Jerry Ganz • Packerland Brokerage Services - Can lower returns lead to more money in retirement? The impact of sequencing and volatility on portfolio value by David Witkin - Jump in Swiss franc triggers short-term losses and long-term uncertainty - Crude oil’s message for the stock market by Tom McClellan - Growing a referral network (Trish Beine, The Strategic Financial Alliance)

1. January 22, 2015 | Volume 5 | Issue 3
Active investment management’s weekly magazine
Swiss franc surprises
Can lower returns
lead to a better
retirement?
Growing a referral network
Crude oil’s message for
the stock market
The impact of sequencing
and volatility
Jerry Ganz
There is only one
reason to invest
And it’s not to beat the S&P

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3. Advisor perspectives on active investment management
- A custodian that makes your life as an RIA simpler.
Odds of success
“I use active money management strategies to help
improve the probabilities for success when I manage
a client’s portfolio. It was probably around 2010 when
I fully realized that there had to be a better way to
manage clients’ assets … especially clients that are
retired and can’t afford to, or choose not to, see their
assets drop by 30, 40, or even 50%.There are just
some wonderful active management stories out there
that are tested, both in terms of actual performance in
using back-testing methodologies and in a forward look
to helping my clients increase their odds of success.”
LOUD & CLEAR
Paul Saganey • Worcester, MA
Integrated Financial Partners Inc. • Lincoln Financial Advisors Corp.
3January 22, 2015 | proactiveadvisormagazine.com
LOUD & CLEAR

4. The impact of sequencing and volatility on portfolio value
By Dave witkin
$
eturns, risk, pricing models,
optimal portfolio construc-
tion—there are so many
facets of effective investing
and portfolio management.
As busy as most of us are, who has time to
really dig in and question conventional
wisdom? So when well-known publications
have said over the years that active manage-
ment results in lower returns than passive
management, I used to take that information
at face value.
But like many things in life, the deeper
you dig into the “passive management wins”
numbers, the less satisfying you find the con-
ventional “wisdom.” Two important problems
with the common arguments concern risk and
withdrawals. It turns out some “passive wins”
news stories don’t take risk or withdrawals
into account. But how much do those factors
really matter? In fact, their impact is so strong
that leaving them out of the discussion may
lead to financially destructive conclusions.
Let’s start with a bit more information com-
paring active and passive strategies. Dr. Antti
Ilmanen, a Ph.D. graduate of the University
of Chicago and currently Managing Director
at AQR Capital Management LLP, wrote
a book in 2011 titled, “Expected Returns:
Paula (Passive management) Ann (Active management)
Starting
capital
Return
rate Return Withdrawal WithdrawalEquity
Starting
capital
Return
rate Return
8.5% Arithmetic average 7.0% Arithmetic average
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
$1,000,000 -8% -$80,000 -$50,000 $870,000 $1,000,000 -8% -$80,000 -$50,000
$870,000 -28% -$243,600 -$50,000 $576,400 $870,000 -4% -$34,800 -$50,000
$576,400 9% $51,876 -$50,000 $578,276 $785,200 7% $54,964 -$50,000
$578,276 36% $208,179 -$50,000 $736,455 $790,164 16% $126,426 -$50,000
$736,455 14% $103,104 -$50,000 $789,559 $866,590 13% $112,657 -$50,000
$789,559 -15% $-118,434 -$50,000 $621,125 $929,247 -5% -$46,462 -$50,000
$621,125 28% $173,915 -$50,000 $745,040 $832,785 18% $149,901 -$50,000
$745,040 21% $156,458 -$50,000 $851,499 $932,686 16% $149,230 -$50,000
$851,499 10% $85,150 -$50,000 $886,649 $1,031,916 8% $82,553 -$50,000
$886,649 18% $159,597 -$50,000 $996,245 $1,064,469 9% $95,802 -$50,000
Figure 2: Comparative hypothetical returns including $50,000 annual withdrawals
Paula (Passive management) Ann (Active management)
Starting
capital
Return
rate Return Equity
Starting
capital
Return
rate Return Equity
8.5% Arithmetic average 7.0% Arithmetic average
Figure 1: Comparative hypothetical returns without withdrawals
$1,000,000Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
-8% -$80,000 $920,000 $1,000,000 -8% -$80,000 $920,000
$920,000 -28% -$257,600 $662,400 $920,000 -4% -$36,800 $883,200
$662,400 9% $59,616 $722,016 $883,200 7% $61,824 $945,024
$722,016 36% $259,926 $981,942 $945,024 16% $151,204 $1,096,228
$981,942 14% $137,472 $1,119,414 $1,096,228 13% $142,510 $1,238,737
$1,119,414 -15% -$167,912 $951,502 $1,238,737 -5% -$61,937 $1,176,801
$951,502 28% $266,420 $1,217,922 $1,176,801 18% $211,824 $1,388,625
$1,217,922 21% $255,764 $1,473,686 $1,388,625 16% $222,180 $1,610,805
$1,473,686 10% $147,369 $1,621,054 $1,610,805 8% $128,864 $1,739,669
$1,621,054 18% $291,790 $1,912,844 $1,739,669 9% $156,570 $1,896,239
An Investor’s Guide to Harvesting Market
Rewards.” After examining a number of busi-
ness and academic sources, Dr. Ilmanen found
momentum and high book-to-market ratio
(referred to as “value” for simplicity)—both
active management strategies—significantly
outperformed stocks, bonds, and almost all
other asset classes on a risk-adjusted basis.
I can already hear some of you saying, “But
my clients only care about absolute returns.”
Of course they do, and who can blame them?
But how would they feel if we showed them
how lower average returns with less volatility
could result in significantly more money in
their pockets?
Let’s walk through an example. Say you
have two clients, Paula and Ann. Paula has
heard through the news that active manage-
ment is a “bad deal” for investors and she only
wants to use passive investment strategies in
her portfolio. Ann, on the other hand, is more
open to active strategies and believes that in
the hands of a skilled advisor, they can pro-
vide significant benefits.
Dr. Ilmanen and others have shown that
active strategies using momentum and value
R
proactiveadvisormagazine.com | January 22, 20154

5. $
$
C|
continue on pg. 11
Paula (Passive management) Ann (Active management)
Starting
capital
Return
rate Return Withdrawal WithdrawalEquity
Starting
capital
Return
rate Return Equity
8.5% Arithmetic average 7.0% Arithmetic average
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
$870,000
$785,200
$790,164
$866,590
$929,247
$832,785
$932,686
$1,031,916
$1,064,469
$1,110,271
$1,000,000 -8% -$80,000 -$50,000 $870,000 $1,000,000 -8% -$80,000 -$50,000
$870,000 -28% -$243,600 -$50,000 $576,400 $870,000 -4% -$34,800 -$50,000
$576,400 9% $51,876 -$50,000 $578,276 $785,200 7% $54,964 -$50,000
$578,276 36% $208,179 -$50,000 $736,455 $790,164 16% $126,426 -$50,000
$736,455 14% $103,104 -$50,000 $789,559 $866,590 13% $112,657 -$50,000
$789,559 -15% $-118,434 -$50,000 $621,125 $929,247 -5% -$46,462 -$50,000
$621,125 28% $173,915 -$50,000 $745,040 $832,785 18% $149,901 -$50,000
$745,040 21% $156,458 -$50,000 $851,499 $932,686 16% $149,230 -$50,000
$851,499 10% $85,150 -$50,000 $886,649 $1,031,916 8% $82,553 -$50,000
$886,649 18% $159,597 -$50,000 $996,245 $1,064,469 9% $95,802 -$50,000
Figure 2: Comparative hypothetical returns including $50,000 annual withdrawals
Paula (Passive management) Ann (Active management)
Starting
capital
Return
rate Return Equity
Starting
capital
Return
rate Return Equity
8.5% Arithmetic average 7.0% Arithmetic average
Figure 1: Comparative hypothetical returns without withdrawals
$1,000,000Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
-8% -$80,000 $920,000 $1,000,000 -8% -$80,000 $920,000
$920,000 -28% -$257,600 $662,400 $920,000 -4% -$36,800 $883,200
$662,400 9% $59,616 $722,016 $883,200 7% $61,824 $945,024
$722,016 36% $259,926 $981,942 $945,024 16% $151,204 $1,096,228
$981,942 14% $137,472 $1,119,414 $1,096,228 13% $142,510 $1,238,737
$1,119,414 -15% -$167,912 $951,502 $1,238,737 -5% -$61,937 $1,176,801
$951,502 28% $266,420 $1,217,922 $1,176,801 18% $211,824 $1,388,625
$1,217,922 21% $255,764 $1,473,686 $1,388,625 16% $222,180 $1,610,805
$1,473,686 10% $147,369 $1,621,054 $1,610,805 8% $128,864 $1,739,669
$1,621,054 18% $291,790 $1,912,844 $1,739,669 9% $156,570 $1,896,239
can outperform passive on both an absolute
and risk-adjusted basis. But for the sake of
argument, let’s say that when we consider fees,
passive management outperforms an active
portfolio during the hypothetical ten-year
period we will use in our example. More spe-
cifically, the arithmetic average return is 8.5%
for the hypothetical passive portfolio and
7.0% for the hypothetical active portfolio.
We use the arithmetic average return because
it is often used by proponents of passive man-
agement strategies as “proof” that a hands-off
approach outperforms. As shown in Figure 1,
the final value of Paula’s passive portfolio is
slightly higher than Ann’s actively managed
portfolio, although the difference—only
about $16,000—is probably smaller than you
might expect.
So even though the hypothetical active
portfolio had 1.5% lower average annual
returns, the passive and active portfolios
have almost the same overall performance
over ten years. But I forgot to mention some-
thing: both Paula and Ann need to withdraw
$50,000 each year from their respective ac-
counts. Since Paula’s passive portfolio had the
slightly higher absolute returns in Figure 1,
you would expect her portfolio to outperform
Ann’s despite the withdrawals, right? Wrong.
Let’s take a look at the table including the
withdrawals.
The annual percent returns for both port-
folios are the same as noted earlier. Despite
the fact that Paula’s passive portfolio outper-
formed Ann’s active portfolio in seven out of
ten years, Ann’s active portfolio ended up in
better shape. As shown in Figure 2, the active
portfolio finishes the ten years with an 11%
higher final equity balance.
January 22, 2015 | proactiveadvisormagazine.com 5

7. 1.25
1.15
1.05
0.95
0.85
Dec 22 Dec 29 Jan 5 Jan 12 Jan 19
Jump in Swiss franc triggers short-term losses
and long-term uncertainty
ast week’s announcement by the Swiss
National Bank that the Swiss currency
could float more freely took most
market participants by surprise—to
put it mildly. Within the past month,
statements by senior officials had convinced
markets that the franc’s 1.20 peg to the euro
would remain intact for the foreseeable future.
Within minutes of the news (1/16) that the
franc’s exchange rate would be untethered, the
currency surged 25-30% against the euro and
18% against the US Dollar. Several currency
trading firms operating on considerable leverage
(or allowing clients to do so) and inadequate
hedging were threatened with violation of
regulatory capital rules. Some sought and
received cash infusions from bigger players,
a few went insolvent, and others remain at
considerable risk. Major global banks, such as
Citigroup and Deutsche, reportedly suffered
losses over $100 million, and many hedge
funds also took significant hits.
But the long-term impact for Switzerland,
the European Union, Russia, and trading
partners around the world will take some time
to shake out. The immediate impact for Swiss
companies, who will now be selling exports at
roughly 10-25% immediately higher prices,
was reflected in steep losses for the Swiss blue-
chip SMI benchmark. It was off 15% in the two
trading days following the announcement and
ended the week with its biggest weekly losses
L
Source: XE.com
since the financial crisis of 2008, down 13%.
Interestingly, in dollar terms, the iShares MSCI
Switzerland Capped ETF (EWL) gained 3.2%
for the week, reflecting the appreciation of the
franc.
Barron’s noted that the prior fixing of the
franc versus the euro, meant to keep export
prices stable, gave the currency a unique global
status. Their analysis said, “The rest of the world
‘used’ the franc, exploiting it by borrowing the
currency at ultralow interest rates, certain in the
promise that its exchange rate versus the euro
would be cemented.” Now, those counting on
that assumption are facing roughly 20% higher
carrying costs for a wide variety of financial
transactions.
SWISS FRANC (CHF) EXCHANGE RATE PER 1 EURO (EUR)
7January 22, 2015 | proactiveadvisormagazine.com
TOPPING THE CHARTS

8. Jerry Ganz
There is
only one
reason
to invest
And it’s not to beat the S&P
By David Wismer
Photography by Mike Roemer
Generating investment returns that
will meet a client’s own plan-based
needs is the goal. Risk management
is the first step.
8

9. Jerry Ganz, CFP
President, Jerry Ganz Financial Planning
Green Bay, WI
Broker-Dealer
Packerland Brokerage Services
Licenses
6, 7, 63, 65
Estimated AUM
$25M
Author, “Plan-based Investing”
Proactive Advisor Magazine: Jerry, how
do you differentiate your firm?
Jerry Ganz: On the basis of two core con-
cepts. The first, and I have actually written a
book about it, is the idea of plan-based invest-
ing. The second is our firm’s use of third-party,
active investment managers. I really know of no
other financial advisor in the Green Bay area
who combines those two operating principles
the way that we do.
Let’s drill down into both of those
concepts. What do you mean by
plan-based investing?
When I sit down for the first time with a
prospective client, after introducing our capa-
bilities and hearing about their needs from a
10,000-foot level, I ask them to share their fi-
nancial plan with me. Most people do not have
one, or may put forward an investment policy
statement and think that represents a plan.
The truth of the
matter is they might
have developed rela-
tionships with several
financial profession-
als—their insurance
agent, their banker, their
broker—but no one has
ever really developed a
comprehensive financial
plan outlining their
actionable goals and objectives. When I talk
them through the basics, our planning process
is usually a real eye-opener. They quickly come
to understand that it is virtually impossible to
have a sound investment strategy without first
having a sound financial plan. Goals or dreams
never put in writing never became real goals—a
total financial blueprint is really the key to
investment success.
We also believe in staying on the cutting
edge of technology. All of my clients have their
own website that they may log into that has
daily updates of all of their investment accounts:
the accounts I manage, their 401(k) plans, their
bank accounts, etc. We continually update their
other assets, such as real estate, and their cash
flow statement, so they can have instant access
to their total financial picture. It is a true wealth
management system.
Where do third-party active managers fit
into this equation?
Once we have established the plan, we
need to help our clients execute it. Like many
of my peers, I was brought up in the industry
on Modern Portfolio Theory and pretty stan-
dard asset allocation models. Several years ago
I was at a large conference where I was first
introduced to active investment management.
It sounded exactly like what I was looking for
in terms of providing more risk management
for client accounts and a high level of sophis-
ticated, quantitative asset management. I freely
admit that while I am a student of the markets
and love investing, I make no claim to being an
expert asset manager. Third-party managers are
the experts with dedicated staff and resources
that I could never duplicate. Each year I move
more and more client money in the direction of
third-party managers.
I started slowly with the process and initially
we used a manager with a fairly straightfor-
ward rotational strategy that could actively
move money into the better-performing asset
classes or go to cash. It was a variation of trend
following in an asset-class sense and rotated
to whatever was performing best at the time,
whether equities or fixed
income, domestic or
international. I liked to
show clients what I joked
was the “periodic chart”
of all major asset classes,
and explained that our
goal was to stay on the
top half of the page
with their investments.
Obviously, it was a lot
more complicated than that, but that was the
basic idea.
The somewhat revolutionary idea of active
investment management has come a long way
since then and the array of different managers
and various strategies is quite impressive. It is
my job, working through my broker-dealer, to
identify the managers and appropriate strategic
approach that works with a client’s specific
plan-based financial goals.
How do you determine the strategies that
may work for a specific client?
I sound like a broken record, but it is really
based on their planning needs, time horizon,
and risk profile.
I use one manager strictly for a tactical
strategy that can go long the market, short,
or into cash, with very low beta and is fairly
conservative. I use other managers with more
growth-oriented strategies that are more suited
to clients with longer time frames and who
are further from retirement. The idea is that
a younger client will be able to give those
strategies more time to come back from draw-
downs and revert to the mean.
One thing people may not realize is that
active managers also provide strategies that are
more market- or index-based and can really take
advantage of bullish trends like we have seen
over the past few years. The difference is that,
as opposed to buy-and-hold strategies, there is
a risk management component also built into
these, which is very different from what was
available 20 years ago. Active strategies can work
well for a variety of different clients, different
risk profiles, and different investment time hori-
zons. Risk management is really the very first
requirement of all of the strategies I use.
continue on pg. 10
It is virtually
impossible to have a
sound investment
strategy without first
having a sound
financial plan.
January 22, 2015 | proactiveadvisormagazine.com 9

10. Show your clients a
friendlier
bear market
800-347-3539 | flexibleplan.com
Past performance does not guarantee future results.
The opportunity for profits
carries with it the possibility of losses.
800-347-3539 | flexibleplan.com
A complete list of all of our recommendations over the last 12 months and Brochure Form ADV Part 2A are available upon request.
L E A R N M O R E
Securities and advisory services offered through Packerland Brokerage Services Inc., an unaffiliated entity. Member FINRA & SIPC.
What is your process for introducing this to
clients?
I talk with clients about the performance of
the S&P 500, but in a very different way. Most
people are familiar with the Index and certainly
that is what the media and markets are focused
on. The core educational component is in look-
ing at the volatility of the S&P over the past 20
years or so. I explain to clients that if they want
the very top years of the S&P performance, they
also have to be willing to accept drawdowns
of up to 50%, based on actual history. When
we look at that in terms of their real portfolio
dollars, it does not sit well with most people.
Second, I explain that the S&P 500 is really
irrelevant to the return performance they need
to fulfill their investment goals. They require
returns at a manageable risk level that will meet
their own personal plan-based requirements,
not “market returns,” whatever they may
happen to be in any given year. One of our
third-party managers has an excellent software
program that can look graphically at a probable
range of expected returns, showing the prob-
abilities of highs and lows within that range.
Clients can clearly see where their returns will
likely fall over time.
I also spend a fair amount of time dis-
cussing financial disaster preparedness. The
world is a very different place today. We have
potentially severe world economic problems
on a fairly constant basis. We examine how
a broad-based recession or other event might
impact a client’s life, income, debt servicing,
or retirement. And there does not have to be
a true calamity to create risk—there are plenty
of more common hidden risks, from govern-
ment actions to inflation risks to health risks.
We do not know all of the answers for
sure, but we can prepare for the possibilities
by using risk management in all elements of a
financial and investment plan.
continued from pg. 9
Jerry Ganz
10 proactiveadvisormagazine.com | January 22, 2015

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What is going on, you ask? There are two issues at work: (1) the
sequence of returns and (2) the impact of volatility.
You may be aware that the sequence of returns makes a difference
in terms of the ending portfolio value. In other words, a negative
return in year 1 has a very different impact than a negative return
in year 10. But in this case, the general sequences of returns—when
positive versus negative years occur in the two portfolios—are
almost identical.
continued from pg. 5
continue on pg. 13
Lower returns
How the world’s wealthiest
families invest
Diversification, balance, and risk management are
critical in a world where it is hard to find attractive
short-term valuations.
Top 5 global issues to watch
Schwab says the investment environment suggests
another year of gains for global stocks but there
are still critical issues to watch closely.
Is this finally the end of falling
U.S. interest rates?
The divergence of real 10-year Treasury yields
from the University of Michigan Consumer
Sentiment Index is usually an indicator that the
interest rate environment is primed for change.
L NKS WEEK
Active strategies using
momentum and value can
outperform passive on
both an absolute and
risk-adjusted basis.
The larger issue here—and a dynamic often overlooked by stud-
ies and news articles proclaiming passive management “outperfor-
mance”—is the volatility of returns. An appropriately constructed
active management portfolio can be significantly less volatile than
a passive portfolio. Returning to Dr. Ilmanen, he shows that from
1990 to 2009, U.S. equities had an average return of 8.5%, but the
volatility was 15.5%, nearly double the return. In contrast, value
investing had a 7.6% average return with a 7.6% annual volatility,
January 22, 2015 | proactiveadvisormagazine.com 11

12. Crude oil’s message for the stock market
Tom McClellan is the editor of The McClellan Market Report newsletter and its companion, Daily Edition. He started that publication in 1995 with his father Sherman
McClellan, the co-creator of the McClellan Oscillator, and Tom still has the privilege of working with his father. Tom is a 1982 graduate of West Point, and served 11 years
as an Army helicopter pilot before moving to his current career. Tom was named by Timer Digest as the #1 Long Term Stock Market Timer for both 2011 and 2012.
Crude oil (Log Scale) set forward 10 years
with 60-month MA
he big question that stock market
analysts are asking themselves lately
is what it means to have crude oil
prices drop below $50. The more
proper question is, “What does the drop in
crude oil prices now mean for the stock market
10 years from now?”
One of the the most fascinating intermarket
relationships ever uncovered is the one between
stock prices and crude oil prices. The core
principle which kept so many from seeing it
involves the delayed reaction. The movements
of stock prices tend to echo the movements
of crude oil prices, albeit with a 10-year lag.
I first uncovered this when I gathered the
data for a long-term view of crude oil prices.
I realized when looking at that chart that I was
seeing a facsimile of the pattern in the DJIA—
but the two did not align properly. I found
that by shifting the oil price plot forward by
10 years, I got a much better alignment of the
price patterns.
This was a big revelation! The automobile
boom in the 1910s led to a big oil price spike
toward a 1920 top, which led to the overly
speculative Texas oil boom of the 1920s. That
March 1920 oil price top had its echo just
under 10 years later with the September 1929
stock market top. The flat period for oil prices
of the 1950s and 1960s was replicated by seeing
stock prices move sideways from 1966-92.
There are multiple other points of similarity in
their histories.
The relationship got into a little bit of trouble
when the Arab Oil Embargo put a thumb on
the scale starting in 1973. And the Iranian
revolution in 1979 perturbed it further. But
once the oil market returned to a normal
fluctuating balance of supply and demand in
the mid-1980s, the relationship trued itself.
T
A November 1998 bottom for crude oil prices
had its echo with the March 2009 stock market
bottom. And the rebound in oil prices from that
1998 low to the speculative commodity bubble
top is now having its own replication in the
form of stock prices undergoing a fairly linear
uptrend lasting longer than most bull markets.
Some credit the Fed and QE, but crude oil
knew about it even before the financial crisis
and subsequent policy response.
What this means for money managers
One of the most helpful insights for trading
is to know whether one is in a trending market
or a corrective trading-range market. The
message from oil prices ten years ago is that we
should see a continued equity uptrend until
we get to the inflection point that is the echo
of the speculative commodity bubble top in
2008, which should be due to arrive in 2018.
The difficult point to ascertain is how much
credence to give to that 2008 event, as there
have been those prior exogenous forces acting
on the oil market in the past which did not see
a precise echo in the stock market.
I do not know if we will see a precise replica
of the 2008-09 oil price decline in 2018, but
the period from 2018-2025 should be one of
those periods when market timers rule. The big
drop in oil prices during late 2014 should have
its echo in stock prices during 2024. That will
be an ugly time for stock market participants,
but we have some time to prepare for that drop
as well. Right now, we have three more years
of an uptrend to harvest, which is the more
important task to focus on.
Proactive Advisor Magazine presents weekly commentary provided by well-known market analysts, financial authors, investment newsletter publishers, and economists. The opinions expressed
each week represent their personal perspectives and not necessarily those of the magazine.
proactiveadvisormagazine.com | January 22, 201512
HOW I SEE IT

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continued from pg. 11
and momentum had a 13.1% average return
and an 11.2% annual volatility—in other
words, volatility was significantly lower in the
active strategies.
It is also worth noting that since both
clients needed to make withdrawals from their
accounts each year, most advisors oriented to
Finally, while there are always exceptions, cer-
tain active management strategies with proven
track records, like value and momentum, could
significantly outperform a passively managed
portfolio. While we have used fairly conser-
vative rates of return in comparing the two
hypothetical portfolios, Dr. Ilmanen’s study
suggests that using the right active strategies
can outperform passive strategies on both an
absolute and risk-adjusted basis.
Lower returns
Dave Witkin is a partner in StatisTrade, a trading strategy modeling and
consulting company. Mr.Witkin has traded stocks, commodities, and options
over the last 20 years, and in 2011 was featured in Dr. Van Tharp’s book,
“Trading Beyond the Matrix”.
How would clients feel if we showed them how
lower average returns with less volatility could
result in significantly more money in their pockets?
passive management would likely put a larger
proportion of the client’s assets into bonds
versus equities. This means the 8.5% annual
returns for passive management over the ten-
year period shown are surely on the optimistic
side—the larger allocation to bonds would
reduce the annual returns, making the active
management strategy look even more advanta-
geous in comparison.
So what is important to take away from this
analysis? First, looking only at average annual
returns in a vacuum can be misleading. The vol-
atility of returns can make a major difference.
Second, when you also consider withdrawals,
the reduced volatility of some active manage-
ment strategies has the potential to make a far
larger impact on portfolio value than losing
some small portion of returns due to fees.
13January 22, 2015 | proactiveadvisormagazine.com
Return Volatility Sharpe Ratio
U.S. Equities 8.5% 15.5% 0.34
Momentum 13.1% 11.2% 0.88
Value 7.6% 7.6% 0.51
Comparing twenty years of returns and volatility, 1990-2009

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Editor
David Wismer
Associate Editor
Elizabeth Whitley
Contributing Writers
Tom McClellan
David Wismer
Dave Witkin
Graphic Designer
Travis Bramble
Contributing Photographer
Mike Roemer
January 22, 2015
Volume 5 | Issue 3
Proactive Advisor Magazine is
dedicated to promoting and educating
on active investment management.
Distribution reaches a wide audience
of financial professionals who advise
clients on investments and portfolio
management. Each issue features
an experienced investment advisor
who offers insights on active money
management, client service, and
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Proactive Advisor Magazine offers
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Growing a referral network
Trish Beine
Greenfield, WI
The Strategic Financial Alliance
ClearPath Financial Partners
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I also think it is very important to
be networking within the organizations
that are important to me on a personal
level. This includes business organiza-
tions, my college alumni group, volun-
teer groups, the YMCA, and so forth. I
am an avid cyclist and have made several
valuable contacts through biking.
The point is not to present oneself
always in a sales mode, but to acknowl-
edge that we offer a highly professional
service that the overwhelming majority
of our clients find very valuable. It is
important to gracefully let people know
that you are in the advisory business and
available for any sort of discussion if that
is of interest to them.”
ne of the wonderful
advantages of working
with our firm is the em-
phasis on marketing. If
I am not talking to people and meeting
with them on a consistent basis, then
I’m not growing my business. We have a
saying at our firm of ‘3 + 3.’ This simply
is a mental reminder that a person sit-
ting within three seats of you virtually
anywhere could possibly use your help
with financial matters—and that it is
important to reach out to a new con-
tact within three days. Those simple
thoughts are a constant prompt that we
are almost always in a position to build
our networks.
Our office then helps us take this
networking to the next level by focus-
ing on education. We hold seminars on
average once a month and invite indi-
vidual questions and personal follow-up
visits. The third-party asset managers
we have access to have come in to share
updates on the economy and their strat-
egies. We have had a special seminar on
what is important to women in investing
and retirement. We have covered Social
Security planning and how to work
within governmental programs.
The firm will advertise these as well
as promote to clients and their guests. It
is far from a hard-sell presentation, but
rather it is very effective in reinforcing
current client relationships, getting our
name out there, and generating new
prospects.
O“
14
TIPS & TOOLS