SAILER FINANCIAL

WE HAVE MOVED! Our new Address is:

340 Seven Springs Way, suite 710 Brentwood, TN 37027

In this issue

Do you know your Risk Profile?

Bitcoin

*Keep an eye out for our treasurechest on any page for helpful jewelsof information.

CLIENT CHRONICLES:

WHERE ARE THEY

NOW? We catch up with

Amy Chubbs Founder of Sailer Financial

News on our move, 2018 outlook, and more…

“It takes as much

energy to WISH as

it does to PLAN”- Eleanor Roosevelt

INSIDE THIS ISSUE:

3 Captains Quarters A review of 2017 at Sailer Financial.

5 Act of graceQuarterly volunteer projects, annual philanthropy and a candy cane twist for your holidays that we hope is as joyous to you as cookies.

6 Cover Story- Risk ProfileTo understand our risk profile, we must understand both of its components.

8 client chronicles: where are theynow? We catch up with the founder of Sailer Financial, Amy Chubbs to find out “where is she now?”

10 helms view:I think I have heard of bitcoin, cryptocurrency, and block chain, but why should I care?

Securities offered through Securities Service Network, Inc., Member FINRA/SIPC. Fee based advisory services offered through Sailer Financial, LLC, a Registered Investment Advisor. If a recommendation is included in the above email, please contact me for additional investment information supporting the recommendation.

CAPTAIN’S QUARTERS By: Jeremy Hutzel

DEAR CLIENTS AND FRIENDS,

It’s been a great year for the team at Sailer Financial. Our extended office family has grown by two. On September 2nd, Pamela Talley and her husband Gabe welcomed their first child into the world! They have a beautiful daughter, Caroline. Pamela is back in the office three days a week, so if you have an opportunity to congratulate her, I’m sure she can share some photos!

And Aubrie and I had a second son, Hawkins Patrick, on June 29th. He’s almost two years shy of his older brother, Holden, and already watches his every move. We are incredibly blessed with our two little guys and very grateful for their health!

Earlier this year we were also recognized by the Nashville Business Journal as one of the TOP 25 LOCAL FINANCIAL PLANNING FIRMS, as ranked by assets under local management. That is 15 straight years of receiving this recognition! Thank you for your support in maintaining this achievement. As our city has grown, the list is increasingly dominated by national and regional companies. We are very proud to remain one of the few locally owned and operated companies on the list.

2017 has also been a very tumultuous – and sometimes vitriolic - year for politics and social issues. It’s human nature that this constant barrage of divisiveness triggers an emotional response. More and more this year, we have been called upon to address our own emotional responses and assist our clients with the same.

Most prominently, we have experienced fear that the market rally is going to end in dramatic fashion, greed to chase the returns in the latest ‘hot’ sector (for example, see Andy Michael’s article on the meteoric rise of Bitcoin), and anger and frustration around our feelings of helplessness in the face of politicized change (major tax reform is on the horizon, or you may have experienced the recent health insurance changes and premium hikes in Tennessee’s marketplace). If you are experiencing the same feelings, believe me, you are not alone! We have seen it first-hand, we have experienced it at times ourselves, and we empathize with the uncertainty it can cause. And yet, this can also serve as a positive reminder that regardless of our personal beliefs we are all ultimately driven and connected by the same human emotions.

Of course, in our line of work we need to remove the emotions and provide objectivity. And frankly, the backdrop for 2017 was a ‘Goldilocks’ scenario for global markets – strong economic growth, low inflation, and accommodative central banks. It’s led to a phenomenal market rally this year. And the rally has truly been global, led by emerging markets. Of course many people remain skeptical. To borrow from the legendary investor John Templeton “bull markets climb a wall of worry and die on euphoria”. I understand the concern. Return is inherently reward for taking on risk, and there has been very little downside risk this year. Personally, and while it may seem counter-intuitive, I look forward to the arrival of volatility, since it would represent normalization. As you know, our portfolio construction process is built around a custom financial plan that can weather periods of volatility. And as Andy pointed out in our last quarterly commentary, that volatility produces substantial return over time.

As we enter 2018, we look forward to discussing your questions, concerns, and thoughts on the future. We are very grateful for the opportunity to serve you and your families through financial stewardship.

To a prosperous 2018,

Jeremy Hutzel, CFA, CFP®

ACT OF Grace:

Our annual Second Harvest event was in December this year. Thank you to all our clients and friends that joined us. Second Harvest distributes food to 46 counties surrounding the Nashville area and 450 partner agencies that give food directly to those who need it.

“work is love

made visible” - Kahlil Gibran

Sailer Financial has created a culture of giving back. Once every quarter, Sailer Financial participates in a volunteer event. In conjunction with our annual Second Harvest event, in 2017, our crew enjoyed time planting trees in downtown Nashville for Cumberland River Compact, helping out on adoption day for the Nashville Humane Society (where one of us almost left with a dog of our own), and spent a day with Poverty and the Arts making coasters out of artwork created by homeless people that in turn are sold to provide a source of income for them. (You can get a first-hand look at some of the coasters when you visit our office)! Additionally, as Holiday gifts for clients, we decided to forego the standard goodies and send 5 girls from an impoverished nation to school for a year- in your honor! The lives of these girls, their families, communities, and their country will be changed for generations. It was our privilege to experience working with each of these organizations and we look forward to seeing what 2018 has in store. If you would like to learn more about any of these non-profits, you can visit their websites.

Heifer International https://www.heifer.org/

Nashville Humane Society http://nashvillehumane.org/

Poverty and the Arts Cumberland River Compact http://povertyandthearts.org/ https://www.cumberlandrivercompact.org/

RISK Profile By Jeremy Hutzel, CFA, CFP®

To know our risk profile, we must understand both its components

A key requirement for successful investing is to determine the appropriate level of risk for your portfolio. After all, we know that risk and potential return are positively correlated. Meaning, the greater your risk, the greater your potential return. (If that’s not the case, you’re doing it wrong!) But chase too much potential return and you end up in a portfolio that is too risky and you will either experience undue anxiety, or worse, liquidate at the nadir. At Sailer Financial, our goal is to develop for each client a portfolio that balances the appropriate amount of risk – i.e. a sustainable and tolerable volatility level – without taking too much, or too little, risk (thereby jeopardizingtheir financial future).

We accomplish this by breaking the risk profile into two separate components: risk tolerance and risk capacity.

Neither risk tolerance nor risk capacity is static. Measuring each produces a snapshot in time, and it’s often worthwhile to reassess.

Risk tolerance can change due to a number of factors. Most distinctly, measure an investor’s risk tolerance immediately after a bear market and the results will be far more conservative than measuring at the tail end a bull market rally. We experience a strong bias towards more recent events. We have also learned that risk tolerance can be influenced by a variety of external factors, including an investor’s feeling of security or confidence in their career, the political direction of their country, or even how things are going with their kids. As behavioral wealth managers, awareness of these tendencies is critical for appropriate portfolio construction. We prefer to measure risk tolerance on a stand-alone basis and reconcile it with individual risk capacity. One of the key benefits of the RiskAlyze tool we use is personalization to your portfolio and the actual dollars at risk. Many assessments of risk tolerance focus on percentage declines. Focusing on the dollars lost in a specific time period, typically six months, paints a more accurate picture. This method also better demonstrates an observed trend: risk tolerance typically declines as the portfolio grows in size. For example, an investor may feel comfortable with a $200,000 decline. In a $500,000 portfolio, that’s a 40% decline – which is very significant in a six-month window and indicates a high tolerance for risk. Ten years later the investor retakes the assessment and may be comfortable with a $300,000 decline. But her portfolio has grown to $1,500,000 and that decline represents 20% – indicating the investor’s tolerance for risk has reduced considerably. Certainly, this is not always the case. But the trend is very standard.

Similarly, risk capacity is not static. We all understand that our capacity for risk decreases as we age, primarily since don’t have as much time to continue contributing to our portfolio before beginning withdrawals. Yet risk capacity is best measured via a customized and comprehensive financial plan. A good financial plan must be continuously updated to account for your changing circumstances. And the best barometer of risk capacity within that plan is the level of discretionary spending.

For example, consider a couple who plans to spend $5,000 per month on their minimum acceptable lifestyle in retirement, but their portfolio creates $9,000 per month in after-tax distributions. Likely, they are still spending the extra $4,000 per month but they don’t need it year-over-year. They can ‘tighten-the-belt’ during lean times. This couple has more risk capacity than a second couple with a larger portfolio generating $12,000 per month in after-tax distributions but requiring $10,000 to cover their minimum acceptable lifestyle. This is not to say we all need to slash our lifestyles and spending! You have earned this money…use it! As you may know, a saying I am fond of is “if we all knew the day we were going to pass, we would bounce our last check.” But we can better understand risk capacity by segmenting expenses into categories.

At the simplest level, the minimum acceptable lifestyle can be paying the bills, groceries, and healthcare costs. But we often discover that the minimum acceptable lifestyle can include annual family vacations, shopping, philanthropy, upkeep on a second home, the golf club membership, etc. – whatever constitutes your minimum acceptable lifestyle.

Therefore, we like to introduce an additional expense category affectionately referred to as ‘the fun bucket’. The fun bucket could be more travel or philanthropy, financial assistance to the grandchildren, starting a new business venture in retirement, etc. Essentially, it is a stream of income you plan to spend, but like a faucet you can turn off the stream if needed (for example, during a prolonged market downturn) and still maintain your acceptable lifestyle. This approach dramatically increases risk capacity because it addresses one of the key hurdles of retirement planning, Sequence Return Risk (which I’ll cover in more detail in a subsequent article). Financial plans with this level of customization lead to a higher probability of success in our Monte Carlo analysis. The more granular we can get on expense segmentation, the higher the confidence interval. When working with a high-achieving client base, we typically observe a decline in risk tolerance as portfolios grow over time. Objectively, this makes a lot of sense: we tolerate a 25% decline on $1,000,000 a lot easier than a 25% decline on $4,000,000. However, by going through a detailed financial plan we can reconcile risk tolerance with risk capacity (depending on the client’s circumstances, risk capacity can actually increase as the portfolio grows while risk tolerance declines). A detailed financial plan uncovers the ‘why’ factor driving risk capacity and provides better results than simply averaging two scores. Through ongoing discussion and education, we arrive together at the optimal result.

Understanding the drivers of each risk component is very useful in navigating turbulent markets. Eventually, the bull market will experience a correction. During a period of volatility, recalling the financial plan and associated risk capacity is a useful reminder that the current downside is comfortably factored into the desired long-term outcome. Conversely, measuring risk tolerance throughout a market cycle can help suppress performance-chasing tendencies during boom times and protect us from taking more than our comfort level of risk. An important reminder as global markets reach new highs and exciting new asset classes grab headlines.

Client chronicles:

An open letter from Amy Chubbs, Founder of Sailer Financial, to update us on where she is, what she’s doing, and how she likes retirement.

Sometimes it’s hard for me to believe that I am now in my 60’s and retired! Like those of you that I worked with at Sailer Financial who have now transitioned into retirement, I’ve discovered that it has been one of the biggest life changes I’ve made. It’s a big corner to turn.

“Life in review” is one of the things I’ve found myself doing since retiring…taking time to learn from all the ups and downs this life has presented me with. In this process, I have gained an even greater sense of gratitude for having chosen a career in financial planning. I didn’t realize all those many years ago that it was going to give me the opportunity to spend a large part of my life developing deep and meaningful relationships with clients who opened their hearts and homes to me. And in the end, I would learn far more from all of you than I could ever give in return. By sharing your life choices and experiences, you taught me so much about what is important, and what’s not. As a result, all of you helped me sidestep some pitfalls and take heart when things were challenging. You also taught me the importance of celebrating victories, being unafraid to face the unknown, finding the courage to try new things, and cherishing my relationships with family and friends.

Speaking of family, Tim and I were given the incredible gift of having my daughter, Audrey, her husband Caleb, and our three beautiful grandchildren move just 10 minutes away from us a few years ago!

Hunter is almost 5, Addie just turned 3, and Charlotte is 1.

We could have never guessed how much joy Grandchildren would bring to our lives!

The unconditional love the Grandchildren have for us is one of life’s greatest gifts! Movie night at our house is a big hit! The kids come over to our house for popcorn, a movie, and a sleepover…in their own room, with bunk beds, which is such a treat!

I also mentioned “finding the courage to try new things.” Some of you know that Tim introduced me to scuba diving. While I initially had to overcome my fear of the ocean, sharks, and all kinds of scary sea stuff (smiling), I have now come to thoroughly enjoy our trips! Some of the highlights have been diving with sea lions off the coast of California, close encounters with beautiful large eagle rays in Cozumel, and diving the Blue Hole in Belize. Every year we take another wonderful dive adventure which has been so rewarding and eye opening for me! It’s a whole ‘nuther world in the deep blue ocean! Go figure, right?

Tim and I share a love of going on adventures, as you might guess! So, 2 years ago Tim set out to accomplish his lifelong dream to become a pilot! He is now not only a pilot, but he just passed the exams for his instrument rating. Go Tim! So we purchased a 4 seater Cessna and enjoy jumping in the plane to grab lunch in Southern California (very fun!) or longer overnight trips to go explore. Recently we flew up to Mendocino (on the Northern Coast), down to Carmel (just south of San Francisco), and back home again in Orange County. It was so much fun!

Finally, whether it is scuba diving, flying in the plane, or snowboarding (did I mention I learned how to snowboard?), I am fulfilling my love of film making with a GoPro! We are enjoying documenting our adventures, mostly for the admiring audience of our grandchildren! Haha! I also volunteer twice a year as the supervisor of video for a non-profit. We do live video productions for their conferences. It’s stretched me! (Continuing to be “stretched” is a good thing!)

So while I am still figuring out what this phase of life is about, I am also aware of how much I have to be grateful for. Especially for all of you who became more than just clients. Thank you for helping me grow the company. Thank you for entrusting your finances to me and now to Jeremy and the great team he has put together. And thank you for sharing your lives with me. It was an honor to get to work with you in such a trusted role. I hope each of you get a chance to count your blessings too in your own “life in Review.”

May you enjoy prosperity, wellness, and much joy in this New Year!

With heartfelt gratitude,

HELM’S VIEW By: Andy Michael

Bitcoin, Cryptocurrencies, & Block Chain technology perspectives.

What is worth more than the Coca-Cola Company, has no governing authority, and has more hits on Google than “Brad Pitt” “New York Yankees” and “Olympics” COMBINED? If you guessed Bitcoin, you are correct (though some political leaders might be a worthy second guess).

By now you have likely heard of the media’s new darling, Bitcoin, and its meteoric rise over the past few months. From December 31, 2016 through December 8, 2017, Bitcoin has rocketed from $963 to $16,047, which is an increase of 17-fold in less than 12 months! Bitcoin is so volatile that the prices mentioned here will be old news by the time you read this article. In the hyper-speed information era we live in today, we fear that answers and opinions are often formed on important topics like Bitcoin faster than good questions are even asked. Just as it takes time and discipline to develop a holistic financial plan, our goal is to equip you with preliminary knowledge and perspective. With that, we want to address three key questions: (1) What is Bitcoin? (2) What does Bitcoin mean to me? (3) Should I consider buying or investing in Bitcoin?

For readers who are interested in taking a deeper dive into the world of Bitcoin, cryptocurrencies, and blockchain technology, we have included at the bottom of the article links to information and resources we have found helpful. Nothing described in this article or in the reference material should be considered an endorsement for investment in Bitcoin, other cryptocurrencies, or blockchain technology.

What is Bitcoin?

Bitcoin is a scarce digital asset used as a medium of exchange to conduct e-commerce that is secured by a globally distributed, decentralized blockchain technology and has become the largest cryptocurrency in the world. Now if you are anything like me, you just read that sentence and immediately felt your eyes roll to

the back of your head! So instead, let’s use analogies to help unpack what all of this means. Bitcoin takes principles we are all familiar with and packages them into a new technology that could be a breakthrough innovation.

If you have ever purchased a song on iTunes, you own a digital asset. You own the song which has value, yet you cannot see or touch the song. Likewise, Bitcoin is a digital asset that a person or entity can own. Bitcoin can be used as a medium of exchange to complete transactions for goods and services, which gives it functionality and provides a valuable service to its users. The difference between your favorite iTunes song and Bitcoin is that Bitcoin is scarce. Unlike your song that can easily be copied all across the world an infinite number of times; there will only be a finite amount of Bitcoin created. This scarcity principle reminds me of my baseball card collecting days. Currently, the most valuable baseball card in the world is a 1909 Honus Wagner card valued at $2.8 million! How could an old, small piece of cardboard be worth so much? It’s because the card is scarce, and demand for a scarce asset creates value.

So how can a digital asset like Bitcoin be scarce? That’s where the blockchain technology comes into play. The records and ownership of Bitcoin are all captured on a permanent ledger database called a blockchain that is irrevocable and encrypted by a decentralized network. This means when Fred sends Tom 1 Bitcoin, the entire Bitcoin network confirms this transaction occurred and encrypts the transaction permanently onto the ledger. In exchange for performing the service of

securing the network, these encrpyters (Bitcoin miners) can be rewarded with Bitcoin and/or transaction fees. There will only be 21 million Bitcoins ever created, of which about 80% are in circulation today. Since the blockchain protects the uniqueness of each individual Bitcoin and transaction, it cannot be copied or duplicated, which thus creates the key component of scarcity to make the digital asset valuable.

While Bitcoin can be used as a medium of exchange, the price is so volatile that it does not make an effective currency as it trades today. Can you imagine if you had agreed to use Bitcoin as the currency to make your home mortgage payments? Your payment would feel 17 times more expensive today than it did to start the year!

What does Bitcoin mean to me?

For the majority of us, Bitcoin does not mean much today except exciting headlines about volatile price swings. We continue to use U.S. Dollars or other major foreign currencies as a medium of exchange for goods and services. Much like driverless cars, thinking about a future with blockchain technology and cryptocurrencies is exciting and the possibilities seem endless. Someday driverless cars may rule the road and Starbucks coffee may cost a fraction of a digital currency; however, today we still drive ourselves to Starbucks and pay for our coffee with cash or credit/debit card on a centralized payment system such as Visa or Mastercard. We expect the early innovation of Bitcoin to continue evolving as large institutions like governments, banks, regulators, and large businesses start to assess how to utilize blockchain technology. While we continue to watch this exciting cryptocurrency story unfold, we expect little change in daily life for most people any time soon.

Should I consider buying or investing in Bitcoin?

The value of an investment is the sum of all expected future cash flows discounted back to today. Real estate, private equity, publically traded stocks, and bonds all produce expected cash flows that can be discounted back to the present and assigned a current value. Other assets like gold, art, jewelry, and now Bitcoin do not produce any cash flows. Instead, investors purchase these assets today with the belief that someone will pay a higher price for the exact same asset in the future. While assets like gold have been considered a store of value for thousands of years, Bitcoin’s short history, price volatility, and uncertain future classify it as speculation rather than investment. For some, speculation can be a great source of

entertainment, such as betting on the latest technology or simply filling out a March Madness bracket each year. However, this should not be confused with sound investing for future benefit.

Not only must you consider the rationality in purchasing Bitcoin, you must also evaluate the actual safety of your hard earned money in this unregulated asset. When you enter the world of decentralized, unregulated Bitcoin, you leave behind the custody protections of FDIC insurance covering your bank accounts and SIPC insurance protecting your brokerage accounts. You are trading away U.S. Dollars, which are backed by the full faith and credit of the United States, in exchange for a digital asset that is only protected by the largely untested system on which it was developed. In addition, your Bitcoin assets are accessed through a unique Bitcoin key called a wallet that is assigned to you. While hacking the entire Bitcoin system may be near impossible, losing or having your Bitcoin wallet hacked or stolen could not only theoretically happen, but has already happened to some Bitcoin holders. In summary, for anyone to participate in an unregulated, unproven, and unprecedented asset class, they should only purchase the amount they would be willing to lose in full. This is the inherent leap-of-faith in speculation.

While the pace of innovation like Bitcoin and blockchain technology continues to explode, we will constantly monitor and evaluate how these changes impact our clients and the success of their financial goals.

Additional resources and information:

1) The original Bitcoin white paper:Bitcoin: a Peer-to-Peer Electronic Cash System bySatoshi Nakamotohttps://bitcoin.org/bitcoin.pdf2) 3-hour documentary Podcast on blockchain andcryptocurrencies:Hash Power – A Documentary on Blockchains & Crypotcurrencies by Patrick O’Shaughnessy, CFA http://investorfieldguide.com/hashpower/3) The Intelligent Investor: Bitcoin, Ignorance, and Youby Jason Zweighttps://blogs.wsj.com/moneybeat/2017/12/01/bitcoin-ignorance-and-you/4) A Letter to Jamie Dimon by Adam Ludwin, CEO ofChainhttps://blog.chain.com/a-letter-to-jamie-dimon-de89d417cb80