Cogent Advisor Wealth Management Guide How To Financial Professionals Can Prevail November 20

The Cogent Advisor Wealth Management Guide:

How Chicago Exchange Professionals Can Prevail
Through Financial and Personal Transitions

white paper | November 2011

The Cogent Advisor Wealth Management Guide: How Chicago Exchange
Professionals Can Prevail Through Financial and Personal Transitions

TABLE OF CONTENTS

Executive Summary 2

Part I: Wealth Challenges Unique to Our Chicago Trading Floor Community 2

From the Floor to the Computer: Before and After 3

Part II: Trader Transitions 4

The Chicago Exchange Trader’s “Trilemma” 5

Part III: Wealth Management for Financial Professionals 8

Defining Wealth Management 9

Working with a Wealth Manager 11

1. The Discovery Meeting 11

2. The Investment Plan Meeting 11

3. The Mutual Commitment Meeting 12

4. The 45-Day Follow-up Meeting 12

5. Regular Progress Meetings 12

Conclusion 13

About The Cogent Advisor 15

The Cogent Advisor Wealth Management Guide: How Chicago Exchange Professionals Can Prevail Through Financial and
Personal Transitions. © Copyright 2011 The Cogent Advisor. All rights reserved.

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1


EXECUTIVE SUMMARY Collectively and individually, former trade floor
professionals share a “trilemma” of challenges
For financial professionals in general — and specific to our industry and its relationship with
especially for the Chicago exchange community — our wealth, our career/earning potentials, and
the past decade has been nothing short of a quiet our lives. As professional traders, we often find it
revolution, swept along by the dual forces of the painful to separate our career-driven, transactional
worldwide shift away from open outcry on the floor and individualistic mindset from goal-driven, team-
to electronic trading as well as ongoing global and oriented wealth management needs. Essentially,
domestic market volatility. Those of us caught in the the financial professional-turned-investor must be
force of change have faced significant transitions in adept at accommodating two mindsets, one for his
both our professional and personal lives. or her trading, entrepreneurial pursuits and another
for the accumulation and preservation of long-term
With only a sliver of the community remaining wealth.
within traditional trading roles, the rest of us have
moved on, whether willingly or A wealth manager should be
not: shifting elsewhere within sensitive to these distinctions.

“
the financial industry, changing He or she should offer an initial
careers and/or fields entirely, and ongoing process based
retiring, or continuing to consider If there is a largest on discovering and achieving
our next move. personal goals, with solutions
lesson to learn from and specialized alliances to equip
As an illustration of both the financial professionals with the
pain and potential found among
the experience, it’s clarity needed to make sound,
survivors of the Chicago trading the value of accepting informed decisions about their
floor heyday, I offer my own, long-term wealth.
initially unwelcome transition a team approach in
from trader to wealth manager. If PART I: WEALTH CHALLENGES
there is a largest lesson to learn your life and your UNIQUE TO OUR CHICAGO
from the experience, it’s the value TRADING FLOOR COMMUNITY
of accepting a team approach career ...”
in your life and your career — What if the National Football
moving from a “winner takes all” League decided to emulate the
to an “all can win” mindset. I can attest, it’s a rough, Chicago exchanges, filling the stadiums with wide-
but rewarding shift for a trader to experience. screen monitors and white-sleeved computer
programmers, and converting its star players to
At first blush, it may seem counterintuitive to think those who could code the best touchdowns?
that a former trader or other financial professionals Imagine asking Chicago linebacker Brian Urlacher
could benefit from the services of a wealth what he would do with his newfound free time.
manager and a team approach, when we are so
very accustomed to relying on our own wits to “What do you mean, ‘What would I do’?”
succeed. In reality, our community faces challenges
resulting from our distinct, “insider” perspective. An This was exactly the response I received when
additional set of eyes, preferably those of a wealth asking “Joe,” a former Chicago Mercantile
manager who has walked in the trader’s same shoes, Exchange (CME) floor trader, what he would do if
can be an important asset in helping trading floor someone else were to manage his wealth for him.
professionals not only survive but thrive amidst the
transition.

2 © 2011 The Cogent Advisor


From the Floor to the Computer: Before and After 1

After

Before Within a handful of years, the tables turned,
with 10-fold programmers for every trader,
and the majority of the 1,000 trades per
There had been more than 10,000 traders second blazing in across the Internet. The
supported by 1,000 computer programmers final blow arrived in October 2008, when the
in a 10:1 ratio, with the best and biggest Great Recession rendered 9 out of every 10
action coming straight from the floor — and, traditional floor traders permanently obsolete
aside from growing numbers, that’s how and left Chicago’s trading houses as quiet as
it had been for 150 years. a locker room after season’s end.

Mind you, Joe is an extremely bright, talented and suit in 2006 (and then merging with the CME)3, and
energetic fellow who has routinely traded millions the CBOE issuing its IPO in March 20104.
of dollars on a typical day. So it’s not as if he can’t
imagine the possibilities. The problem is, I’m asking When computer trading took hold as expected,
him to consider what seems like an impossibility. many former members and other shareholders
A professional linebacker intercepts real pigskin. A in the Chicago exchange community profited
professional floor trader trades with real body and handsomely from the companies’ improved
soul. As far as his career is concerned, trading isn’t positions. But the benefits were bittersweet — in
what he does; it’s who he is. some respects, blood money for the demise of our
livelihood. Not only did we lose our proverbial skin
Or at least, who he was. For Chicago’s professional in the game, but the game of open outcry as we
exchange community — the CME, the Chicago Board knew it was over.
of Trade (CBOT) and the Chicago Board Options
Exchange (CBOE) — the impossible has happened. Few outside of the financial industry can fully
In fact, it was even self-inflicted. When the CME appreciate the magnitude of this silent, startling
became the first U.S. exchange to go public in revolution that swept across the Chicago trading
December 2002, it was a member-driven decision, floor community during the first decade of the 21st
in recognition of the accelerating transition from century. For those who were directly involved, it
the floor to computer trading2. If Chicago were to was no minor speed bump in the road; it was Lake
remain the premier center for global derivatives Shore Drive hurtling itself off the edge of Navy Pier
activity, its members had to agree to take it on the during rush hour.
chin. The CME was the first, with the CBOT following



As a veteran CME commodities trader myself, one In short, more cleanly separating and prudently
of the things I loved the most about my CME career managing each of these — long-term wealth
was its equalizing entrepreneurialism. I could have accumulation, business capital and sustainable
been anyone from a Harvard-educated lawyer to a personal spending — is increasingly critical as
former Chicago policeman with a GED, a descendant the traditional trading floor culture has been
of George Washington to a first-generation restructured, and issues regarding total as well as
American. Bottom line, our staying power mattered liquid wealth loom considerably larger than before.
a whole lot more than any credentials. Those who I cannot overstress the importance of recognizing
were good enough, loud enough these distinct and overlapping trio

“
and, yes, lucky enough could of challenges, and sooner than
make money. Lots of money. later. As a financial professional,
Chicago trading your ability to address each and
I happened to be the kid of a all is key to achieving a successful
member of the Chicago Fire floor professionals, transition into your new future.
Department, equipped with It’s key to you as an individual
the luck of the Irish and some nearly to a person, and a family steward. It’s also
financial coursework from DePaul critical to transitioning into a
University. I began as a filling have seen our respected player at the forefront
broker and switched to being of any number of enterprises and
a local floor trader, trading my traditional roles come opportunities that await both the
own capital and thriving on the elite skill sets you’ve honed on
jostling, yelling and hand signals;
to an end, one way or the trading floor as well as the
the rewards that came from being another.” new talents you’ll develop for
able to stand out, outshout and your next career.
outmaneuver my adversaries in
this zero-sum game of capitalism M.C. Escher, a master of depicting
in the raw. If I won, someone — a bank, a hedge seemingly visual impossibilities in his artwork,
fund or just another floor trader — had to lose. once asked, “Are you sure that a floor cannot also
be a ceiling?” For traders-turned-investors who
I admit, I found that kind of action addictively can recognize the possibilities within seeming
appealing. The physical effort energized me to play impossibilities, the sky can indeed be the limit as
the game with gusto, and the competitive sport you plan for your future wealth.
fed my energy. Most days, enough days, I returned
home to my family tired, satisfied. Happy. Next, let’s consider some specific illustrations,
including my own experience in making the
After a while, I’d built up a comfortable nest egg, adjustment. It wasn’t always the smoothest of
larger than most other sons of Chicago’s city rides.
workers. And I’d earned it doing something I loved.
If things had stayed that way forever, that would PART II: TRADER TRANSITIONS
have been fine by me. It was me against the world,
and that’s the way I liked it. Where have all the traders gone? A small group,
approximately 10 percent of 1997 floor traders5,
But of course we know how this story ends, and it continue in some semblance of their former floor
wasn’t happily ever after. As a result of the upheaval, careers, either remaining in the dwindling pits or
thousands of Chicago floor traders, brokers, hedge entering the cool, quiet world of computer trading,
fund managers and other financial professionals as distant from the hurly-burly glory days as is
share a trio of distinct wealth, career/earning and implied by the jargon that describes the shift:
life challenges. “moving upstairs.”



THE CHICAGO EXCHANGE TRADER’S “TRILEMMA”

WEALTH — Past wealth accumulation has often been significant, but large swaths of wealth have been
ravaged by the combined forces of our industry’s transformation, the Great Recession and ongoing
market volatility. As described in a white paper sponsored by the University of Chicago’s Graduate
School of Business (today, the Booth School of Business), “The futures trading industry generates the
most individual wealth of any industry in Illinois. … However, with the restructuring of an industry, there
are also challenges.”6

CAREER/EARNING — Traditional avenues for
dramatic wealth accumulation within the trading
LIFE — It’s critical to remember that many floor profession no longer exist. But financial
of life’s greatest rewards are found in family, professionals are an entrepreneurial, risk-tolerant
community and personal aspirations outside community. This can work in favor of identifying
of our careers. Former floor traders facing new earning opportunities for former floor traders
personal and professional redefinition can who want and/or need to remain professionally
turn to new sources for meaningful living as engaged for years to come. Still, even as former
part of an evolving definition within their own traders find and embrace new career opportunities
lives. However, when the identity of “trader” outside of the trading profession, diminished
has served so well for so long, these kinds of incomes typically demand challenging adjustments
emotional shifts can be easier said than done. in spending habits and lifestyles.

The vast majority of those from the traditional Regardless of what the future holds, Chicago
Chicago exchanges have moved on: trading floor professionals, nearly to a person, have
• Shifting elsewhere within the financial industry seen our traditional roles come to an end, one way
• Changing careers and/or fields entirely or another. Some were better than others at finding
• Retiring new, satisfying situations for themselves and their
• Still considering their next significant move loved ones. I can thank (and sometimes curse)
the industrywide changes for my own shift from



trader to wealth advisor and Registered Investment 3. The Beginning — We eventually emerge from
Advisor firm CEO. To determine the challenges and the neutral zone no-man’s-land to form specific
opportunities we’ve faced along the way, I prepared plans for the future — plans that guide us into
for this paper by interviewing more than two dozen new relationships, new opportunities … a new
colleagues, primarily Chicago filling brokers and life.
floor traders, CME board members, and clearing
firm owners. I sought to determine: Are there So, to circle back to our earlier question: Where
applicable ideas we can share? have all the traders gone? Slap on an “under
construction” sign, because most of us are busy
The concept of sharing in itself represents a fresh transitioning. Some are still grappling with their
mindset for many of us. And of course there is no former career ending; some linger in the neutral
single story that captures the countless ways each zone. The most successful have made it through to
of some 10,000 individuals made his or her very the beginning of their new beginning.
personal transition to a new life. But we’ve certainly
seen and experienced some common threads that In my own transition, I faced the fear and
characterize the experience. In his book, Transitions: uncertainty as well as the intriguing excitement
Making Sense of Life’s Changes, William Bridges of each uncomfortably overlapping stage. Despite
aptly describes a roughly three-stage process: my optimism about and enjoyment of the CME, a
skeptical part of me had always figured it was too

Leaving home Neutral Starting life in
culture zone new culture

1. The Ending — Our old way of life has ended. good to last. I and my fellow CME members could
We’ve shed many of our past connections and see the inexorable advance of global electronic
have gradually stopped expecting or hoping for trading. It didn’t take a genius to recognize what
their return. this would eventually mean to our world.

2. The Neutral Zone — As the ending sinks in, Even so, when the end finally did come after a few
many of us experience a “What’s next?” period years of trading off the floor, when it was time to
— sometimes brief, sometimes lengthy — during consider a new career, I was better prepared for
which we recognize that the “good old days” it by having routinely set aside a portion of my
are gone, but the future remains ill-defined. earnings into a separate portfolio. My investment
For most, this fallow period is filled with more activities weren’t yet optimal. I engaged a different
fear and anxiety than excitement or optimism. money manager, but the relationship felt shallow
Still, just as soil needs time to recover between and lacking. I’d not yet learned the important role
growing seasons, so too do most people need a wealth manager can play in overseeing the many
time to work things out at the root level prior to moving parts. But the efforts had reduced the
meaningful renewal.



temptation to treat all of my wealth as spendable ingredient I could bring to the table was the
cash, fully available for the immediate needs of following personal understanding:
business and pleasure.
Trading and wealth management require
Still, on an emotional level, it was a trying time. As two distinct mindsets — within one and the
I endured my own “neutral zone,” I found myself same person.
pulling away from former colleagues, and even
from my wife and children. As cliché as it may have One former trader colleague described it as having
been, I would sit in Starbucks for hours, reading to “rebrand” himself and his trading skills:
or continuing to study for the

“
nighttime, graduate-level classes You know, it’s not easy. There
I was taking at DePaul University. ... professionals are plenty of days I wish I
Sometimes, I would use the time could wake up, go down to the
to stay in shape physically by often fail to provide pit, make 40 grand and come
taking long bicycle rides alone home. But you have to move
in the mass of Chicago traffic, a full spectrum of away from that because it just
all bustling to and from their messes with your head. I think
chosen pursuits. Sometimes I advice to encompass a traders, when they are exiting,
used the time to think and reflect. should be handed some sort
Sometimes I used it to curse and
financial professional’s of 90-day course in wealth
worry. Sometimes I used it for
nothing at all.
unique needs and management, to convince them
to not beat the market. Do you
problems, hopes really think standing on the
Eventually, through the combi- floor and trading futures has
nation of continuing education, and dreams.” anything to do with beating the
self-reflection, physical activity market in stocks? It just flat out
and the simple passing of time, never has and never will. If you
plans emerged for the next phase in my life. Hazy want money to trade, take whatever you need
at first, they were based on a few early revelations and do it. And put the rest into a portfolio that
that have served as my guideposts through the fog. you have predetermined for the risk and the
I realized that, for me, the first guidepost was my time frame you like.
family. The second was my community. Spending
time with them was the most important thing I had. In a way, a trader-turned-investor must be able
My money and career would intersect, but I realized to dream in two languages: the native tongue of
they weren’t the “it” of it. entrepreneurial pursuits, born on the trading room
floor, as well as the foreign lingo of long-term wealth
Striving for balance offered me the flexibility I accumulation and preservation. To explore this final
needed to make an appropriate career choice, — critical — point, we turn to solutions for addressing
which became my third guidepost. I needed a the unique wealth management challenges faced by
career that would enable me to engage financial the “bilingual” financial professional. I have learned
professionals and their families who are enduring the new language myself, in my personal pursuit of
similar journeys and overcoming similar barriers how to manage my own wealth and how best to
to their own successful transitions. I was ready to build a world-class wealth management business.
make the move from “me” to “team.” An essential



PART III: WEALTH MANAGEMENT FOR FINANCIAL To illustrate, as much as I loved the trading floor,
PROFESSIONALS in setting aside a portion of my profits into a
So how do financial professionals resolve the globally diversified portfolio, I understood that
distinct “trilemma” of conflicting forces generated there was a difference between the high stakes I
by our wealth, career/earning paths and personal willingly accepted in my career, versus planning for
lives? How do we become comfortably bilingual, the reliable assets my family depended upon for
able to converse in both the solo financial achieving long-term financial goals such as college
entrepreneurialism that makes life interesting, as and retirement funding.
well as the team-oriented wealth

“
planning that makes life’s goals At the same time, I initially
achievable? believed that I could fly solo
with my personal portfolio
Many have no doubt worked with I want enough management, just as I had done
various investment advisors, retail in my trading activities. A do-it-
brokers or hedge fund managers
information, a firm yourself approach worked to a
of one kind or another. However, grasp going in, so I point; I fared better than many
these professionals often fail other fellow traders who had
to provide a full spectrum of don’t lose control, failed to establish any sort of
advice to encompass a financial investment portfolio separate
professional’s unique needs and so I can make from their trading accounts.
problems, hopes and dreams.
These distinctions are important, informed decisions.” But the more involved I became
as a 2007 CEG Worldwide study in the investment world, the
shows that, although nearly half more I appreciated the benefits
of all advisors (46.3 percent) of a team approach to wealth
call themselves wealth managers, only 6.6 percent management. Here, unlike on the trading floor, I
practice true wealth management. discovered the importance of working in alliance
with rather than in opposition to respected, like-
Financial professionals — and Chicago trading minded colleagues.
professionals especially — need wealth managers
who understand what they’re going through, One of my learning experiences occurred when a
with apt processes and far-reaching solutions to “boring” short-term municipal bond fund holding
encompass their complex financial, career and life I’d selected plummeted 44 percent overnight.
pressures. Without the benefit of advice from a specialized
bond portfolio expert, I had not seen that the
To benefit from wealth management, financial fund managers had been mishandling the account
professionals need to shift their mindset from compared to its stated goals. When the discrepancy
immediate, independent and transactional to long- came to light, the bottom fell out.
term, team-oriented and systemic. They must move
from the perspective of treating all their wealth as For me, it represented a tolerable loss compared
a single, liquid source of ATM-style cash for every to my overall wealth; a lesson learned on how to
facet of their lives, to assigning different roles for properly manage fixed income risk. But it was a
different portions of their wealth. By deliberately severe blow to many of the fund’s shareholders
structuring each portion for the distinct role it plays, — teachers and public service retirees and other
we can shift from ad hoc, reactionary spending to everyday investors whose life savings had vanished
more sustainable, goals-based wealth management, in what amounted to a collapsed Ponzi scheme.
that addresses the full trilemma of our complex
personal and professional lives.



This made me mad. Mad enough to become lead state’s Bright Start 529 college savings plan — what
plaintiff in a class-action suit against the fund, and a thrill it was to be invited to share the podium
mad enough to be instrumental in successfully with then-Treasurer Alexi Giannoulias when the
recovering more than half of the assets lost by my announcement was made) paved the way for my
fellow plaintiffs, even though it took seven years of decision to become a wealth manager, to position
my life. so many more families like mine to invest in the
right way, using the right approach.
Both the insights into appropriate fixed income
investing as well as the aftermath Defining Wealth Management
of successfully defending my What is the right approach to

“
fellow investors’ interests in the wealth management? It’s neither
subsequent class-action suit a legal nor regulated term, so how
were a significant influence on During the do you know it when you see it?
my wealth management career to Sometimes, it’s easier to define
come. It was one of my first tastes
discovery meeting, what something is by eliminating
of what it was like to make financial
decisions on behalf of and along
you and the wealth what it is not. The hallmarks
become clear when the wealth
with others. As lead plaintiff, manager will explore manager is compared with other
you make the decisions that advisors.
affect everyone, after consulting your values, wants
a variety of specialized subject Advisors tend to fall into three
matter experts. I was gathering all and needs ...” broad categories: investment
available information from a wide generalists, product specialists
and diverse team, and then acting and wealth managers.
as a fiduciary for everyone else in
the class. I kept stressing to our attorneys, “Tell me Investment generalists offer a broad range of
what’s best for everyone in the class.” And that’s products but do not specialize in a single type.
what we’d do. At its essence, these are the same While they offer their clients many different
skills that a wealth manager brings to force for his products, they do not make consulting an essential
or her clients. part of their business model. They are focused on
the transaction (and the resulting commission paid
After the dust had settled, I continued with my by the product provider).
trading career for several more years, but I also
resolved to educate myself on the intricacies of Product specialists focus exclusively on an
asset management. This is the period during which investment-oriented product niche and offer a
I began to attend nighttime classes at DePaul single type of product as a potential solution. They
University, culminating in a graduate certificate often offer products such as managed accounts,
in Financial Planning and Asset Management. To stocks, fixed income or alternatives. Like investment
guide my decisions, I also sought out informational generalists, these advisors do not have a consultative
interviews with a number of financial advisors and orientation and tend to be transactional.
wealth managers across the country, attended
several key industry technology and practice In either case, transactional advisors are assisting
management conferences, and generally explored with parts but not the whole, often failing to address
the gamut of possibilities that shaped my next key needs of the financial professional/investor.
move. After all, professional traders don’t need extensive
help with transactions. If that’s all there were to
When the time came to shift careers, this and other it, they’d already feel confident that their lives’
early experiences (such as having championed goals were on track, with little need for additional
the addition of low-cost, index-style funds to the consideration.



But that’s not what I heard as I interviewed my two- closely with the client (and his or her family),
dozen-plus financial colleagues. I found a common upfront and ongoing. They identify specific needs,
theme of unmet concerns, such as: design custom strategies and track ongoing
implementation to ensure that plans remain on
• Uncertainty on how to bridge the gap between target.
trading versus building wealth — how to balance
safeguarding accumulated wealth and allocating “Working closely” means exactly that: Wealth
portions of it to support ongoing entrepreneurial managers stay in touch. A wealth manager will
aspirations offer a wide range of services and will coordinate
with specialized strategic alliances to help with a
• Additional unanswered questions about how to wide array of financial needs. Below are some of
plan for their personal and professional financial the essential ones:
future
• Cost-competitive asset management services—
• Holes in the levels of far-reaching wealth advice mutual funds, managed accounts, brokerage
they were currently receiving accounts, custom bond portfolios and alternative
investments
• Missing or misapplication of advanced planning
tools to complement earning and investment • Planning services — financial planning, education
activities planning, retirement planning

As one trader described it: “I want enough • Charitable gifting services — including private
information, a firm grasp going in, so I don’t lose foundations, donor-advised funds, charitable
control, so I can make informed decisions. That’s remainder trusts and charitable lead trusts
what you pay somebody for — his advice and his
research, to parse out all the information. I don’t • Wealth transfer services — identifying and
have to be ‘that guy,’ but I want to be at that comfort facilitating the most tax-efficient ways to pass
level about where I’m putting my money.” assets to succeeding generations

• Wealth protection services — shielding wealth
Wealth managers take a comprehensive approach
from litigants, creditors, children, in-laws and ex-
to meeting clients’ needs. We use a consultative
spouses
approach to construct integrated strategies for
clients’ specific problems. We take the time to • Risk management services — covering everything
deeply understand the client base we serve. from protecting the mundane (autos, homes) to
Although many advisors call themselves wealth the exotic (rare artwork, top-end yachts), and
managers, the following are hallmarks of those who elevating risk management to also serve in an
walk the walk: advanced planning capacity to enhance liquidity,
estate transfer and more
• They use a consultative process to establish a close
relationship with each client, to gain a detailed • Credit services — including mortgages and
understanding of his or her most important goals, personal and business loans
financial wants and financial needs.
In my case, I additionally layered on a variety
• They offer informed expertise, customized
of outsourcing solutions, ranging from select
choices and recommended solutions to fit those
operation and marketing support professionals, to
specific needs. They take into account a range of
investment strategy and solutions from Dimensional
interrelated financial services, such as investment
Fund Advisors, to a collaborative think tank of like-
management, risk management, estate planning
minded advisor community found at BAM Advisor
and retirement planning.
Services. After carefully choosing my alliances, I
• They deliver these customized strategies working left the island to join the mainland.



Exhibit 1 and years of the relationship, the wealth manager
will likely arrange a series of meetings designed to
The Consultative Client Management encourage questions, interaction, conversations
(CCM) Process and understanding.

Exhibit 1 is a brief outline of the meeting structure we
have adopted at our firm. Of course valid variations
exist, and our own processes are intentionally flexible
CCM1: Discovery Meeting to accommodate clients’ unique circumstances, but
Duration: 1.5 hours these are typical of the kinds of meetings you can
Interval to next meeting: Two weeks expect in a wealth management environment.

1. The Discovery Meeting
At the first meeting, the wealth manager uses a
systematic, detailed interview process to define an
CCM2: Investment Plan Meeting investor’s true financial needs, goals and current
Duration: 1–1.5 hours position. This process will provide the advisor with
Interval to next meeting: One week the information he or she needs to create a total
client profile. This profile becomes a key tool for
communicating the broad financial picture to a
network of specialists to whom the advisor will turn
for help in creating customized wealth management
CCM3: Mutual Commitment Meeting strategies.
Duration: 1 hour
Interval to next meeting: 45 days During the discovery meeting, you and the wealth
manager will explore your values, wants and
needs; collect information to assess the suitability
of working together; and gather the details
necessary to initiate structured planning, should
CCM4: 45-Day Follow-up the relationship continue.
Duration: 1 hour
Interval to next meeting: 90+ days 2. The Investment Plan Meeting
The second meeting should build on initial discovery.
Continued collaboration between you and the wealth
manager should lead to a customized investment
CCM5: Regular Progress Meeting plan that reflects you and your specific goals. In
Duration: 1 hour this meeting, the wealth manager proposes a draft
Interval to next meeting: Regular/Periodic investment plan to describe your needs and risk
tolerances, and offer benchmarks as well as a road
map for tracking progress toward your expressed
goals. Your custom investment plan should be
guided by these important discussion points:
Source: CEG Worldwide
1. Establishing a clear definition of long-term
needs, objectives and values, such as forming
Working With a Wealth Manager a new enterprise, retiring early or purchasing
Because wealth managers are focused on a additional homes
consultative process, they use a system that often
differs from the traditional, transaction-based 2. Identifying levels of risk tolerance for various
advisor. From a client’s first meeting to the time an assets
agreement is reached and throughout the months



3. Assessing expected time horizons for your so far, you both likely commit to establishing a
investments formal advisor-client relationship. Together, you
execute the necessary documents and proceed
4. Exploring expected rate- with finalizing and implementing
of-return objectives that your investment plan.

“
complement personal financial
goals based on your unique 4. 45-Day Follow-up Meeting
ability, willingness and need to
take market risk
To put it simply, As implementation unfolds,
it makes sense for you to set
5. Understanding the evidence-
wealth management aside time for a formal follow-
up meeting with your wealth
based tenets of applying
low-cost, globally diversified,
might be considered a manager. This ensures that your
wealth manager has the
asset-class investing as the fancy term for quality opportunity to update you on
recommended strategy for
any important details regarding
long-term wealth accumulation of life.” your portfolio implementation,
or preservation
continue the collaborative,
6. Ensuring a strategic implemen- educational process, and discuss
tation plan that is aligned with questions or concerns.
individual goals
5. Regular Progress Meetings
7. Continually monitoring, tax managing and Moving forward, you continue meeting with your
rebalancing to remain within planned risk wealth manager as appropriate, to address issues,
targets questions, changes and performance assessments.
The overarching objectives are to:
It’s important to emphasize that your well-drafted • Ensure your plan is on track relative to your
investment plan should not be a document handed particular long-term goals, and to assist with
to you “from on high,” so to speak. Rather, it should adjustments as those goals evolve.
represent a consultative exploration in which you • Discuss and implement advanced planning
are deeply involved, to provide that “comfort level” solutions; if your investment plan is the found-
articulated by our financial colleague on page 10 — ation of your financial house, then advanced
a sense that the wealth manager is making smart planning represents additional, important
decisions in concert with you. A well-designed structure. As appropriate, we’ll engage our
investment plan further serves as the foundation select team of expert “engineers,” and co-
for an entire financial picture, establishing the ordinate their activities in addressing your
framework for bringing in a professional network particular risk management, estate planning,
of top providers to help with specialized financial tax mitigation and charitable giving goals.
challenges.

3. The Mutual Commitment Meeting
At this meeting, if both you and the wealth manager
are pleased with the discussions and relationship



CONCLUSION

To put it simply, wealth management might be transition did not occur without loss. On the trading
considered a fancy term for quality of life. floor, everyone knew me as “MJ,” and if I had a suit
coat at all, it spent most of its time in the back of my
This is true for investors in general. It’s just as closet. As CEO of The Cogent Advisor, I’m Michael,
true for Chicago financial professionals who are and I wear my business attire proudly, to respect
transitioning from the floor-trading world that no and honor the time my clients agree to share with
longer exists in its traditional form. Like anyone me.
who is undergoing a life transition — accepting an
ending, enduring a period of fallow contemplation, Making the leap from one-man show on the floor to
and embarking on a new beginning — a helping forming — and being formed by — a personal wealth
hand can make all the difference between surviving support team has been one of the most daunting,
versus thriving. yet rewarding personal makeover moves ever. It’s
been a little like the television show “Survivor” in
“I’m certainly not a savvy investor,” observed one reverse, where I’ve discovered that getting voted off
of my colleagues. “When all was said and done, I my own little island was actually the best thing that
should’ve found a wealth management group that could have happened. It’s enabled me to harness
said, ‘Look, let’s protect your purchasing power, all of my past experiences and tightly focus my
let’s diversify it.’ I want to outsource all of this present energies on building the strongest personal
asset allocation to you guys, and I want to be left relationships needed to serve as my clients’ wealth
with some money so I have an opportunity to do manager and Personal Chief Financial Officer.
something with it — if it’s trading, if it’s whatever. I’ll
do my thing and you guys do your thing.” As my colleague above observed, achieving
quality of life means giving up some financial
My colleague was not a client of our firm, but rather control into the hands of a wealth manager. This
he was expressing his thoughts on the role he felt is an intimidating prospect for any individual. It’s
any wealth manager should play. A wealth manager a particular challenge for financial professionals,
frees financial professionals and their families since we are used to calling all our own shots for a
to identify, and then do, “their thing.” A wealth living. There’s no question that, as a trader turned
manager should free one’s wealth for something wealth manager, I’m a different man than I used to
more. be. But I have regained one key ingredient in my
career. Once again, I return home to my family at
Today, through the power of collaboration, I’m the end of the day, tired but happy.
CEO of my company and CEO of my life. But the

This Article does not intend to make an offer or solicitation for the sale or purchase of any securities or products. Investment in securities involves the risk of
loss. Nothing in this Article should imply that past results are an indication of future performance. Information provided is for education purposes only and in
no way is intended to be viewed as, or a substitute for, personalized investment advice. Be sure to first consult with a qualified financial advisor and/or tax
professional before implementing any strategy discussed in this article. Independent advice should be sought in all cases.



ENDNOTES

1. The 2009 movie documentary “Floored” offers an intriguing chronicle of the events.
2. “Exploring Entrepreneurship: The Chicago Futures Trading Industry,” Polsky Center for Entrepreneur-
ship, The University of Chicago Graduate School of Business, April 2006. Page 10.
3. Ibid.
4. “CBOE Holdings, Inc. Files Registration Statement for Proposed Initial Public Offering,” CBOE
Holdings, March 11, 2010.
5. Phil Morehart, “Hit the Floor,” Chicago Journal, January 13, 2010.
6. “Exploring Entrepreneurship,” pages 3–4.



ABOUT THE COGENT ADVISOR

Before founding The Cogent Advisor, Michael J. Evans was a veteran commodities trader on the Chicago
Mercantile Exchange, executing his own and other customers’ trades for more than 20 years. Michael’s
experiences as a trader honed his skills for identifying and managing
investment risk — a critical attribute that paved the way for him to dedicate
his expertise to helping fellow financial industry professionals manage the
future of their long-term wealth. Michael remains a proud member of the
Chicago Mercantile Exchange. A Chicagoan to the core, he is easy to get to
know and will tell you plainly what needs to be said.

In addition to his professional experience, Michael attended DePaul
University, receiving his B.S. from the College of Commerce. He also
completed the graduate certificate program in Financial Planning and
Asset Management at DePaul. He is husband to Colleen and father of their
three children.


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