one typ-
ically sets an allocation of stocks and bonds
with the expectation that when the equities
allocation underperforms, bond performance
will compensate. The equity and bond portions
of the portfolio are also diversified to offset the
potential of underperformance in one area with
higher quality returns in another. For example,
Read text only
D
DIVERSIFICATION
and the
ACTIVE MANAGER
“It is the part of a wise man to keep himself today
for tomorrow, and not venture all his eggs in one basket.” - Sancho Panza
Don Quixote, by Miguel de Cervantes [1547-1616]
proactiveadvisormagazine.com | August 21, 20144

5. a bond portfolio may be diversified among gov-
ernment, corporate and high-yield bonds. The
vulnerability of this approach is that part of the
portfolio is usually underperforming, reducing
overall returns.
Among the questions investors inevitably
ask is, “why are we investing in underperform-
ing assets?” Why not adapt the allocation to
take advantage of opportunities that the current
market environment offers?
Diversification takes this a step further to
acknowledge that there are many different
ways to actively invest, some of which perform
better in different market conditions than
others. While active investment strategies strive
to adapt to market conditions, no investment
strategy consistently outperforms the market
every quarter, or even every year. Every in-
vestment strategy has stopped working—or
delivered less-than-optimal results—at some
point. An advisor may have faith in his or her
chosen approach and be willing to hold on
until it rebounds, but the average client is often
another matter.
Diversifying by investment strategy as well
as by investment manager allows portfolio
volatility to be reduced, ideally improving
performance over the long run.
In or Out Diversified Allocation Strategies
Many active management firms began by
allocating portfolios between stock, bond, and
money market mutual funds, adjusting the mix
based on the market’s direction. It made sense.
Mutual fund exchanges could be made within
the same fund family (and later the fund plat-
form), at no cost. Investors benefited from the
investment selection abilities and diversification
provided by the mutual fund, with the added
layer of risk management.
The campaign against “market timing”
and resulting limitations on the number of
permitted exchanges by the fund families
adversely affected many third-party managers
using this approach. But new investment
vehicles emerged in the form of index funds,
Exchange Traded Funds (ETFs), stock baskets,
and cost-effective access to individual securities
that launched a much wider and more diverse
active management universe. Typically, today’s
allocation strategies focus on market indexes,
such as the S&P 500 or NASDAQ, and adjust
allocations in response to changes in the index’s
trend. These strategies may also use leveraged
and inverse funds to enhance opportunities for
profit.
Equity Strategies
Equity strategies have proliferated with
the development of index, sector, and coun-
try funds, and the ability to trade individual
securities relatively inexpensively, along with
advances in technology and the availability of
market data. Equity approaches typically strive
to identify leading investments within a defined
universe or segment of the market. Among the
equity investment approaches are strategies such
as market leaders, sector rotation, and country
leaders. While these strategies may retreat to
the safety of money markets in extreme market
conditions, non-correlated investment vehicles
typically exist to keep strategies invested.
Bond Strategies
Bonds are an entire investment universe
in and of themselves. Domestic U.S.Treasury,
government agency, municipal, corporate, and
corporate high yield compete with internation-
al government and corporate issues. Managed
funds, index funds, and individual securities all
offer opportunities to exploit trends and market
inefficiencies for profit. The result has been
manager and strategy specialization focused on
the bond markets that often utilize both long
and short positions.
continue on pg. 11
Why not adapt
the allocation to
take advantage of
opportunities that the
current market
environment offers?
Diversifying by
investment strategy
as well as by investment
manager allows portfolio
volatility to be reduced.
August 21, 2014 | proactiveadvisormagazine.com 5

7. Jan 1, 2006 Jan 1, 2008 Jan 1, 2010 Jan 1, 2012 Jan 1, 2014
3.00
2.00
1.00
-0.01
-1.00
-0.01
Germany 2-year bond yield falls to negative territory
he German 2-year note yield
entered negative territory (again)
on Friday, August 15. According
to most analysts, this was a flight
to quality during a period of geopolitical
risk and fear of further slow growth and
deflationary pressures throughout Europe.
Investing.com reviewed several of the
possible reasons for the close last week at a
-0.01% yield on the German 2-year note:
• Euro-area economies are either in a
recession or stagnating, with high
levels of unemployment persisting in
several nations.
• Tensions continue to rise regarding
Ukraine and Russia, which has led
secondarily to the escalating trade war
between Russia and the European
Union/U.S. and its negative impact
on European economies.
• There is deflation risk in the euro area,
which could force the ECB to enact
quantitative easing.
• The Federal Reserve is set to end its
quantitative easing in October, which
could cause more market volatility
across the globe.
The drop in bond yields across Europe
also came on the heels of disappointing
Q2 GDP reports for the region, with
Germany’s GDP falling 0.2% from Q1,
Italy appearing to move into recession,
and the euro-zone overall growth rate flat.
Bloomberg notes that Germany’s results
were particularly disappointing, as it has
historically been the growth engine for
Europe. They also reported that a gauge
of investor confidence in Germany fell
T
Source: Investing.com
this month to the lowest level since 2012
and factory orders slumped by the most
in more than 21/2 years. Despite this, the
Bundesbank maintains a growth estimate
close to 2.0% for 2014 and 2015. Bespoke
Investment Group said of Europe this
week, “Europe is a basket case, and there
are real risks that EU weakness could spill
over to a U.S. economy whose domestic
demand appears to be chugging along at a
relatively healthy, and possibly accelerating
rate.”
Read text only
0.8%
0.7%
-0.2%
-0.4%
0.3%
0.4%
2Q 3Q 4Q 2Q1Q13 1Q14
Source: Bloomberg/OECD.org
GERMAN GDP
GERMAN 2-YEAR
7August 21, 2014 | proactiveadvisormagazine.com
TOPPING THE CHARTS

8. Joe Wirbick
Founder and president of Sequinox in Lancaster, PA
Sequinox was awarded Business of the Year by Central Pennsylvania Business
Journal (CPBJ) in 2011
Twice awarded Executive of the Year by CPBJ
Recognized as #1 Wealth Manager in Central Pennsylvania by CPBJ in 2011
Serves on board of directors for PA public broadcasting station WITF
Member, Million Dollar Round Table, Top of the Table since 2006
Read text only
By David Wismer
Photography by Jeremy Hess
Joe Wirbick
Asset
protection
CALLS FOR
active
management
8 proactiveadvisormagazine.com | August 21, 2014

9. Proactive Advisor Magazine: Joe, what
is your personal philosophy regarding
investing?
Joe Wirbick: I come from a pretty modest
economic background, strictly lower middle
class. My parents were very hard-working,
always trying to make ends meet.
I will never forget that in the eighth grade
I told my teacher on a field trip that one day
I was going to buy a commercial building like
the ones we were driving by. You know what? I
recently just bought the property our offices are
located in.
This sort of defines the essence of my invest-
ing philosophy. I believe in multiple streams of
income and in being well diversified. It’s also
important to be proactive—not to just sit idly
by watching things happen when action should
be taken.
Great story. How do you apply this to
clients?
I think everyone needs to have asset pro-
tection on several fronts. This can be through
active investment management, through strong
diversification, and in having investments with
different time horizons, risk, and rates of return.
I feel blessed to have received some excellent
training early in my career working for major
financial services organizations. But my beliefs
have evolved greatly over the years. I have some
very definite ideas and have developed my own
arsenal of financial solutions for clients.
Please explain.
One of the major changes we made about
three years ago was switching to third-party
active money managers. I only wish I had done
that about twelve years ago.
It may be controversial to say, but I think a
lot of advisors subtly mislead clients by saying
they are managing their money for them. Most
of us spend the bulk of our time working with
current clients on their specific needs, finding
the right solutions to various issues, educating,
and prospecting. It is a rare advisor who can
spend the day closely following the financial
markets.
I do not think parking client money in a va-
riety of mutual funds is really managing money.
I think it makes much more sense to employ the
services of an entire investment team with the
skill and training to handle billions of dollars.
They are professionals dedicated to doing that
and nothing else.
It is a whole different world—like night and
day versus the old asset allocation methods.
These managers have strategies that do not just
go long the market like most traditional funds,
but can go to cash at any time, or go short in a
down market.
Did you ever really hear of major institu-
tions telling their clients to sell when markets
were plummeting? No, they tell them to hold
on and wait it out—no matter how bad it gets.
Being down 30-35% in 2008 is not doing the
best job for clients, in my opinion. Not losing
significant money in that kind of environment
is the goal. That is the difference between a buy-
and-hold approach and active management.
How do you communicate the benefits
of active management to clients?
For a new client or prospect, I ask them what
sort of protection they have for their portfolio. continue on pg. 10
When it comes to investing, Joe Wirbick is not shy about his convictions. His call to action is loud
and clear: asset protection, asset protection, asset protection. Utilizing third-party managers and
educating his clients about active investment strategies is first in his arsenal of defense.
The answer is almost always one of three things:
“I have none,” or “I don’t know,” or “I don’t have
any money in stocks.”
For obvious reasons, none of those answers
is acceptable. It is a pretty easy and persuasive
argument why all or part of their life savings
should not be exposed to markets without some
measure of risk management. How much can
they stand to lose? Most will say very little, and
that leads naturally into a discussion of their
individual risk profile.
My tendency is to use a combination of
solutions for clients whenever appropriate—
that might be some combination of indexed
life, indexed annuities, and actively managed
strategies.
With the active management portion of the
portfolio, the third-party money managers we
work with have done well in all sorts of market
environments. Active money management is
not designed to beat the market during strong
upturns, and I tell clients that point blank.
But when the market is down, clients will
appreciate the protection it can provide. If we
Joe Wirbick is a Registered Representative of J.W. Cole Financial, Inc.
Securities offered through J.W. Cole Financial, Inc. (JWC), Member FINRA/SIPC. Advisory Services offered through J.W. Cole Advisors, Inc.
(JWCA). Sequinox and JWC/JWCA are unaffiliated entities.
August 21, 2014 | proactiveadvisormagazine.com 9

10. M U LT I - M A R K E T
+
MULTI-STRATEGY
+
MULTI-MANAGER
One p rtfolio
D Y N A M I C A L LY R I S K - M A N A G E D
L E A R N M O R E
Past performance does not guarantee future results.
The opportunity for profits
carries with it the possibility of losses.
800-347-3539 | flexibleplan.com
A complete list of all of our recommendations over the last 12 months and Brochure Form ADV Part 2A are available upon request.
for allocations into or out of the market, they
also use a variety of asset classes: equities,
fixed income, commodities, or currencies. It is
eye-opening for clients to understand that they
do not have to be limited to a long-only strategy
or just one or two asset classes.
How would you summarize your
advisory work?
It is definitely a constant process and our
review meetings with current clients are very
important. Have their life circumstances
changed? Has anything changed with their em-
ployment or with their business if they are an
owner? Have their tax circumstances changed?
We take a great deal of pride in differentiat-
ing our firm by working with tax issues. If we
are doing everything in our power to develop
sound risk management practices for portfolios,
shouldn’t we also be providing investment strat-
egies that are as tax effective as possible?
Our firm has shown tremendous growth
over the years and I attribute that largely to
the emphasis we place on client education.
can outperform during down years, active man-
agement should provide meaningful returns
over the long term. It is not about winning the
inning, but winning the game.
Each element of a well-designed portfolio
will likely have different performance char-
acteristics during different types of market
environments—up, down, sideways. The idea
is to have this diversification working to the
client’s benefit regardless of how the overall
markets are doing.
Beyond the theory of your approach, are
there any specific tools you use?
One of the things we do is run a Morningstar
analysis on a new client’s current portfolio. This
will show how their returns have actually per-
formed in one or more mutual funds over the
length of that investment.
We all know past performance is not in-
dicative of future performance. But the track
record of our active money managers in such
a comparison exercise is very compelling.
Aside from the flexibility these managers have
continued from pg. 9
Explaining concepts such as active manage-
ment as thoroughly and as simply as possible
to the average person is critical to developing
shared expectations and having satisfied clients
over the long run.
10 proactiveadvisormagazine.com | August 21, 2014

11. There can be no assurance that any investment product will achieve its investment objective(s). There are risks associated with investing, including the entire loss of principal invested. Investing involves market
risk. The investment return and principal value of any investment product will fluctuate with changes in market conditions. Guggenheim Investments represents the investment management businesses of Gug-
genheim Partners, LLC. Securities offered through Guggenheim Funds Distributors, LLC. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim Partners, LLC. x0515 #12526
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Absolute Return Strategies
Absolute return portfolios are designed to
produce a positive return regardless of the di-
rection and the fluctuations of capital markets.
How the third-party manager arrives at that
return can be a blend of non-correlated invest-
ments or more esoteric, proprietary investment
approaches or hedges. Absolute return strat-
egies are not designed to outperform market
indices but seek to always increase value in the
portfolio.
Alternative Investments Allocation
Alternative investment strategies take the
technical analysis expertise of active manage-
ment and apply it to assets beyond traditional
stocks, bonds, and cash. These assets may be
private equity, options, futures, commodities,
leveraged funds, hedge funds, exchange funds,
real estate, structured notes, etc. Manager and
strategy specialization become part of the diver-
sification mix.
Hedge Funds
Hedge funds may be part of the alternative
strategy mix or their own allocation with the
caveat that they are restricted to qualified in-
vestors and usually have holding period require-
ments. While there is a tendency to characterize
hedge funds as long-short strategies, their
current field is much broader. Hedge funds are
currently less regulated by the U.S. Securities
and Exchange Commission (SEC) and, being
relatively less restricted, can invest in a wider
range of securities than mutual funds. That
leaves a lot of room for different approaches to
the market.
Adding Depth and Responsiveness
to Diversification
Within each of these diversification oppor-
tunities, active managers may be using a variety
of technical approaches to determine their view
of the market … from fundamental analysis to
trend following, pattern recognition, relative
strength, momentum, mean reversion, season-
ality, market cycles, and more. While actively
managed strategies are often disciplined, math-
ematical approaches to investing, they have the
flexibility and maneuverability that is lacking in
traditional buy-and-hold portfolios.
The result is a fascinating blend of oppor-
tunity. Add the ability to go long, short, or to
cash and to use leveraged vehicles, and investing
enters a new dimension that is no longer de-
pendent on a rising market for profitability. At
times, the choices may seem overwhelming, but
the diversity of an active management approach
also highlights the vitality and excitement of this
rapidly expanding investment discipline.
continued from pg. 5
11August 21, 2014 | proactiveadvisormagazine.com

12. 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.
Editor
David Wismer
Associate Editor
Elizabeth Whitley
Contributing Writers
Linda Ferentchak
David Wismer
Graphic Designer
Travis Bramble
Contributing Photographer
Jeremy Hess Photographers
August 21, 2014
Volume 3 | Issue 8
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.
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Publishing, Inc. All rights reserved.
Reproduction of printed form, whole or in
part, without permission is prohibited.
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Are there issues for advisors and investors in the
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12
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