Johnathon Davis • Retirement Tax Advisory Group Inc. - Profiling ultra-high-net-worth clients by Katie Kuehner-Hebert - Will weak jobs numbers delay Fed rate hike? - Why you have way too much invested in U.S. stocks by Meb Faber - Building a “niche” into a practice focus (Phylyp Wagner, Matt Quattlebaum, H. Beck)

1. April 9, 2015 | Volume 6 | Issue 2
Active investment management’s weekly magazine
Will weak jobs numbers
delay Fed rate hike?
9 types of
ultra-HNW
clients
Building a “niche” into
a practice focus
Do you have too much invested
in U.S. stocks?
Johnathon Davis
Kentucky blue
is seeing green
403(b) plans at UK
aim for growth and
risk management

3. Advisor perspectives on active investment management
- A custodian that makes your life as an RIA simpler.
Partnering with the experts
I want to surround myself with the people and
products that are at the top of the class, the best in
the business. I have always operated that way and
that carries over to the area of active management.
Third-party managers have complete focus on
the markets every day and the expertise to build
strategies that can react favorably to changes in
market conditions.
LOUD & CLEAR
Angela Sloan • Clover, SC
Sloan Financial Group LLC • Madison Avenue Securities Inc.
3April 9, 2015 | proactiveadvisormagazine.com
LOUD & CLEAR

4. By Katie Kuehner-Hebert
Active investment management
may help address many of the
financial concerns of UHNW
clients, including their desire
to leave a legacy to heirs and
charitable causes.
Profiling
ultra-high-net-worth
clients
4 proactiveadvisormagazine.com | April 9, 2015

5. hile ultra-high-net-worth clients
(UHNW) may not have to worry
about living paycheck-to-paycheck
or saving for their kids’ college
educations, the very rich do have
concerns for which an active portfolio manage-
ment strategy might prove beneficial.
UHNW clients who have more than five
million in assets want to ensure they will leave
enough money to their beneficiaries and, in
many cases, to their favorite charities. As such,
engaging the services of an advisor practicing
active portfolio management may make a
great deal of sense. A properly allocated, active
management approach can achieve the goal of
capital appreciation over time while employing
defensive mechanisms in turbulent markets.
The resultant smoothing-out of returns is well
suited to maintaining and growing assets for
family generations to come.
While many ultra-high-net-worth clients
may ostensibly be in a position to be more
aggressive in their investment styles due to their
overall wealth, active portfolio management
can accommodate all types of risk profiles, from
the most conservative to the most aggressive.
Advisors who have the ability to manage port-
folio strategies across the risk spectrum will be
able to better serve clients with differing invest-
ment attitudes and objectives.
Personality types of the
ultra-high-net-worth client
Advisors should never assume that all
UHNW clients are of the same mindset.
Indeed, Russ Alan Prince, president of R.A.
Prince & Associates Inc., and Brett Van Bortel,
director of consulting services for Invesco
Consulting, contend there are actually nine
personality types among the very affluent that
advisors should take under consideration:
Family Stewards
Conservative, “hands-off” investors who
mainly want to take care of their families and
are not very interested in the mechanics of
investments
Independents
Believe investing is a necessary means to an
end to gain personal financial freedom
Phobics
May have inherited their assets but are
confused and frustrated by the responsibility
of wealth and generally avoid focusing on
investing
Anonymous
Value privacy, concentrate their assets, and
have a few close relationships with profes-
sional services firms
Moguls
Care most about controlling the asset
management process and can present a
challenge to advisors
VIPs
Value prestige and prefer to affiliate with
advisors with leading public reputations
Accumulators
Knowledgeable and involved clients whose
only goal for investing is to grow their assets
Gamblers
High risk tolerance, relish the process of
investing, and feel they have the ability to
discern the “next great” investment trend or
stock
Innovators
Technically savvy and very interested in
companies with leading-edge products and
services
Within these profiles, a wide disparity exists
with regard to interest and involvement with
investments, their risk profiles, and their atti-
tudes surrounding various types of investment
asset classes. Advisors may need to adjust their
communication styles for these nine personality
types, as well as have access to a wide array of
broad investment approaches and specific in-
vestment strategies.
“One size fits all” certainly does not hold true
for the ultra-high-net-worth client. Advisors
who employ third-party asset managers, partic-
ularly active managers, may have a competitive
edge with their diverse array of strategies, the
highly sophisticated nature of those strategies,
and the ability to formulate portfolio approach-
es that can work for a wide variety of client risk
profiles and behavioral tendencies.
Charitable focus, worry lists, and
challenges for heirs
UHNW clients, no matter their individ-
ual investment outlook, also typically want
to continue to allocate a significant portion
of their money to charities. According to a
2012 Bank of America Study of High-Net-
Worth Philanthropy, 95% of high-net-worth
households donate regularly to at least one
charity—compared to roughly 65% of the
general population. The share of total charitable
contributions made by the upper 5% of U.S.
wealth holders is staggering.
And then there are the affluent clients who
still worry whether or not they will outlive their
money in retirement. According to a Lincoln
continue on pg. 13
W
58%
3%
13%
26%
One generation
Two generations
Three generations
Four generations
or more
Generations of sustained family wealth
58% of high-net-worth individuals are the first generation in their family to be wealthy,
while 26% have sustained wealth for two generations.
Source: 2014 U.S. Trust Study: “Insights on Wealth and Worth”
5April 9, 2015 | proactiveadvisormagazine.com

7. 0
600k
400
200
-200
-400
-600
-800
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
{
Longest streak of monthly job gains
since WWII: 54 months.
Previous best was 49 months
ending June 1990.
126
Will weak jobs numbers
delay Fed rate hike?
ccording to the New York Post,
“U.S. employers took an early spring
break in March,” ending a strong
hiring streak by adding just 126,000
jobs—the fewest since December 2013.
Though equity markets were closed last
Friday (4/3), futures traders had a swift and
negative reaction to the report. This was a
bit surprising, as the “data-dependent” Fed
might be expected to lean toward a rate hike
delay with recent sluggish reports on many
aspects of the U.S. economy. However, while
a delay would normally be a positive for
stocks, MarketWatch points out how this
might be overshadowed by concerns that
companies are facing difficult conditions in
the next few quarters.
“Earnings are expected to decline for the
next two quarters, the economy might actually
have contracted in the first quarter and the
Federal Reserve is set to raise interest rates.
A powerful backdrop for equity prices this is
not,” said Dan Greenhaus, chief strategist at
BTIG, in a note.
This employment report was particularly
weak, with the actual numbers barely surpassing
50% of the going-in consensus estimate.
Experts blamed everything from statistical
seasonal anomalies, to the continued weakness
in the energy field, to a tough winter in north-
ern regions, to a slowing economic trajectory
hindered by a West Coast port slowdown and
a strong dollar.
The Labor Department also adjusted job
gains for January and February lower, lead-
ing to a three-month average monthly gain
of 197,000, under the 200,000 benchmark
considered important by many analysts.
Said Georgetown economist Harry Holzer,
“That would indicate slower economic and
employment growth versus 2014.”
A
Source: Bespoke Investment Group
On the flip side, more upbeat analysis
pointed to the fact that the jobs market has
reached a 5.5% unemployment rate much
faster than expected and a “breather” should
not be surprising. Tony Dwyer of Canaccord
Genuity remarked, “One would be hard-
pressed to find a similar period of such sus-
tained jobs growth in the post-WWII era.”
The U.S. equity markets reversed course
early Monday, with a fuller contingent of
market participants considering what the Fed
might do next. Barron’s quoted JPMorgan’s
Fed watcher, Michael Feroli, who quipped
that “June vacation plans just got a little
safer,” referring to his belief the first rate hike
might be delayed.
NY Fed president William Dudley also
helped markets with Monday comments,
suggesting the Fed likely won’t raise interest
rates until September at the earliest. Indeed,
the Fed-fund futures market is now pricing
in a rate of 0.34% by December 2015, sig-
nificantly lower than the last official Fed “dot
plot” median estimate of 0.625%. Said the
WSJ, “Even if a June rate rise is off the table,
the market’s chronic state of uncertainty
ahead of the Fed’s next move lingers.”
CHANGE IN NONFARM PAYROLLS
April 9, 2015 | proactiveadvisormagazine.com 7
TOPPING THE CHARTS

8. Proactive Advisor Magazine: Johnathon,
tell me about your practice.
Johnathon Davis: I have developed a very
significant practice in the 403(b) area. Having at-
tended the University of Kentucky, I have a great
affinity for the university and do a lot of work
with several employee groups there.
The university has an excellent benefits plan
and matching contribution schedule for employ-
ees. UK employees have the option of two differ-
ent custodians and over 100 investment choices.
This is great, and it is coordinated with simple
is more or less a pretty random process with
people hoping it will all work out in the end.
This is where I come in.
How does your process usually work?
I am 100% focused on the financial advi-
sory side. Many of my current clients are in
the medical profession at UK. They are very
caring, career-oriented people with demanding
schedules. While they are concerned about
retirement planning, they have not been able to
devote time to really learn about it.
enrollment education on the nature of the 403(b)
plans and the investment selection process.
But, frankly, no one is designated to help
these employees actively navigate their way
through the investment decision-making pro-
cess over a 20- to 40-year timeframe, with the
goal of achieving a successful retirement. It’s a
common refrain that I hear when meeting with
employees that there was really no discipline or
concrete rationale as to why they made certain
investment decisions. It is often based on what
they may gather from financial news sources or
what they hear from their fellow employees—it
Kentucky
blue is
seeing green
By David Wismer
Photography by Chris Cone
403(b) plans at UK aim for growth
and risk management with active
investment management strategies.
proactiveadvisormagazine.com | April 9, 20158

9. Johnathon Davis
Retirement Tax Advisory Group
Lexington, KY
Estimated AUM: $35M
Licenses: 6, 26, 63, 65
Education: University of Kentucky,
B.A., Business Marketing
“Investors are not aware of how
much risk they are assuming in
a passive investment strategy.”
continue on pg. 10
Johnathon Davis graduated from the University of
Kentucky, where he was a three-year letter winner with
the vaunted Wildcat basketball team. While there, he
earned a Bachelor of Arts degree in Business Marketing.
Mr. Davis has worked in several different financial ser-
vices capacities, including vice president of commercial
lending with a Fortune 500 bank. His firm, Retirement
Tax Advisory Group, is based in Lexington, KY, and Mr.
Davis is registered as a Uniform Investment Advisor.
Mr. Davis and his wife Ginger have two children: son
Jackson, a collegiate-level basketball player himself,
and daughter Clark, an Opera major at the University of
Kentucky. When not helping his clients to achieve their
financial goals, he watches and cheers for his son’s
Butler University team and provides his daughter with
the occasional vocal instruction.
A member of Consolidated Baptist Church and
Omega Psi Phi Fraternity Inc., Mr. Davis is active
in several non-profit groups.
Step one is education on how invest-
ments may fit in with their overall retirement
planning picture. When we have the basics
squared away and I have a fundamental
understanding of their investment objec-
tives, I explain my use of third-party active
investment managers to help in applying a
risk-managed approach to investing. This
almost always gets a positive response, and
for the vast majority of my clients, I am
able to manage 100% of their 403(b) assets
through third-party managers.
Why does active management work for
you and your clients?
Having been a licensed member of the finan-
cial services community for more than 20 years,
and with apologies to the great JamesTaylor, I tell
clients, “I’ve seen fire, and I’ve seen rain.” What
I mean by that is not only the market displace-
ments we have seen in the 2000s, but also how
emotions come into play for investors, leading
them to either poor decision-making or acting
like a deer in headlights. Too often paralysis by
analysis makes it justifiable to do nothing with
one’s investments. And if everyone else is doing
nothing, shouldn’t I be doing nothing, too?
The key selling point for active management
is its ability to react to current market condi-
tions. This is a fresh concept for most of my
clients, who have been uncomfortable seeing
their accounts move up and down based on the
volatility of the markets. Our money managers
use a quantitative approach to help smooth out
that volatility, which becomes especially import-
ant during bear markets such as those in the early
2000s or 2008.
Were you always in the active
management camp?
When I first started in the business, I was
indoctrinated into pretty traditional ways of
thinking on diversification, rebalancing, and
standard asset allocation models.
Modern Portfolio Theory worked for nearly
50 years, but “buy-and-hold” investing is now,
in my opinion, an inappropriate investment
strategy when clients’ retirement futures are on
the line. The average investor is likely not aware
of exactly how much risk they are assuming
by being passive in their investment strategy.
Our mission is to help our clients have access
to both growth and defensive tactics in asset
management as conditions warrant.
The recent financial crisis showed investors,
especially retirees, the dramatic impact a stock
market decline can have on their holdings at the
timewhentheyneedtoaccesstheirmoneymost.
With life expectancy increasing and markets
fluctuating, investors need help managing their
money in tough times. We use those third-party
money managers who diligently practice active
April 9, 2015 | proactiveadvisormagazine.com 9

10. Retirement Tax Advisory Group Inc. (RTAG) is a Kentucky-based Registered Investment Advisory Firm. Securities offered through American Equity Investments, member FINRA and SIPC.
management. Accounts are monitored daily,
and money is moved as deemed appropriate.
We are convinced that this is the best strategy
to give our clients a chance to reach their goals
through both up and down markets.
How do you communicate the active
management story to clients?
With active money management, our whole
thesis is not about making the most money
when the market goes up, but losing the least
when the market goes down. I use elementary
math to illustrate how this works out over time.
The growth of a portfolio is severely hampered
by trying to make up for periods of great loss,
and that is exactly what we are trying to protect
against. But the beauty of active management
and trend-following is that when conditions
are in place to be bullish, the strategies we use
should take advantage of that.
I also tend to use sports analogies with
clients. They can quickly relate to the fact that
every successful sports team has to have an
equally strong offense and defense. I personally
have had the privilege to have been affiliated
with some legendary basketball coaches. I use
those lessons I learned, as they are timeless and
applicable to just about anything in life: Treat
people with respect. Be disciplined. Be prepared
for any circumstance. Then, put the best talent
that you can on the floor and make sure it is
well-coached and stays attentive and involved.
You can pretty quickly see how those prin-
ciples can apply to working successfully with
clients and in providing sound investment
management practices.
continued from pg. 9
Johnathon Davis
10 proactiveadvisormagazine.com | April 9, 2015

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Target-date fund investors
face disappointment
Inflexible allocations to stocks and bonds could
become an issue for pre-retirees and retirees in a
lengthy period of lackluster returns.
Stock price path influences
investment decisions
Investors feel better about a loss if it follows a
recovery—a behavioral trait that can influence
future investment decisions.
L NKS WEEK
April 9, 2015 | proactiveadvisormagazine.com 11

12. Why you have way too much invested in U.S. stocks
Meb Faber is a co-founder and the chief investment officer of Cambria Investment Management. Faber is the manager of Cambria’s ETFs, separate accounts and private
investment funds. Mr. Faber has authored numerous white papers and three books: Shareholder Yield, The Ivy Portfolio, and Global Value. He is a frequent speaker and
writer on investment strategies and has been featured in Barron’s, The New York Times and The New Yorker. Mr. Faber graduated from the University of Virginia with a
double major in Engineering Science and Biology. www.cambriafunds.com and www.mebfaber.com
Ranking country valuations by CAPE ratios
Least expensive Most expensive
Greece
Russia
Hungary
Austria
Portugal
Brazil
Czech
2
5
6
8
8
9
10
Mexico
Sweden
Switzerland
Japan
USA
Philippines
Denmark
22
23
23
26
27
28
34
Source: Global financial data, MSCI, Bloomberg. Country valuations based on cyclically adjusted price-earnings (CAPE) ratios.
uick question: How much of your
global stock portfolio is in U.S. stocks?
Let me guess: 70%? 80%? 100%?
The JPMorgan Guide to the Markets illus-
trates the U.S. as a percentage of global market
capitalization (52%) and GDP (20%). Even
if you are a die-hard Vanguard “Bogelhead”
indexer, you should only have about half of your
equity allocation in U.S. stocks.
But few do.
Most investors around the world invest
the majority of their assets in their own stock
market. This is called the home-country bias,
and it occurs everywhere. Vanguard details
the effect in the U.S., the U.K., Australia, and
Canada. U.S. investors have approximately 72%
invested in the U.S. market. It isn’t just retail
investors—professional investors allocate most
of their assets to their home countries as well.
A home-country bias is compounded by an-
other unfortunate tendency that most investors
exhibit: favoring market indices weighted by
market capitalization. Why is market-cap weight-
ing so problematic? Market-cap weighted indexes
are constructed using only one variable—size—
which is determined by price.
When overvalued assets grow to be bigger
and bigger parts of a market—or become
the market—you no longer want to invest
in that market or stock. That’s the beauty of
capitalism and creative destruction. When a
company grows to be one of the most successful
companies in the world, that success places a
large target on its back. When Apple made the
world-changing iPhone, companies began to
seriously compete with it.
Japan’s stock market rose to account for
nearly half of the world’s market cap in the
Q
1980s. And if you believed in the efficient
market, you would have invested half of your
equity allocation in Japan. But Japan returned
approximately -2% per year from 1990-2010,
including more than 20 years of negative re-
turns. A value-driven approach works not just
by investing in the cheapest markets, but also
by avoiding the most expensive.
What is the biggest country in the world by
market cap now? The U.S.—with nearly half of
global stock-market capitalization. The figure
above shows the cheapest and most expensive
countries in the world. Notice that the U.S. is
one of the most expensive countries in the world.
The U.S. was cheap relative to the rest of the
world in the early 1980s, which also happened
to be the start of the long bull market. The late
1990s saw the U.S. near the top of the range,
which preceded the bear market that began in
2000. Will the current overvaluation signal
another bear or perhaps a time to shift more
assets to foreign markets? Time will tell.
The bad news is that U.S. stocks are expen-
sive, although not in bubble territory. I expect
U.S. stocks to return about 2% per annum for
the next 10 years. The good news is that most
of the rest of the world is quite cheap.
Here are a few actions investors can take to
improve the future returns of their equity port-
folio: 1) allocate your portfolio reflecting global
market-cap weightings; 2) consider also weight-
ing along global GDP, avoiding market-cap-con-
centration risk; and 3) consider more of a value
global approach, overweighting a basket of
cheaper countries and lowering weight to the
most overpriced. For those heavily allocated to
the U.S., this might mean a significant reduction
in relative percentage weight.
Proactive Advisor Magazine presents weekly commentary provided by well-known market analysts, financial authors, investment newsletter publishers, and economists. The opinions expressed
each week represent their personal perspectives and not necessarily those of the magazine.
proactiveadvisormagazine.com | April 9, 201512
HOW I SEE IT

13. Rydex Funds
A Comparison of ETFs and
Mutual Funds—The True
Cost of Investing
continued from pg. 5
Financial survey, nearly half (48%) of wealthy
Baby Boomers who have saved more than $1
million for retirement feared their money would
not last until their death. Many of the superrich
also worry about the prospect of losing significant
portions of their wealth. According to Prince &
Associates, more than 80% of those worth $20
million or more are deeply concerned about
being the target of lawsuits from plaintiff lawyers
who seek out deep pockets. Others cite “medical
crises,” “family disputes,” and “changes in the
family dynamic” as top worry points potentially
affecting their wealth.
Advisors can help foster relationships with
the children of UHNW clients by engendering
trust that their wealth is being proactively
managed and protected. Such strategies would
also be effective for those heirs who might have
very different attitudes about money than their
parents, particularly children of parents who
were not born into wealth, but accumulated it
through hard work and perseverance (see exhibit:
more than 50% of UHNW are first generation).
Through education on the long-term market
cycles of economies and investments, where
active management can shine, many heirs may
learn that they cannot assume their money will
always be there for them without proper and
continual management. They would benefit
greatly from a financial advisor or wealth man-
ager who employs active investment strategies
that can be adjusted as market or economic
conditions fluctuate.
On the flip side, proactive advisors may be
able to attract young high-net-worth clients
who seek an alternative to their parents’ advisors
by demonstrating the superiority of active port-
folio management over what may have been a
multi-generational static relationship with an-
other advisory firm. Roughly half of rich heirs
under the age of 40 say that they are willing
to shop for another advisor, according to a
recent survey by Morgan Stanley and Campden
Research.
Then there are heirs whose families have
never used the services of a wealth manager—
preferring instead to rely on their own real estate,
stock market, or business investment prowess.
Unfortunately, in more cases than not, such
acumen is not necessarily passed down to the next
generation. In fact, according to a 2014 U.S.Trust
study, “the majority of wealthy parents question
whether their children will be adequately prepared
to handle the inheritance planned for them.”
Financial advisors or wealth managers with
a true point of difference—skilled in employing
the services of third-party active managers—may
be able to demonstrate the prudence of working
with a professional who has the expertise to
handle the ever-increasing sophistication and
complexities of the investment environment.
The children of ultra-high-net-worth clients,
who stand to inherit an unprecedented amount
of wealth over the next 30 years, would be well-
served by a proactive investment approach—
instead of falling back on what may be an
outdated and dangerous family philosophy that
their “wealth will last forever.”
UHNW Clients
Katie Kuehner-Hebert is an award-winning journalist with more than two
decades of experience writing about the financial services industry. She has
expertise in the banking, insurance, financial planning, economic develop-
ment, and employee benefits areas and her work has appeared in many
leading publications.
Advisors may attract young HNW clients
by demonstrating the benefits of active
portfolio management.
13April 9, 2015 | proactiveadvisormagazine.com

14. Advertising
proactiveadvisormagazine.com/advertising
Reprints
proactiveadvisormagazine.com/reprints
Contact
info@proactiveadvisormagazine.com
Copyright 2015© Dynamic Performance Publishing
Inc. All rights reserved. Reproduction of printed form,
whole or in part, without permission is prohibited.
Editor
David Wismer
Associate Editor
Elizabeth Whitley
Contributing Writers
Meb Faber
Katie Kuehner-Hebert
David Wismer
Graphic Designer
Travis Bramble
Contributing Photographer
Chris Cone
April 09, 2015
Volume 6 | Issue 2
Proactive Advisor Magazine is
dedicated to promoting and educating
on active investment management.
Distribution reaches a wide audience
of financial professionals who advise
clients on investments and portfolio
management. Each issue features
an experienced investment advisor
who offers insights on active money
management, client service, and
investment approaches. Additionally,
Proactive Advisor Magazine offers
an up-close look at a topic with
current relevance to the field of
active management.
The opinions and forecasts expressed herein are those of the author and may
not actually come to pass. Any opinions and viewpoints regarding the future
of the markets should not be construed as recommendations of any specific
security nor specific investment advice. The analysis and information in this
edition and on our website is for informational purposes only. No part of the
material presented in this edition or on our websites is intended as an investment
recommendation or investment advice. Neither the information nor any opinion
expressed nor any portfolio constitutes a solicitation to purchase or sell securities
or any investment program.
Building a “niche”
into a practice focus
Phylyp Wagner, CFP®
McLean, VA
H. Beck
Founder
Wagner Resource Group Inc.
Securities and investment advisory services offered through H. Beck Inc.,
member FINRA/SIPC and an SEC-registered investment advisor. H. Beck Inc.
and Wagner Resource Group Inc. are not affiliated. Investments will fluctu-
ate and when redeemed may be worth more or less than when originally
invested.
hile we will gladly work
with clients from any walk
of life, we have found
a niche target segment
that has expanded to become the bulk of
our client roster. Attorneys are excellent
prospects for forward-thinking financial
planning. They are affluent, consumed with
their professional lives, and appreciate the
principles of risk management in planning
for their financial futures.
Targeting attorneys came about by a little
bit of luck and a lot of hard work. It started
with a thorough investigation of SIC codes
to see what might be good target segments in
the Washington, D.C., metro area. It became
obvious that the legal profession was one of
the dominant segments, with over 25,000
attorneys in the area.
We have developed several marketing and
database methods to identify specific law firms
and attorneys, and have developed a commu-
nicationsplantoreachouttothem.Aftermany
years of doing this, we have some expertise in
what works and have a very good response rate
leading to initial meetings. We average two or
three new prospect appointments a week, plus
additional follow-up meetings coming from
contacts in our existing client base.
In addition to the marketing side of the
equation, our core competencies as a firm
are appealing to this audience. Attorneys can
appreciate the sophisticated active investment
management strategies that we employ. They
are also very receptive to messages around risk
management, for both their investments and
their insurance needs. They like our focus
on tax-advantaged financial planning and
expertise in alternative investments. They also
represent a good target for 401(k) investment
management and generally have substantial
assets in their plans.
This has become a very successful
marketing focus so the legal profession
really no longer qualifies as a niche for us—
it represents the bulk of our client roster.
Other firms certainly target this segment,
but we believe we do it exceptionally well by
drilling into and understanding all aspects
of their firms’ benefits and qualified plans.
W
Matt Quattlebaum, CFP®
McLean, VA
H. Beck
Senior Financial Planner
Wagner Resource Group Inc.
This enables us to assist our attorney clients
in many more aspects of their lives. As
such we have become the “go-to” financial
planning firm for many of the law firms in
our region. Currently we are represented in
over 60 law firms and have multiple clients
in many of those.
14
TIPS & TOOLS

15. Active Management
There is a great deal of confusion surrounding the term “active
management” created by the business press. When one reads a headline
in any given year that “active managers” are underperforming or overper-
forming their benchmarks, this typically is referring to “active” managers
of a mutual fund—who are being measured against a specific index or
competing funds within that style.
Within the field of true active portfolio management, this narrow and
misleading definition really has little significance.
Active investment management is not about exceeding a specific
benchmark or “beating the market.” Active management seeks favorable
risk-adjusted returns in any market environment, generally employing
sophisticated algorithms and models to capture gains and protect against
losses in a wide variety of sectors, asset classes, and geographies.
It is about controlling risk in the markets, finding new ways to
dynamically diversify, and smoothing out the long-term volatility typically
found in any asset class. Active managers tend to rely on quantitative
approaches for asset allocation, exposure to the market, and adjustments
to portfolios based on current market conditions. When it comes to
evaluating returns, they generally will not compare to the S&P 500 or
global total market indexes, but are far more interested in risk-adjusted
returns and in meeting their portfolio objectives.
In theory, it is fundamentally about a long-term approach to portfolio
management that is diametrically opposed to “buy-and-hold.”
Fee-based assets continue to grow among advisors
101
Dynamic
Strategic
Diversification
Tools Models
Strategies
5 reasons to consider active management
Buy and hold is dead(ly)—While bull market runs are impressive,
history shows it is not a matter of “if” but more a matter of
“when” for the next bear market. Investment expert Kenneth Solow
sums it up: “Patiently waiting for stocks to deliver historical average
returns does not rise to the level of an investment strategy.”
Bear market math is daunting—It takes longer than most in-
vestors think to recover from bear markets—a gain of 50% is
needed to overcome a 33% portfolio loss.
Risk first: always—As one prominent active manager has said,
“No one would ever jump into a car without brakes, so why
would investors even consider having an investment strategy that did
not have a strong defense?”
Active management aligns with investor psychology—Behavioral
finance studies have documented the tendencies of investors to
operate on the destructive principles of “fear and greed.” Disciplined
active management takes emotion out of the equation.
Does “set it and forget it” really make sense?—For retirees or
those approaching it, the “sequence of returns” dilemma can
have a devastating effect on future income needs. Active management
offers a prudent path to achieving the twin goals of asset preservation
and compounded capital growth.
Resources for Advisors
Websites
Proactive Advisor Magazine: Active investment management’s weekly magazine, providing
advisor perspectives, topical issues in active management and commentary on strategy and
tactical tools. www.proactiveadvisormagazine.com
National Association of Active Investment Managers (NAAIM): Peer-to-peer networking
in the active investment management community, providing best practices among successful
advisors and advisory firms. www.naaim.org
Market Technicians Association (MTA): Leading national organization of investment analysts,
stock market analysis professionals and certified market technicians. www.mta.org
Advisor Perspectives: Audience-generated and vendor-neutral forum where fund companies,
wealth managers and financial advisors share their views on the market, the economy and
investment strategy. www.advisorperspectives.com
Whitepapers
“Bucket Investing with Dynamic Risk-Managed Portfolios,” Flexible Plan Investments
goto.flexibleplan.com/download/whitepaper-bucket-investing.pdf
“Comparison of ETFs and Mutual Funds—The True Cost of Investing,” Guggenheim Investments
guggenheiminvestments.com/rydex
“Understanding Leveraged Exchange Traded Funds,” Direxion Investments
www.direxioninvestments.com
“Small Accounts, Big Opportunities,” Trust Company of America
www.trustamerica.com/resources
“Why Gold? Seven Enduring Reasons,” Flexible Plan Investments
goldbullionstrategyfund.com
“The State of Retail Wealth Management, 4th Annual Report,” PriceMetrix
www.pricemetrix.com
2011 2012 2013
Fee-Based Assets (% of Total Assets) 25% 28% 31%
Fee-Based Revenue (% of Total Revenue) 43% 45% 47%
Fee Accounts per Advisor 85 92 101
Average Fee Account Assets ($000s) $240 $258 $293
Source: PriceMetrix Insights – The State of Retail Wealth Management 2013 – 4th Annual Report (Aggregated
data representing 7 million retail investors and over $3.5 trillion in investment assets.)