Investor Update Presented by: Advisor Name Company

Tonight’s Agenda  Overview of Current Economic Issues  Year-End Planning Strategies  Questions & Answers 2 All examples provided are hypothetical and meant for illustrative purposes only. State income tax laws can be different from Federal income tax laws depending on your state. Be sure to take this into account before making any decisions. Individual situations will vary so please consult a tax advisor to address your specific situation.

Five Key Areas of Financial Planning 3 Protection  Protection  Retirement Plan  Investments  Tax Planning  Estate Planning

August 11 th 2015 Long Live the Bull The 23 bull markets in U.S. stock since 1900 have lasted an average of 1,219 days. The current bull market is the fourth-longest on record at 2,262 days.

Market Volatility Returned ! Source: Barron’s 8/21/2015

Market Volatility Continues! Source: Barron’s 8/28/2015

What is causing this Volatility? Slower than expected growth in China

What is causing this Volatility? Instability of oil prices

What is causing this Volatility? Fear of rising interest rates Source: Numbernomics.com

What is causing this Volatility? Investor Emotions

History has been kind to investors Indexes are unmanaged and investors are not able to invest directly into any index. Past performance is no guarantee of future results.

After an extremely volatile two weeks, in September 2015, billionaire value investor Mario Gabelli said he's largely ignoring the recent extreme stock market volatility, saying his investment horizon is 3 to 5 years, not 6 to 12 weeks. Source: Yahoo! Finance

Trying to time the market can cost you

5 Years Later Source: Fidelty.com

Are you an investor or a speculator ? “There are two times in a person’s life when they should not speculate: when they can’t afford it and when they can”. Mark Twain

Knowledge is Powerful Franklin Templeton asked 1,000 investors whether the S&P 500 went up or down in the years 2009 and % percent thought it went down in 2009, 66% percent thought it went down in 2009, 49% said it declined in In reality, the index gained 26.5% in 2009 and 15.1% in 2010.

Are you a bull or bear?

Is it time to revisit your portfolio ? Has your cash flow or liquidity needs changed? Has your risk tolerance changed? Have any of your goals or timelines changed?

What will the future bring?

What Is Rebalancing? Rebalancing is defined as the process of buying and selling portions of your portfolio in order to set the weight of each asset class back to its original state. What Is Rebalancing? Rebalancing is defined as the process of buying and selling portions of your portfolio in order to set the weight of each asset class back to its original state. Source: Investopedia.com

How about bonds? Source:

Duration is Important

Our goal it to proceed with caution!

Some Keys to Successful Rebalancing include: Focusing on the Long Term Focusing on the Long Term Recording Recording Comparing Comparing Adjusting Adjusting Using Professional Guidance Using Professional Guidance *Rebalancing a portfolio cannot assure a profit or protect against a loss in any given market environment.

2015 Year End Tax Planning

There are still 7 tax brackets for 2015

5 Tax Tiers Traditional Income Tax Alternative Minimum Tax 3.8% Tax on Net Investment Income “PEP” and “Pease” limitations The 39.6% and 5% incremental rates

2015 Long-Term Capital Gains & Dividends 28

Bracket Management %35%33%28%25%15%10% MOST Tax-Sensitive Tax Aware Tax Efficient

31 Key Year-End Tax Planning Strategies Harvesting – Gains and Losses Harvesting – Gains and Losses Retirement Plan Contributions Retirement Plan Contributions Gifting Gifting Roth IRA Conversion Roth IRA Conversion

Gain Harvesting – Tradeoffs On the surface, it appears that taxpayers should always harvest gainsOn the surface, it appears that taxpayers should always harvest gains However, harvesting gains introduces a tradeoff between lower tax rates versus the loss of tax deferralHowever, harvesting gains introduces a tradeoff between lower tax rates versus the loss of tax deferral ̶Tax is paid at a lower rate, but it is paid sooner ̶Need to determine a crossover point at which selling sooner makes more sense 32 Income Tax Planning Opportunities in 2015

Gain Harvesting Sell assets with long-term capital gains in 2015 if able to take advantage of lower bracketsSell assets with long-term capital gains in 2015 if able to take advantage of lower brackets Repurchase same or similar assetsRepurchase same or similar assets Sell assets whenever you would have sold them otherwiseSell assets whenever you would have sold them otherwise 33 Income Tax Planning Opportunities in 2015

Gain Harvesting – When Should Gains Be Harvested? Very short time horizonVery short time horizon ̶Gain harvesting will almost always be favorable because the benefit of tax deferral is small Very long time horizonVery long time horizon ̶Gain harvesting will almost always be unfavorable because the benefit of tax deferral is large Taxpayer in the 0% long-term capital gains bracket in 2015Taxpayer in the 0% long-term capital gains bracket in 2015 ̶Gain harvesting will always be favorable from a tax perspective because it gives you a free basis step-up 34 Income Tax Planning Opportunities in 2015

Loss Harvesting – Key Issues “Wash sale” rule (IRC §1091)“Wash sale” rule (IRC §1091) Diminishing value of capital losses Diminishing value of capital losses Inefficiency of capital loss offsetting Inefficiency of capital loss offsetting 35 Income Tax Planning Opportunities in 2015

Short-Term GainLong-Term Gain Short-Term Loss NEUTRALINEFFECTIVE Long-Term LossEFFECTIVENEUTRAL Loss Harvesting – Inefficiency of Capital Loss Harvesting In general, capital losses are more tax effective if they can be used to offset income taxed at higher tax rates (e.g. short-term capital gains and ordinary income)In general, capital losses are more tax effective if they can be used to offset income taxed at higher tax rates (e.g. short-term capital gains and ordinary income) ̶Thus, long-term losses used against short-term gains are more tax-efficient than short-term losses being used against long-term capital gains 36 Income Tax Planning Opportunities in 2015

Loss Harvesting Strategies Buy stock of similar company Buy stock of similar company 1.Taxpayer has a stock (e.g. Coke) with an unrealized loss (i.e. “loss stock”) 2.Taxpayer purchases a similar stock (e.g. Pepsi) at any time prior to (or after) the sale of the “loss stock” ̶NOTE: The sale and purchase can occur on the same day in that the two stocks are not “substantially identical” Double-up “loss stock” – wait 31 days

Retirement Plan Contributions Always Consider Contributing to Your Retirement Plans if Possible!

Gifting in 2015 Annual Gift Amount for 2015 is $14,000 Annual Gift Amount for 2015 is $14, Plans 529 Plans Charitable Donations Charitable Donations Lifetime Amounts Lifetime Amounts

Roth IRA Contribution Contribution Conversion Conversion

Roth IRA Conversions – Roth IRA Conversion Benefits Lowers overall taxable income long-termLowers overall taxable income long-term Tax-free compoundingTax-free compounding No RMDs at age 70½No RMDs at age 70½ Tax-free withdrawals for beneficiariesTax-free withdrawals for beneficiaries 41 Income Tax Planning Opportunities in 2015

RothIRA Conversions – Understanding the Mathematics Roth IRA Conversions – Understanding the Mathematics In simplest terms, a traditional IRA will produce the same after-tax result as a Roth IRA provided that: In simplest terms, a traditional IRA will produce the same after-tax result as a Roth IRA provided that: ̶The annual growth rates are the same ̶The tax rate in the conversion year is the same as the tax rate during the withdrawal years 42 Income Tax Planning Opportunities in 2015

Roth IRA Conversions – Understanding the Mathematics 43 Income Tax Planning Opportunities in 2015

Roth IRA Conversions – Understanding the Mathematics Critical decision factors Critical decision factors ̶Tax rate differential (i.e. tax rate in year of conversion vs. tax rate in years of withdrawals) ̶Ability to use “outside assets” (i.e. non-IRA funds) to pay the income tax on the conversion ̶Time horizon / need for IRA to meet annual living expenses 44 The goal of a successful Roth IRA conversion is to keep as much of the conversion income as possible in lower income tax brackets The goal of a successful Roth IRA conversion is to keep as much of the conversion income as possible in lower income tax brackets Income Tax Planning Opportunities in 2015

Taxpayers may “recharacterize” (i.e. undo) the Roth IRA conversion Taxpayers may “recharacterize” (i.e. undo) the Roth IRA conversion 45 Income Tax Planning Opportunities in 2015

Roth IRA Conversions – Roth IRA Conversion Timeline Roth IRA Conversions – Recharacterizations 2016 Conversion PeriodRecharacterization Period1/1/2015 First day conversion can take place First day conversion can take place /31/2015 Last day conversion can take place Last day conversion can take place 4/15/2016 Normal filing date for 2015 tax return 10/15/2016 Latest filing date for 2015 tax return / last day to recharacterize 2015 Roth IRA conversion 12/31/

Invest – Don’t Trade or Speculate Invest – Don’t Trade or Speculate Don’t Panic Don’t Panic An Investor Who has all the Answers Doesn't Even Understand all the Questions An Investor Who has all the Answers Doesn't Even Understand all the Questions Hire Wise Experts to Help You ! Hire Wise Experts to Help You ! Sir John Templeton 47

Where do we go from here? 48

Our GOAL is to Monitor your Situation! 49

What can you expect from us? Constant communication Frequent discussions Frequent discussions We are constantly reviewing economic, tax, estate and investment issues for our clients We are constantly reviewing economic, tax, estate and investment issues for our clients 50

51 Our Role as Your Advisor  We won’t be making panicky decisions  We will maintain a non-emotional objective  We will avoid knee-jerk reactions  We will assist you in making decisions that are always in your best interest! - and  WE ARE HERE FOR YOU !!!!

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Thank You We appreciate the opportunity to assist with YOUR financial needs! We appreciate the opportunity to assist with YOUR financial needs! 55

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The views expressed are not necessarily the opinion of Insert Broker-dealer name. Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed. This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Investing involves risk including the potential loss of principal. No investment strategy, such as asset allocation and rebalancing, can guarantee a profit or protect against loss in periods of declining values. Please note that rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non- retirement account, taxable events will be created that may increase your tax liability. Contents provided by Academy of Preferred Financial Advisors, Inc. Copyright 2015 Academy of Preferred Financial Advisors, Inc.