Gold’s momentum?

pg. 7

Setting client expectations • pg. 3

9 reasons investors lack discipline • pg. 4

June 26, 2014 | Volume 2 | Issue 12 First magazine focused on active investment management

Closing sales with company principals

Daniel Namey

AIMING HIGHpg. 8

An investor should consider the investment objectives, risks, charges, and expenses of The Gold Bullion Strategy Fund before investing. This and other information can be found in the Fund’s prospectus, which can be obtained by calling 1-855-650-7453. The prospectus should be read carefully prior to investing.

There is no guarantee that The Gold Bullion Strategy Fund will achieve its investment objectives.

Flexible Plan Investments, Ltd., serves as investment sub-advisor to The Gold Bullion Strategy Fund, distributed by Ceros Financial Services Inc. (member FINRA). Ceros Financial Services, Inc. and Flexible Plan Investments, Ltd. are not affiliated entities.

Advisors Preferred, LLC is the Fund’s investment adviser. Advisors Preferred, LLC is a wholly-owned subsidiary of Ceros Financial Services, Inc.

The principal risks of investing in The Gold Bullion Strategy Fund are Risk of the Sub-advisor’s Investment Strategy. Risks of Aggressive Investment Techniques, High Portfolio Turnover, Risk of Investing in Derivatives, Risks of Investing in ETFs, Risks of Investing in Other Investment Companies, Leverage Risk, Concentration Risk Gold Risk, Wholly-owned Corporation Risk, Risk of Non-Diversification and Interest Rate Risk. “Gold Risk” includes volatility, price fluctuations over short periods, risks associated with global monetary, economic, social and political conditions and developments, currency devaluation and revaluation and restrictions, and trading and transactional restrictions.

For more information on the risks of The Gold Bullion Strategy Fund, including a description of each risk, please refer to the prospectus.

The Gold Bullion Strategy Fund (QGLDX) offers your

investors access to gold bullion in a mutual fund format.

Launched in 2013, the fund is designed to:

• Diversify a portfolio with a strategic allocation to gold• Offer a purer play on gold• Provide a more cost-effective way to own gold with

Form 1099 reporting

To learn more, please download Flexible Plan Investments’white paper, The Role of Gold in Investment Portfolios atwww.goldbullionstrategyfund.com/white-paper

A fresh take on anenduring alternative

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Fund gross estimated annual operating expenses = 1.55%

POLLS TIPS & TOOLS

performance and the maximum drawdown that similar portfolios have historically experienced. The key is emphasizing performance over time and against their own expected benchmarks, not the market’s one-year returns.”

he concept of active in-vestment management

can be a new one for most clients.I start with a brief history of the

stock market, explaining the cycli-cal nature of markets and the fre-quency with which bull, bear, and sideways markets tend to occur.

In this context, one of the most important points to explain about active management is that it should be judged over a full market cycle. This might mean a time period of 5-7 years, and would preferably in-clude both a bull and bear market.

Why is that? Active manage-ment is designed to manage risk and volatility. As such, it may underperform during strong bull markets, but it may minimize losses during down markets. I show clients a series of exhibits, including the expected range of

Setting client expectations around active management

Carla Zevnik-SeufzerGreenfield, WI

President, ClearPath Financial Partners

T“

Carla Zevnik-Seufzer is a registered representative and investment advisor of The Strategic Financial Alliance. Securities and advisory services offered through SFA, member FINRA/SIPC, which is unaffiliated with ClearPath Financial Partners.

There is no guarantee that active management will outperform a buy-and-hold approach to investing. Investing involves risk and potential. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be considered opinion.

VOTE

Spending habits

Investment experience

Tax situation

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Last week’s results

VIEWER RESPONSE

Which variable helps determine the cost basis of an investment?

-Results in next issue

This week’s poll

Which client information is most helpful in determining risk tolerance?

Stock splits. Stock splits will usually have the greatest direct impact on the per share cost basis. However, the cost basis of an investment must also be adjusted to account for any stock dividends as well as the com-missions paid on the purchases. The cost basis determines the amount of capital gain or capital loss when the security is sold. A lower cost basis would result in a higher capital gain.

14%28%

44%

14%

Stock splitsCommissions paidDividends paid in the pastNone of the above

June 26, 2014 | proactiveadvisormagazine.com 3

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indomitable

9 reasons most investors lack the discipline to succeed

Steven M. Sears, Senior Editor with Barron’s, takes a hard look at investor behavior—both typical shortcomings and the unique qualities leading to positive results—in his 2012 book, “The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails.”

investor

(not so)the

By David Wismer

proactiveadvisormagazine.com | June 26, 20144

So, what are the specific traits, behav-iors, or attitudes that help Sears define the challenges facing most investors?

Not understanding risk

Sears quotes Arthur Levitt, former chairman of the SEC: “Too many people don’t know how to determine saving and investment objectives or their tolerance for risk … they don’t know how to choose an investment, or an investment profes-sional, or where to turn for help.”

Greed

“The great crowd that comes to Wall Street to make money mostly ‘greeds in and panics out’ … Rising stock prices are seductive and it is easy to believe they will continue to rise.”

Fear

“Fear causes rational people to ignore the financial facts that shape the prices of stocks … people sell based on emotional reaction to the news, exacerbated by the crowd’s behavior … What is the person-ality of the most successful investors, ac-cording to neurologist and money manag-er William Bernstein? They aren’t affected by other people’s feelings.”

Misuse of information & news

“You must learn to use the news and not let the news use you.” Sears describes a modern-day information hierarchy as it pertains to the investment world. He says,

“The challenge for investors is focusing on known unknowns and preparing for unknown unknowns (Black Swans) … People think they are making smart ratio-nal decisions in response to information, rarely realizing they are chasers of smoke.”

Not preparing for market chaos

“Volatility is globalization’s side effect … to avoid getting crushed you must make friends with volatility … ‘blackswanning’ investment portfolios has become a cot-tage industry on Wall Street, adopted by the upper echelon of the financial market … Modern Portfolio Theory (buy-and-hold diversification) is no longer adequate all by itself.”

continue on pg. 11

Lack of due diligence

“The discipline of questioning how your money is managed applies to all areas of your financial life … a healthy skepti-cism will serve you well.” Sears covers a wide variety of issues under this umbrella, sparing few sides of the financial services industry from scrutiny. He does not make sweeping judgments, however, essentially concluding that the prime consideration of any transaction or relationship with the industry ought to be, “Does it consistently add value?”

“We must think how we approach investing— and even acknowledge we never understood it in the first place—before it is too late.”

Sears brings a rich background of achievement to his task, as both a reporter and executive with two major exchanges. Sears has reported for Dow Jones and The Wall Street Journal, covering most major modern financial events, including the Asian Contagion, the bursting of the Internet Bubble, the Credit Crisis, and Europe’s sovereign debt crisis. He also was part of exchange executive teams that modernized the U.S. options market and introduced electronic trading.

Sears’ overall message carries great import for advisors, asset managers, and the wealth management and financial services industry as a whole. The book’s introduction sums up:

“The financial crisis of 2007 was a seri-ous wake up call. Most people realize they may never lead lives of financial ease, but now many live in fear of never even retir-ing. We must think how we approach in-vesting—and even acknowledge we never understood it in the first place—before it is too late.”

Independent research has shown that now in the middle of 2014, an unusual phenomenon has occurred within a broad swatch of the retail investing public. There is currently a barbell distribution between those investors suffering from a euphoric “short-term market memory loss” and those who remain paralyzed with “loss aversion.” Neither state of mind will be conducive to prospering over the long haul in the equity markets—under-scoring the importance of Sears’ thesis.

While not necessarily known as a pro-ponent of active investment management, Sears highlights many concepts central to the core principles of that discipline. His first chapter, for example, states:

“Bad investors think of ways to make money. Good investors think of ways to not lose money. Those 17 words are the most important words any investor can know. Learn the meaning of those words, and you have a chance of real success in the stock market.”

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Can gold maintain momentum?

old futures surged over 3% last week (through Friday, 6/20) and are on track for a gain of nearly 6% in

the month of June if current prices hold.According to CNNMoney, investors fled

the gold market last year as they chased better returns in riskier assets. Gold prices fell nearly 30% in 2013 for the biggest decline since 1981 and the first year-over-year drop since 2000.

Several factors are being cited for the recent uptick in gold prices:• Geopolitical risk emanating from the situations in Iraq and Ukraine. “Gold and other so-called ‘hard’ assets often find favor in times of political and economic uncertainty,” writes CNNMoney.

• FOMC Chair Janet Yellen’s statements last week indicating that low interest rates may be sustained longer than previously anticipated.

• The European Central Bank’s recent commitment to further accommodative monetary policy.

• Consumer Price Index readings this month that were above expectations.

G

Source: Bespoke Investment Group

• Several technical factors that may have led to last week’s reversal of some short positions, including gold’s break above its 50-day moving average.

• Indications that some major funds have increased bullish positions on gold.The jury is mixed on whether gold can

maintain its recent momentum, with naysayers citing an eventual pullback in global tensions, the inevitability of higher

U.S. interest rates over time, and slowing physical demand for gold in China.

“Gold may just continue to grind here,” says Rob Kurzatkowski, senior commodities analyst at optionsXpress. “There are too many factors underpinning the market for gold to collapse, but there’s not enough to spark the metal higher either—especially with continued equity market strength.”

GOLD FRONT-MONTH FUTURE: LAST 6 MONTHS

7June 26, 2014 | proactiveadvisormagazine.com

TOPPING THE CHARTS

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Daniel NameyLife Underwriter Training Council Fellow (LUTCF)

Member of Leadership Circle for United Way of Northeast Florida

Served on Board of Directors for the YMCA

Enjoys hunting, fishing, running, and surfing

Supports his wife Kim in her training for Ironmans and marathons

Closing sales with company principals

Daniel Namey

AIMINGHIGH

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8

Proactive Advisor Magazine: Daniel, what types of clients are you trying to cultivate? Do you have a specific target?

Daniel Namey: Here, in north Florida, we get a lot of clients who are retirees, or are near retirement, referred to us—people who need help with distribution plans, growth, and protection of their accumulated assets. They are entering a new phase of life and have a lot of important questions about retirement—will their assets last? Should they be engaged in equity markets? Can they grow assets without having to worry about the next market crash?

We have also always had a strong focus on small business owners of companies with anywhere from 25-400 employees—for their company 401(k) needs as well as for wealth management for owners and key executives.

Tell me about that sales process.

After the initial contact with a business owner, we work on developing a relationship that can lead to handling their company’s 401(k) needs. Our strong relationships with third-party administrators, insurance compa-nies, and asset managers are a key part of build-ing the trust needed to earn the business.

Follow-through is a must. You need to do what you say you will do with respect to ser-vicing the company’s qualified plan. Then you are on solid ground to ask for the business of

personal wealth management for the owner and executives. A holistic financial plan—insurance needs, tax reduction strategies, estate planning, asset management—with a single point-of-contact is efficient and effective for the business owner and for my practice.

Is the process similar for other clients?

Yes. First thing is to establish who we are and start building trust with the client. We look at the client’s entire financial history, including life insurance, long-term care, retirement plan-ning, 401(k)s, and legacy planning. We really drill down on putting together a complete plan, including asset management.

How do you view the asset management piece?

Essentially we divide it into buckets—short-term, medium-term and longer-term money, each with its own specific goals. We generally will break it into different areas and outsource investment management according to the needs and what is appropriate.

Talk about the role of active management.

We transitioned to a greater use of active management back in 2009. We were in front of our clients a lot during the financial crisis—dealing with a variety of stressful situations.

continue on pg. 10

Daniel Namey, President at Namey Financial Group, Inc., has over twenty years of experience advising clients on wealth planning and retire-ment issues, with a particular expertise working with owners of closely held corporations.

I made the decision to transition to outside money managers who have strong track records and the ability to stay on top of their strategies at all times.

The bottom line is we have access to many different money managers. We evaluate the best match for our clients to help fit their goals and objectives. And they, then, actively manage the account based on their quantitative systems.

They have the flexibility to move money to better performing sectors, go to cash, or allocate more to alternative investments—all depending on the strategies we select for the client’s portfolio. But the key factor is that they are implementing their strategies at a high level and with a very disciplined process. I only uti-lize carefully selected money managers for my clients. Those managers employ exhaustive due diligence to select investment strategies.

How do you explain this active management approach to clients?

Our philosophy is risk management, and we look to mitigate portfolio drawdowns like those seen in the last two market crashes. As part of this we will explain that there is a good chance our strategies may not produce gains as high as buy-and-hold in a very bullish market. But hopefully, at the end of the day, these active di-versified strategies will produce more favorable average returns over a full market cycle.

June 26, 2014 | proactiveadvisormagazine.com 9

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A complete list of all of our recommendations over the last 12 months and Brochure Form ADV Part 2A are available upon request.

proprietary or otherwise, that are oriented to make changes based on market conditions. It is non-emotional and disciplined. That is how I want my personal money managed.

I like to graphically demonstrate to clients that if they have a loss of 50% in their portfolio, it takes far more than a 50% increase to get back to even—it takes about 100%. The idea is to keep projected returns in a much tighter range of performance, with less volatility, than just by following the markets. This is where active man-agement comes into play and this is the message I am giving to clients. This does make sense, especially for those with a lot of concerns about retirement and the safety of their principal.

What examples can you share of what has happened to a prospective client that did not use active management?

There are several, but in one particular case this gentleman had run his own business for many years, fairly successfully. He had money tied up in his business as well as typical portfo-lio asset allocations.

When 2008 hit, he had a double whammy of weaker business results and a portfolio almost cut in half. At the time, he had kids in college as well as other cash flow needs. He had to put

off selling his business and retiring, and instead took out loans on his business and his building.

Would active management of his portfolio have been the answer to all of his problems? No, but it certainly could have helped put him in a better position to deal with a difficult financial situation.

Instead of having to liquidate investments at fire-sale prices, active management is designed to manage the risk which could have mitigated his portfolio losses. While drawing upon assets before retirement is never a great solution, in this case it was necessary. With the right financial planning upfront, we hope that for most clients it never reaches that type of situation.

Building on that story, what would your message be to a new client about active management?

I typically ask a prospective client, “Wouldn’t you rather have your portfolio man-aged actively, with someone actually at the con-trols watching the markets each and every day?” Active managers have systems in place,

continued from pg. 9

Securities and investment advisory services offered through H. Beck, Inc., member FINRA/SIPC and an SEC-registered invest-ment advisor. H. Beck, Inc. and Namey Financial Group, Inc. are not affiliated. Investments will fluctuate and when redeemed may be worth more or less than when originally invested.

10 proactiveadvisormagazine.com | June 26, 2014

Read a fund’s prospectus and summary prospectus (if available) carefully before investing. It contains the fund’s investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com. There can be no assurance that any investment product will achieve its investment objective(s). There are risks associated with investing, including the entire loss of principal invested. Investing involves market risk. The investment return and principal amount of any investment product will fluctuate with changes in market conditions. Shares of the funds are not deposits of, or guaranteed or endorsed by, any financial institution; are not insured by the Federal Deposit Insurance Corporation (FDIC), the federal reserve board, or any other agency.

The referenced funds are distributed by Guggenheim Funds Distributors, LLC. Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), which include Security Investors, LLC, (“SI”), the Investment advisor to the referenced funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim and SI. x0515 #12524

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Misunderstanding market cycles & patterns

Sears reviews how seasonal, secular, and economic patterns can influence the stock market but also be grossly misused. “Patterns influence stock trading like mag-nets attract slivers of metal—except when they don’t … they can be a prism to better focus the market but not a foolproof trad-ing system … the least knowledgeable people feel the most empowered by the (pattern) information and act because things are supposed to happen.”

Irrational behavior

Sears reviews the growing impor-tance of behavioral finance theory, from “anchoring” to the effects of the “casino culture.” His bottom line? “Biases tend to emerge when making complex decisions

with uncertain outcomes, like investing … major psychological pitfalls hurt most investors most of the time.”

Financial literacy, or lack thereof

Sears says that despite massive techno-logical and financial innovations, certain things will likely never change:

• boom-and-bust cycle of the markets

• regulatory, government, and finan-cial institutions that are either ill-equipped or unwilling to protect individual investors

• Wall Street environment that is com-plicated, hard for most to understand, and merciless in separating investors from their money

His proposed solutions are extensive changes and initiatives to address inves-tors’ financial literacy, to safeguard their interests, and “close the chasm” between Main Street and Wall Street.

But acknowledging that this may never happen in full, Sears encourages investors to adopt the tools of the most sophisticated market participants, either through their own efforts or through trusted advisors. People who win the most, says Sears, are the most disci-plined and fully understand that “suc-cessful investing is always a matter of controlling risk.”

continued from pg. 5

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“Bad investors think of

ways to make money.

Good investors think of

ways to not lose money.”

11June 26, 2014 | proactiveadvisormagazine.com

The opinions and forecasts expressed herein are those of the author and may not actually come to pass. Any opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. The analysis and information in this edition and on our website is for informational purposes only. No part of the material presented in this edition or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any portfolio constitutes a solicitation to purchase or sell securities or any investment program.

EditorDavid Wismer

Marketing CoordinatorElizabeth Whitley

Contributing WriterDavid Wismer

Graphic DesignerRoger Ackerman

Contributing PhotographerRyan Ketterman

June 26, 2014Volume 2 | Issue 12

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 investment approaches. Additionally, Proactive Advisor Magazine offers an up-close look at a topic with current relevance to the field of active management.

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Proactive Advisor MagazineCopyright 2014 © Dynamic Performance Publishing, Inc. All rights reserved. Reproduction of printed form, whole or in part, without permission is prohibited.

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Top 5 practice management mistakes advisors make

From structuring your practice to client service “must-haves,” here are five critical mistakes that should be avoided.

Do large swings in equity values change risk tolerance?Data from January 2007 to May 2012 was examined to test whether fluctuations in equity returns influence average risk tolerance scores over time.

Trust in wealth management industry spiked in 2014

The trust of high-net-worth individuals (HNWI) in wealth managers climbed 13.5 percentage points to 74.7% in Q1 2014, according to a

report from Capgemini and RBC Wealth Management.

Fighting the bond bearsNot everyone is swayed by the bond bears who say interest rates

can only go in one direction—up.

The virtuous cycle of impact investing no longer requires sacrificeMany investors want the option of putting their money to work to change the world as well as generate competitive returns.

12

L NKS WEEK

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