Wall street is broken Making Money or Making Mistakes

Wall street is broken Making Money or Making Mistakes
Welcome to our seminar series titled: Making Money or Making Mistakes. This particular presentation is called Wall Street is Broken, which is quite a statement, but as you’ll see, very true. Wall street is broken

Making Money or Making Mistakes
This discussion is offered free of charge. It is designed to be educational in nature and is not intended to provide tax or legal advice. Consult with your tax advisor and/or legal counsel for suitability for your specific situation. Hypothetical and/or actual historical returns contained in this presentation are for informational purposes only and are not intended to be an offer, solicitation, or recommendation. Rates of return are not guaranteed and are for illustrative purposes only. Projected rates do not reflect the actual or expected performance within any example or financial product. First to cover some basics…(Read slide).

Redhawk Wealth Advisors
Disclosure Investment advice is offered through Redhawk Wealth Advisors an SEC Registered Investment Adviser. Insurance products are sold through Vick & Associates, Inc. Include your disclosure and read.

How many Americans say they are conservative investors?
70%? Who Knows? Ask the question, “How many Americans say they are conservative investors?” (Let the audience respond then say…) Who knows?

What is a conservative investment?
“A conservative investment is an investment that has to do with conserving or maintaining purchasing power at the least amount of risk as possible.” “An investing strategy that seeks to preserve an investment portfolio's value by investing in lower risk securities such as fixed-income and money market securities, and often blue-chip or large-cap equities.” Investopedia July, 2010 Huh? A better question might be “What is a conservative investment?” Here are two typical Wall Street definitions. Isn’t it odd that something seemingly so easy to grasp, Wall Street makes it hard to understand. Plus, the definitions seem so incomplete and frustrating. Wall Street is obviously disconnected with Main Street. Let’s see how this plays out in 6 Wall Street Myths.

Wall Street is really good at confusing people, even themselves
Wall Street is really good at confusing people, even themselves. Let’s take a look at Six Wall Street “Maxims” that may just be myths. I’ll let you decide. Six Wall Street Myths

Wall Street Maxims or Myths?
I haven’t lost until I sell. The large wire houses are the best place to get professional advice. A diversified allocation of asset classes reduce your overall risk. Buy and hold is an effective conservative strategy. Just buy an index fund. Index Annuities are dangerous. Here are six Wall Street maxims which I believe may be myths you might hear often from investment advisors. Most people have heard these and you might have even said the same thing yourself. Some of these myths come from the world of taxation, others come from advertising, and still others are emotional crutches. They are very commonly accepted by both investors and investment professionals. Read Slide Again I ask, if they come from a broken culture are they valid, and did we learn anything from the last 2 years?

I haven’t lost until I sell
“Realizing gains & losses” A tax reality turned into an investing maxim. (Not a good idea!) Myth #1 If it were true that you don’t lose until you sell, then all the bad mortgages would just be a paper loss and not a reality. And if it wasn’t a reality then the black abyss of 2008 would never have happened because it was directly related to “paper losses” of mortgages! I get people in my office every week that have a problem with their statements. The problem is they don’t believe what is written on them. Their account shows that over the last 2 years they have lost money. They had X amount of money last quarter, last year or when ever, and now they have less than that. Their statements are clear. But they don’t believe them. They say that they haven’t lost the money until they sell the asset. Now I understand where this belief comes from. This myth comes from the TAX reality that they haven’t “realized” their losses (or for that matter their gains), until they sell out of them. So, from a tax standpoint there is truth to this maxim. If, say over a year, your investment goes down in value and you don’t sell, then comes back to it’s original value and beyond you didn’t “realize” the loss at the low point. This is true. But, what isn’t true is that you didn’t lose. Because, when your quarterly statements came each month and they showed a loss of value in the assets, you did experience a loss for that quarter. If you needed the money and had to sell, you would only have what was on the statement, or the value at the time of the sale. That’s reality! It is a Wall Street Myth that you haven’t lost. It’s important for brokers to tell you that so you won’t feel bad and leave them as an advisor. Yet, the truth is, you had exactly what your statement said you had! If you lost, as many did in 2008, forty percent of your portfolio value on your December 31st statement it would take a gain of a little over 65% to regain the value you once had. That’s a hefty percent to hope for. I believe people have an emotional problem when they experience losses. Let’s take a look at what may really be going on.

Status Quo Bias People are inclined to stay with what they have no matter how bad the performance. The real problem with this myth is that people are inclined not to change.

Status Quo Bias “Most real decisions, unlike those of economics texts, have a status quo alternative—that is, doing nothing or maintaining one's current or previous decision. A series of decision-making experiments shows that individuals disproportionately stick with the status quo. Data on the selections of health plans and retirement programs…reveal that the status quo bias is substantial in important real decisions.” (“Status Quo Bias in Decision Making” – Journal of Risk and Uncertainty. 1:7-59(1988)Kluwer Academic Publishers, Boston, William Samuelson, Boston University and Richard Zeckhauser, Harvard University) I believe that this myth is an easy one for people to believe because they don’t want change. Change is hard. We call it the Status Quo Bias. People are inclined to stay with what they have no matter how bad the performance. There are plenty of university studies that document this problem. (Read slide)

“The truth is the market goes up and down. Your accounts may very well recover to their old levels, but until then, “you have what you have” is a better catch phrase to use. Reality is always a better place to begin when evaluating how to move forward. You can even say that you have lost money in your investments and if you keep them they may one day regain their value. I’m sure that’s what the owners of Enron stock said.” Dave Vick in his book “Bat-Socks, Vegas and Conservative Investing” addresses this issue. (Read quote). Mr. Vick shows that it can actually be a dangerous position to hold. Just ask those holding the worthless stock of once large companies that have gone south. “Bat-Socks, Vegas & Conservative Investing” by David P. Vick

Brokers are leaving Wall Street…
(Play the video. At the end say…) Don’t you sometimes wonder what’s going on in a broker’s head, especially as they see a market in freefall like 2008? It brings us to another maxim. Brokers are leaving Wall Street…

“The large wire houses are the best place to get professional advice”
“After a decade of pushing fee-based services, Wall Street is slashing and burning the infrastructure that has supported the business. The moves threaten to damage the long-term health of the wirehouse business model for financial advisers and their clients… Myth #2 Read slide. A wirehouse is a big Wall Street firm that most of you have heard of like Merrill Lynch or Wells Fargo, etc. And it’s interesting that brokers are leaving these big brokerage houses in large numbers. If they are leaving, and you are still there, you have to wonder why.

So, if they’re leaving, who are you listening to now?
“…On the new Wall Street, wirehouses are gutting the home office staff that has driven the growth of fee-based business…Even getting a simple phone call returned from the home office is turning into a trial. Forget about one-on-one attention.” Myth #2 It may make one wonder if financial representatives of these firms are leaving, should you be still there? Not that you need to totally be out of securities, but maybe you need a different investing perspective. A different model. (“Slash and Burn: The New Wall Street Growth Model” Mark Elzweig, Investment News, November 8, 2009

A diversified allocation of asset classes reduce your overall risk.
“When the tide goes out you find out who’s swimming naked…” - Warren Buffett Myth #3 I realize what Mr. Buffet is trying to say here. But, guess the real point for me is that if you don’t understand what you’re doing maybe you should do something you can understand. Something a little less complex than diversified asset classes moving in different directions to minimize risk.

Myth #3 FAILED Here’s what the editor of Investment Advisor magazine, an industry journal written to advisors, says about this myth. He says “Euthanize Wealth Management Practices”… they’ve FAILED! Investment Advisor Magazine, July 2009

Listen to the editor for Investment Advisor Magazine (July 2009 emphasis mine): “The wealth management practices of Wall Street firms and big banks are broken. Again. To understand this point, it’s important to step back and remember that regardless of which particular investment was the flavor of the month, the common theme heard over and over again in the big investment houses over the past 30 years was that by dividing your assets among many different categories that won’t move in the same direction at the same time, you were going to reduce the overall risk. This premise seemed to have some validity and was appealing to the average investor – until October 2008, when virtually every category except high quality short and intermediate fixed income investments got caught in the same downward draft. Put another way, the Wall Street wealth management model failed its biggest test. Investors who were told that they were diversified suffered losses of double or triple the magnitude of what they were told to expect during a tough year. What went wrong? The fixed income substitutes pushed by the major investment houses – “low volatility” hedge funds, preferred stocks, asset backed securities or other structured products, closed-end bond funds, income/mortgage REITs, and master limited partnerships - weren’t fixed income substitutes at all. None of them is a substitute for the most important characteristic that investors should be looking for from the fixed income portion of their portfolios: safety of principal. Myth #3 Here’s what he says about the broken Wall Street system that many of you still take advice from. Read the slide.

“Buy and hold is an effective conservative strategy”
“Buy and hold as a strategy is very questionable…It’s worked in the past, but in time of severe market stress it just doesn’t work.” Ben Stein 12/28/08 Myth #4 The buy and hold strategy might just be a myth too. After all that went on in 2008, even the king of buy and hold Mr. Buffet lost a lot of value. Here’s a quote from Ben Stein. Read quote.

“Buy and hold is an effective conservative strategy”
The reality is, if you invested $100 in the S&P 500: 1/1/2008 $100 1/1/2009 $62 1/1/2010 $74 1/1/2011 $93 1/1/2012 $98 1/1/2013 $111 That’s only 2.2% a year for the last 5 years, and a pretty wild ride! Let’s take a look at reality. For every $100 that you had invested in the market on Jan. 1st, 2008, you had $62 by the end of that year. And even though the market came back close to 20%, you still only have $74. By the beginning of this year you have got back your money and gained about 11%, which is only 2.2% a year for the last five years and a pretty wild ride! If you look at your statement and had to take money out for a car, vacation, kids wedding, or what ever reason, ask yourself, “Is buy & hope a true conservative strategy?” Can you really afford this in retirement? Stats from YahooFinance.com 1/7/2013

“Just buy an index fund”
S&P 500 Index January 3rd, 2000 December 31st, 2009 -23.37% LOSS!! Myth #5 Myth number 5 is “Just buy an index fund.” This is a very popular concept thanks to companies like Vanguard, which allows investors to have low fees while just tracking with an index. Today, more and more people are getting into ETF’s for just this reason. And the theory is that money managers, over time, just don’t beat the indexes. There are some great managers out there, but finding them is hard and you don’t know if their hot streak will continue after you place your money in the fund. So, just following indexes should net you the return you want, right? Let’s take a look at the first decade of the 21st Century. I know, this will probably never happen again right? (Go over the numbers on the slide.). So in other words, losing 23% of your assets over a ten year period is a good thing??? Stats from YahooFinance.com 2/19/2010

S&P 500 Index January 2nd, 2003 * December 31st, 2012 * 23.5% Gain! A little over 2% gain a year for the last 10 years! Myth #5 Let’s fast forward to the last 10 years. We have a gain of less than 2% a year! CD’s would have returned more than that and with none of the sleepless nights! Stats from YahooFinance.com 1/7/2013

Myth #5 SUCCESS!! Here’s an article that highlights a study by Jack Marion and the Advantage Compendium which compares Index Annuities, CD’s, and an S&P 500 Index Fund over the 5 year period we’ve been referring to. (Just read the article) So is “just buying an index fund” the answer to investing for retirement? Well, it can be good for some of your money, but it’s certainly not the world beater it’s made out to be.

“Index Annuities are dangerous”
This advice is generally given by the same folks who brought you Myth’s 1-5!!! Myth #6 Read the slide

People who hold this position would have you believe that these assets are so horrible they are like great white sharks, they’ll jump out of the water and swallow you whole! They’re like great white sharks…they’ll jump out of the water and swallow you whole!

Index Annuities in the News…
Play video Index Annuities in the News…

David F. Babbel Professor of Insurance and Finance The Wharton School of Business University of Pennsylvania Myth #6 While I know there is a lot of negative press out there in the media about index annuities, I’m fairly confident that much of it is a result of a business war waged between the insurance industry and the securities industry over money. Which means that much of what is written has a bias toward one industry or another. So, it would be nice to have a comment from a reliable source that doesn’t have a “dog in the fight” so to speak. Professor David Babbel from the Wharton School of Business at the University of Pennsylvania is just such a voice. Quotes from Tom Cochrane’s Blog on AnnuityDigest.com 8/4/09 & 9/3/09

Myth #6 While I know there is a lot of negative press out there in the media about index annuities, I’m fairly confident that much of it is a result of a business war waged between the insurance industry and the securities industry over money. Which means that much of what is written has a bias toward one industry or another. So, it would be nice to have a comment from a reliable source that doesn’t have a “dog in the fight” so to speak. Professor David Babbel from the Wharton School of Business at the University of Pennsylvania is just such a voice. Quotes from Tom Cochrane’s Blog on AnnuityDigest.com 8/4/09 & 9/3/09

Digging down a little further, this information is taken from Professor David Babbel and Jack Marrion’s study on FIA returns since their inception and ending in 2010, is very instructive. Just compare the S&P returns against the ave. FIA returns and it will tell you that FIA’’s may be useful for some of your retirement dollars.

We live in perilous times!
So, how do you plan in such a time as this? On average: Every 3 years you have bear market. Every 8 years you have a significant bear market. If you hold your money for 17 years you won’t have a problem. This bear started in 2000. “The Anatomy of a Bear” Napier 2005 Read slide

A plan for your retirement assets from being subject to a repeat of history.
Read slide So lets look at a new model, we call it the ABC planning process. Where many of you are used to the old paradigm of pyramid investing. Let’s talk about the ABC planning process…

10% 60% 30% Three Green Money Rules: Rule #1: Protect Your Principal
Rule #2: Retain Your Gains Rule #3: Guarantee Your Income Three RED Money Rules: Rule #1: Must be tactical Rule #2: Must be liquid Rule #3: Must be long term 1% – 3% 3% – 7% +30% – -30% Taxable Liquid Bank CDs Savings Checking Tax-Deferred Moderately Liquid Taxable Liquid 401k IRA’s Stock/Bond Let’s divide assets into categories, A, B, and C, which represent three types of assets. Category A is your cash reserves. Cash assets potentially carry low returns, but the principal is guaranteed, and interest is compounded. According to the Federal Reserve the average six month CD rate from was 4.37% (20 years); was 3.32% (10 years); from was 3.99% (5 years).(1) It is interesting to note the average inflation rate from was 2.57%, which leaves the five year return averaging less than 1.5% before taxes. (2) These accounts are typically taxable and have optimum liquidity. However, they can also be set up in various tax-advantaged strategies such as traditional IRA’s, Roth IRA’s, etc. Most often these are bank held assets like CDs, savings accounts, and money markets. Financial advisors will often refer to this as short term money, or emergency funds. If your furnace breaks down, your roof leaks, or you have a medical emergency, category A is where you save for such an occurrence. If you are saving for an exciting vacation or a new car, this is where the money goes. It is also where you might want to keep a savings account to replace any income lost due to a prolonged illness, injury, or job loss. Commonly, financial advisors will tell you to have six months to a year of income put away for these instances. The illustration below shows Column A assets. Imagine them as “Yellow Money” accounts. The second category is Column B, the Green Money Column, and holds Protected Growth assets. They offer potentially moderate returns, are tax-deferred and offer partial withdrawals. The principal is protected, and previous years gains are retained as interest. The annual returns on these assets vary greatly. In my own practice I have seen them yield from 0% to as high as 16%. Some include bonuses from 3% to 7%. These assets are designed to be the middle ground between CDs and the market. I prefer using fixed indexed annuities in column B which link the interest credits to the performance of a market index, such as the S&P 500, S&P Midcap 400, DOW, Russell 2000, Euro Dow, etc. Column B money is set aside for a longer period, often 5-10 years. Annuities have strings attached for withdrawals, but can be an excellent source of income over a lifetime. In other words, don’t allocate money to the B column Generally assets in this column offer only partial withdrawals without a penalty, yet many include riders that waive surrender fees in the event of a nursing home stay or terminal illness. Indexed annuities are designed to function as the middle ground between lower interest rates of bank CDs and savings accounts, and the potential higher returns of risk oriented market money. This is the Fixed Principal Asset column, where the principal is protected. The ABC Model looks at Fixed Income Assets different than Wall Street does. Over the years, Wall Street has used a laddered portfolio of bonds to accomplish the goals of column B, yet a bond can lose value. From 1999 to 2009, if you were holding Lehman Brothers, Bear Stearns, ENRON, or World Com bonds, you might have thought you were safe, but found out just how much you could lose in a bond. If you are holding a California bond right now you might be a little insecure. That is why we use Fixed Principal Assets in column B rather than Fixed Income Assets. Column C represents our Red Risk Growth assets which move up or down with the market. Investors usually chase higher returns over time, though these assets can gain or lose 30% in a year or even more. The S&P 500 lost 38% in 2008, but the average annual return from was over 25%. (4) The market “giveth” and the market “taketh” away, there are no protections or limits. This money is invested in securities like stocks, bonds, mutual funds, variable annuities, options, REITs, and the like. The principal isn’t protected and last year’s gain may be lost in a downturn of the market. While these accounts are associated with a longer time horizon they are usually more liquid due to the “sellable” nature of securities, unless they are in a variable annuity which offers partial withdrawals. The majority of the assets found in column C are in retirement accounts such as 401(k)’s, 403(b)’s, IRA’s and variable annuities. Column C monies can also be found in the form of non-qualified (after-tax) brokerage accounts, mutual funds, stocks, or bonds, held by an individual, jointly, or even in trust. You can be your own manager or hire a professional investment adviser to manage this part for you. Let’s paint these investments Red for Risk. Sometimes it’s confusing as to which assets belong in which column. Column B has Three Green Money Rules which are: Protect your principal, retain your gains, and guarantee your income. If an asset can’t do those three things it doesn’t belong in the ABC Model’s Column B. Bonds don’t follow those rules so they must go in the next Column C. Therefore, a Fixed Indexed Annuity is probably an ideal asset for column B. 10% 60% 30%

What is your client’s greatest priority?
What is your client willing to give up? Gains? Liquidity? Protection? Cash Protective Growth Risk Growth Potentially higher returns Taxable or tax-deferred Offer partial withdrawals or liquid Potentially lower returns Taxable or tax-deferred Liquid Potentially moderate returns Tax-deferred Offer partial withdrawals Now let’s take a glance at what you gain and lose in each column. There is a “Risk-Reward” for each column, which means, you stand to gain or lose something by placing assets in each scenario. If your main goal in placing money in column A is good liquidity, you will probably have to put up with low interest rates. So, you would be capturing liquidity and losing some potential gains. If you want the protection of Column B, then you will have to consider a longer-term mindset, putting up with 10% liquidity each year. If what you want by placing money in Column C is higher potential gains, you will have to give up protection of those assets. Said differently, in Column A you give up GAINS to get more LIQUIDITY. In column B you give up some LIQUIDITY to acquire PROTECTION from risk, and in Column C you give up POTECTION for higher potential GAINS, as illustrated. Liquidity Protection Gains Gains Liquidity Protection

Explain FIA’s by Using a Simple Four Year Graph
15%+ 10%+ 5% 10% 5% 0% 5% cap This four year graph shows a simple, base-model chassis of an index annuity. Let’s say that the market goes up 10% in the first year. The annuity company will cap your earnings in some manner, so let’s say the cap is 5%. Now, if the market went down the next year 30%, how much would you lose? Zero! So, would you be upset if the market went down 30% an you got zero? Of course not. Zero is your hero. In fact the 5% stays in the account unless you pull money out. In the third year, if the market went up 5% and the cap was still 5%, the company would give you 5% compounded on top of the first year’s earnings. In the fourth year, if the market went up a whopping 15%, and the cap was still at 5%, you would throw in another 5%. Now you are up more than 15% because of compounding while the market isn’t even back to where it started in year one. Sounds too good to be true doesn’t it. So, let’s take a look at some negative aspects of the annuity. Once you deposit money in an annuity you will have limited liquidity, usually 10% a year of the account value, after the first year. The length of term can be anywhere from 6 to 16 years. You can choose a ladder of maturities that never go over 10 years or even less if you’d like. That’s why you develop liquidity in Columns A and C of the ABC Model. You need to find out about caps and other riders that can limit or enhance your earning power, which is something we discuss on an individual basis. Year One Year Two Year Three Year Four 5% -30% 15% Items to Consider: ___Surrender Duration ___Liquidity Options ___Caps ___Income Riders ___Crediting Methods ___Other

What if you simply can’t decide on percentages?
Let’s use the example of Sleepless Steve. Finally, like some of my clients, you might not have a clue how much money you want in each column and need a little guidance. It might be helpful to picture money as being either GREEN or RED; GREEN for Safe and RED for Risk. GREEN Safe money is money not exposed to risk in the market. RED Risk money is just that, money in the market. It might also help to picture my friend Steve the Sleepless Investor. He’s a 65 year old retired salesman with $600,000 of investible assets. Steve’s advisor suggests an often used formula called the Rule of 100 to help him determine how much he wants in Columns A, B, and C.

RULE OF 100 100 65 Investor’s Age 35% Percent of Red Risk Assets
Very simply he used the formula below of 100 minus his age, to determine how much money he wants in Green protected accounts and Red risk accounts. Steve decides to put 65% in the first two columns. Mr. Sleepless first determines he wants in 10 % or $60,000 in Column A for emergency fund, plus he’s planning a “restful” vacation in Seattle. Next, he puts the balance of the green money portion from the Rule of 100 which is 55% or $330,000 in a laddered portfolio of indexed annuities in Column B. Steve has 35% or $210,000 left to be placed in Column C’s Red Risk assets. He chooses a professional money manager who manages a conservative portfolio of funds. Steve is finally able to find peace with his assets. Now he’s on vacation, asleep in Seattle.

Now it is time to figure out how you would allocate your assets in the ABC Model. All you will need to do is ask yourself, “What percent of my total assets do I want in each column?” We will determine in the following chapters what specific assets to use, but for now try to use percentages in each column that “feels right” to you. There is no right or wrong answers. It is up to you the investor to look at the guidelines for each column and decide. So, what percent of your investable assets would you like in each column? Go ahead and take a shot at it. Start with column (A) and ask yourself how much emergency money or liquidity you need. In other words, don’t worry much about return but concentrate on liquidity. How much money do you need available immediately. How much money would you need in the next six months to live on if your current income went away? You can express it in a percentage or a specific dollar amount. Your number will be personal to you. Second, you could ask yourself how much money you want at risk in the market and what type of market risk you want. Do you want Stock-type risk or Bond-type risk? As a conservative investor you probably don’t want options or aggressive risk oriented assets. Keep it simple here. Decide how much money you want at risk, and then decide what type of risk. The more conservative you are, the more you will gravitate toward bond-type risk. The more moderate you are, you will probably have a higher percentage in this column and most of it will be in stock related assets such as mutual funds, ETF’s, or managed accounts. Again, just ask how much money you’re willing to expose to losses. If you can’t stand the thought of losing a penny, your answer to this question is “0”! Go ahead and take a stab at it. Got your number? Let’s move on. Once you have the percentage you want in Columns A and C simply add them together and subtract from 100 to get your B Column percent. It is that easy. You now have percentages in each column and can make adjustments. For instance, if you feel you have too much at risk simply put more in Columns A or B. Or if you feel you have too much tied up in Column B and don’t want any more risk, then simply add more to Column A. Play with the numbers until you think you have what you want.

What if a bear market happens again? 2003 through 2012
Let’s take a look at how the ABC’s plays out over a few decades. The illustration above shows the S&P 500 returns for the years 2003 through 2012 on the left. The investible assets are $500,000. This example shows a typical investor who has about 10% in cash earning an average of 3% and 90% allocated to the market represented by the S&P We use the broad market index to approximate what investing in the market in general was like over that period of time. Certainly an investor could have been in more or less risk than illustrated here. Yet, the illustration shows in general terms how the market performed from Notice, there are no monies allocated to Column B, which are Index Annuities. The chart shows at the end of the ten year period this investor would have gained over $290,000. So it looks like a good decade in the market, but for that one glitch in 2008, a 35% loss. Next slide

$4,810 Using the same $500,000 over the identical ten years, let’s allocate 60% to laddered maturities in indexed annuities. Using the same caps and interest rate in the previous illustration, the ABCs gain a little over $5,000 more in a pretty average decade in the market. Let’s take a look at a couple of Bear market decades, remembering that you need to plan for 30 years in retirement. Next slide

The illustration above shows the S&P 500 returns for the years 1969 through 1978 on the left. The investible assets are $500,000. This example uses the same criteria for caps in the index annuities, but uses the 7% average CD rate for the decade. Wouldn’t you love that again! We use the broad market index to approximate what investing in the market in general was like over that period of time.. The chart shows at the end of the ten year period this investor would have gained a little over $17,000. Look at all the red years in that decade! 5 out of 10 years were negative! So, let’s take a look at the ABC allotment.

$126,219 The ABC allotment of 10/60/30 grows to over $143,000, which is a $126,219 difference! That’s with 5 out 10 years negative! Very positive toward the ABC bear market strategy for retirement. Now let’s take a look at a really nasty decade. One we’re all familiar with. Next slide.

The illustration above shows the S&P 500 returns for the years 2000 through 2009 on the left. The investible assets are $500,000. This example shows a typical investor who has about 10% in cash earning an average of 3% and 90% allocated to the market represented by the S&P We use the broad market index to approximate what investing in the market in general was like over that period of time. Certainly an investor could have been in more or less risk than illustrated here. Yet, the illustration shows in general terms how the market performed from Notice, there are no monies allocated to Column B, which are Index Annuities. The chart shows at the end of the ten year period this investor would have lost close to $100,000. I don’t know about you, but a 20% loss in the market is devastating when it comes to retirement! Imagine if you were 52 years old in 2000 and planning to retire when most people retire at age 62. Would you do what many have had to do, which is work another 3-5 years in hopes of recovering those assets needed to retire? And what if it happens again? What if the next ten years aren’t any better than this decade? Can you afford to lose another 20% or possibly more? Can you continue to push off your retirement indefinitely? When I show this graph to clients they tell me, “Yep, that’s about what happened to us.” Yet, the same clients will surprisingly stay in this broken down Wall Street model attempting to recover with a hope and a prayer. There has to be a better way, and I believe there is. Next slide.

$190,448 Using the 10/60/30 ABC split, this person gains $108,000 instead of losing over $80,000! Now that’s a strategy that works for retirement years. IT does so because it obeys Warren Buffet’s first rule of investing, “Never lose any money.” BTW, that happens to be rules number 2 and 3 also. And it has to be true, especially for retirees or those heading into retirement. Simply putting some of your money in the green money column protects you from those down years and now with the tremendous guaranteed income payouts the green money column is even more a must for retirees. We don’t want you to get totally out of the red, or growth money assets, but it’s obvious that the green money column is perfect for conservative clients looking for alternatives to Wall Street’s roller coaster rides.

relationships with client-partners.
What are we here for? We are looking for a few High-Trust, Long-Term relationships with client-partners. In the end, here’s what we are looking for, a few high-trust, long-term relationships with client-partners. Here’s what I mean my client-partner. First, I want to say that as a planner, I hate asking for referrals. It is uncomfortable for me and for my clients. I think its imposing on them. Advisors have used the same tired old tactics to ask for referrals forever. It is distasteful. I just do not believe in it. Something I do believe in is a partnership between the client and advisor. The advisors role is to create, implement, and adjust the financial plan tailored to the needs of the client. The advisor is partnering with the client to see them succeed in their retirement. Partnership is a two way street by definition. The role of this client partnership is very important. The role of the Client-Partner is to talk with others about the experience of working with the advisor and invite them to meet the advisor at a client event, workshop, or at an individual conference. As you are out in the community with your friends, family, and acquaintances the subject of finances comes up. All you need to do is say, “you might want to speak with my advisor Joe If they say they already have an advisor, drop the subject. Yet, if they ask you who your advisor is, tell them about the “experience” of working with him. Then simply invite them to meet with you and your advisor for lunch (the advisor will pay), or invite them to the next client event or workshop. This will enable your friend to meet your advisor in a casual setting to see if your advisor is the “kind of person” they might want to work with. You can always call your advisor after speaking with your friend and get permission to have them call your friend. The advisor can take it from there. The relationship of an advisor and client-partner can be a long and prosperous one for both parties. Bringing your friends who have expressed a financial need to meet your advisor is a major compliment. Finding an advisor you trust, like, and is competent makes it all the more enjoyable.

None of this made sense to you or you are simply not interested.
So, What Now? None of this made sense to you or you are simply not interested. You are intrigued by the ABC’s and would like a complimentary ABC Strategy Session. You are intrigued and would like to be put on our & mailing list. So, how might you respond to this evening. Read slide.

Thanks again for visiting us today!
THANK YOU Thanks them for the evening and wish them well.

Wall street is broken Making Money or Making Mistakes

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Wall street is broken Making Money or Making Mistakes

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