1. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com The Changing Landscape for Retirement Planning and the consequent change in the advisory industry Paula H. Hogan, CFP®, CFA Hogan Financial Management, LLC

2. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com Challenges to Individual Investors Increasing longevity Increasing longevity No more pensions No more pensions Social Security less certain Social Security less certain Escalating healthcare costs Escalating healthcare costs Declining family support Declining family support Unrealistic financial expectations Unrealistic financial expectations

3. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com What Consumers Want I want to step out of the workforce and be able to keep my same standard of living. I am very concerned about health care costs. If things go well, I’d like to have some extra money to do things like travel or to help our kids. I don’t want to go backwards in my standard of living. I am very concerned about financial safety. I want to step out of the workforce and be able to keep my same standard of living. I am very concerned about health care costs. If things go well, I’d like to have some extra money to do things like travel or to help our kids. I don’t want to go backwards in my standard of living. I am very concerned about financial safety.

4. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com Planners’ Response Save Save Diversify Diversify Withdraw carefully Withdraw carefully Maintain extra cash reserves and buy some long-term care insurance Maintain extra cash reserves and buy some long-term care insurance -- and then hope it all works out OK -- and then hope it all works out OK

5. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com Life Cycle Investing Theory People have both human capital and financial capital, and financial capital needs to be tailored to the human capital. People have both human capital and financial capital, and financial capital needs to be tailored to the human capital. Consumers care most about lifetime consumption, not wealth Consumers care most about lifetime consumption, not wealth

6. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com Next Generation of Planning Products Initially, inflation-indexed annuities Initially, inflation-indexed annuities Add medical underwriting Add medical underwriting Add long-term care insurance Add long-term care insurance Add structured exposure to equity markets Add structured exposure to equity markets Accumulate with laddered TIPS Accumulate with laddered TIPS Mix with longevity insurance Mix with longevity insurance The list goes on. The list goes on.

7. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com New Advisory Conversation How to develop the human capital How to develop the human capital How to coordinate the financial capital with the human capital How to coordinate the financial capital with the human capital How much wealth to annuitize, at what rate, with which entity, under what terms, and with what safety nets How much wealth to annuitize, at what rate, with which entity, under what terms, and with what safety nets How much downside risk to accept in the stock portion of the portfolio How much downside risk to accept in the stock portion of the portfolio

8. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com Objections to Annuitization Enron, United Airlines, IBM pensions Enron, United Airlines, IBM pensions Prior experience with annuities Prior experience with annuities Loss of wealth for heirs Loss of wealth for heirs Higher comfort level with stock investing Higher comfort level with stock investing Personal wealth relative to cash needs Personal wealth relative to cash needs How the decision is framed How the decision is framed AUM advisory business models AUM advisory business models

9. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com A Plea for Clear Thinking It’s not annuities that are abusive. It’s not annuities that are abusive. It is the traditional distribution channels for annuities that facilitate abusive practices. It is the traditional distribution channels for annuities that facilitate abusive practices.

10. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com Life Cycle Investing Is Here Focus on Human Capital Focus on Human Capital New Policy Defaults New Policy Defaults Annuity Sales are Way Up Annuity Sales are Way Up New Products New Products New Distribution Channels New Distribution Channels

11. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com New 401(k) Defaults Are Coming “I would prefer to see a default distribution that leaves the money in the plan until age 70 and provides for paying out 4% per year as regular installments. At age 70 and for each of the next four years, annuitize 10% of the balance on a 100% joint and survivor basis. The retiree would be able to opt-out of this default option for any funds not yet annuitized.” Anna Rappaport “I would prefer to see a default distribution that leaves the money in the plan until age 70 and provides for paying out 4% per year as regular installments. At age 70 and for each of the next four years, annuitize 10% of the balance on a 100% joint and survivor basis. The retiree would be able to opt-out of this default option for any funds not yet annuitized.” Anna Rappaport

12. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com What’s wrong with this picture? “The withdrawals have the potential to keep pace with inflation over a defined period of time, provided that the funds’ investment strategy works as intended.” Investment News, 10/23/07 “ More Funds With Managed Payouts Coming ” “The withdrawals have the potential to keep pace with inflation over a defined period of time, provided that the funds’ investment strategy works as intended.” Investment News, 10/23/07 “ More Funds With Managed Payouts Coming ”

13. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com Evaluating A New Product Is it tailored to the human capital? Is it tailored to the human capital? Does it specifically address the risks of inflation, longevity, and principal loss? Does it specifically address the risks of inflation, longevity, and principal loss? Is it sold through a distribution channel that forces meaningful competition? Is it sold through a distribution channel that forces meaningful competition?

14. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com NAPFA/Income Solutions ® Alliance NAPFA members can purchase immediate annuities through a distribution channel that sets up meaningful competition. NAPFA members can purchase immediate annuities through a distribution channel that sets up meaningful competition. The alliance contributes to the public interest. The alliance contributes to the public interest. The alliance is strategically important for our practices. The alliance is strategically important for our practices.

15. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com Impact of Inflation Protection 4% Drawdown on $100,000 = $4000/year 4% Drawdown on $100,000 = $4000/year Market Risk, Potential Loss of Principal Market Risk, Potential Loss of Principal Longevity Risk Longevity Risk Inflation Inflation Inflation-Protected $100,000 Single Life Annuity = $6000/year Inflation-Protected $100,000 Single Life Annuity = $6000/year Above risks are addressed Above risks are addressed 50% annual increase in income (without adjustments for inflation) 50% annual increase in income (without adjustments for inflation)

16. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com Inflation-Indexed $1m Annuity INFLATION-INDEXED3% ANNUAL INCREASE Age 65Lifetime 10-Year Period CertainLifetime 10-Year Period Certain Female $60,364 $59,124$63,812$62,132 Male $66,539 $64,161$70,128$67,522 Joint $52,902 $52,811$56,086 $55,976

17. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com Inflation-Indexed $1m Annuity INFLATION-INDEXED3% ANNUAL INCREASE Age 75Lifetime 10-Year Period CertainLifetime 10-Year Period Certain Female $85,287 $78,019$87,209$80,498 Male $97,964 $85,046$99,576$87,091 Joint $68,351 $67,205$74,510 $73,237

18. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com Issues that Need Addressing Best Practices Best Practices Fiduciary standards: trusts/401(k) plans Fiduciary standards: trusts/401(k) plans Advisory business models Advisory business models Tax planning with gradual, partial annuitization of IRAs into inflation indexed annuities Tax planning with gradual, partial annuitization of IRAs into inflation indexed annuities Administrative procedures Administrative procedures

19. 250 W. Coventry Ct., # 202, Milwaukee, WI 53217  (414) 352-9111  Fax (414) 352-9166  hogan@hoganfinancial.com  http://www.hoganfinancial.com Key Planning Points Life Cycle Saving and Investing is washing into the current market place. Life Cycle Saving and Investing is washing into the current market place. It exactly addresses the true goals of consumers. It exactly addresses the true goals of consumers. We need an interdisciplinary approach to iron out implementation issues. We need an interdisciplinary approach to iron out implementation issues. Financial planners have much to offer to the industry conversation. Financial planners have much to offer to the industry conversation.