MAKING THE MATCH

Oil surge impact • pg. 7

Serving special needs • pg. 3

The problem with pie charts • pg. 4

June 19, 2014 | Volume 2 | Issue 11 First magazine focused on active investment management

CARLA ZEVNIK-SEUFZER IS

PG. 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

www.goldbull ionstrategyfund.com

Fund gross estimated annual operating expenses = 1.55%

Committing time and pro-fessional resources to the special needs community is a passion of mine and allows me to give something back—to pay things forward. I can combine my pro-fessional expertise with a real service in helping people who face tremendous challenges.”

n my advisory practice, I work with individuals

from all sorts of backgrounds, income levels, and varying de-grees of financial sophistication. No matter who I am working with, developing a bond of trust is very important.

My wife and I are parents of two special needs children. I have become very involved in the special needs community and in counseling parents, and often their children.

I have done a lot of speaking to special needs groups, addressing their specific financial planning needs. I broadly talk about the three major components they need to be considering: the emotional challenges, the financial pressures, and the importance of sound legal advice for a variety of issues, such as custody and estate planning. Different insurance needs also are important for these families.

Serving special needs

Russell LuceOak Lawn, IL

Foresters Equity Services, Inc.President, Planning Legacies Financial Group

I“

Russell Luce is an investment advisor representative of and offers securities and advisory services through Foresters Equity Services, Inc., a registered investment advisor, member FINRA, SIPC. Planning Legacies Financial Group is located at 9233 Sproat Avenue, Oak Lawn, IL, 60453.

Last week’s results

Have bond prices surprised you this year?

VOTE

-Answer in next issue

This week’s poll

Which variable helps determine the cost basis of an investment?

Stock splits

Commissions paid

Dividends paid in the past

None of the above

According to Morningstar, it was a shock to most strategists when 10-year Treasury yields fell from 3.04% at year-end 2013 to 2.53% recently, with most of the decline happening in January. Coming into 2014, interest rates were expected to rise slowly but steadily. Many had the same reasons: accelerating global economic growth, a strengthening U.S. job market, and continued Federal Reserve tapering. Accordingly, most investors positioned themselves for the damage that rising interest rates would inflict upon their bond portfolios. Read more >

June 19, 2014 | proactiveadvisormagazine.com 3

POLLSText only

TIPS & TOOLS

with

pie charts

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Relying on thirty-year-old asset allocation models makes little sense in today’s investment environment.

By Greg Gann

The

proactiveadvisormagazine.com | June 19, 20144

actical,” “strategic,” “active,” “passive”: these are all somewhat nebulous terms that financial advisors use expecting the gen-eral investing population to appreciate their significance. How can an investor possibly ascertain which approach is best when

there is so much long-standing debate among investment professionals? Like any good debate, this topic can be influenced by personal,

deep-rooted biases. If one believes that rules-based and/or mathemati-cal formulas will not outperform the market, and if one has developed and marketed a business plan in accordance with this belief, then those biases will frame his or her arguments.

But there is another side to the story.“Lies, damned lies, and statistics” is an adage popularized by Mark

Twain. The gist is that all of us can creatively set parameters for a statistical analysis to support a position. This creative licensure is ever prevalent in the world of investing. By way of example, passive inves-tors who seek to replicate an index can boast that their returns in the last five years have outpaced the performance of many active managers. However, if the period were modified to include 2008 performance results, different conclusions could be reached.

The framework for this discussion is whether allocating “strategi-cally” to a classic “pie chart” model—which is by definition some-what “passive”—is better than investing through a more “tactical” and “active” methodology.

AN AGING ASSET ALLOCATION MODEL

The approach that has dominated the investment world for at least a generation is a diversified pie chart asset allocation model. Based on the answers to basic risk tolerance questions, investable dollars are allo-cated in defined percentages typically into only two general asset class-es—stocks and bonds—and then further segregated into subcategories of these two asset classes. For equities, this usually means classifying the stock universe along broad parameters such as large and small caps, U.S. and foreign, growth and value, etc.

When these models were originally introduced, the world looked and acted very differently than today. For one thing, the world pre-Internet was much less connected. Moreover, emerging markets were far more distinct from the developed world. There was much less cross-border trade between continents, and this resulted in greater negative correlation between markets and pieces of the “pie” on the asset allocation model.

A passive asset allocation model can work quite well in a bull market. Investor ignorance can be blissful. However, when markets recede or mean revert, especially in an Internet-linked world, asset classes that were negatively correlated can become positively cor-related, and the diversification of the pie chart allocator actually becomes “diworsification.”

MULTIPLE ISSUES WITH PASSIVE ALLOCATION

While “life” is a noun, “live” is a verb. Life is active and it evolves. Technological advancements evidence this evolution. Yet, today’s pie chart allocator doesn’t look much different than the model used prior to the Internet’s mass adaptation and the leaps in computing technologies.

For investors with a time horizon of de-cades before liquidity is needed, the pie chart approach might work just fine. However, this is an unlikely scenario. The current econom-ic and geo-political environments need to be taken into consideration when determining when and how to invest. By definition, a static pie chart ignores current conditions.

It may be considered “strategic,” but it is fairly passive. Even if an investor’s time horizon is lengthy before needing liquidity, most investors significantly underperform benchmarks because the pain from loss is too powerful of an emotion to rationally contain. The power of negative compound-ing is greater than the magic of positive compounding, making it unrealistic that most investors will remain committed to the percentages in the pie chart, even if the need to do so is intellectually understood.

Economics is part science and part psy-chology. It is impacted by human behavior and sentiment. Positive market momentum can raise the values of both good and bad stocks. And, negative momentum can lead to overreactions, fear, and panic which distort markets. If markets were always efficient and rational, they would not experience booms and busts. Determining market percentages and rebalancing back to those pre-defined percentages regardless of market behavior seems counter-productive and irrational.

Another issue with static models is that they ignore the continuum of market cycles. During economic contractions, it makes sense to tactically allocate to more defensive sectors, to cash, or even to an inverse posi-tion on the markets.

As the economy demonstrates signs of early-stage and then late-stage recovery, cer-tain sectors should be favored and rotated.

continue on pg. 11

"

“When these models were

originally introduced, the world looked and acted very differently

than today. “

June 19, 2014 | proactiveadvisormagazine.com 5

$60

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Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14

Oil price surge troubling, but still within ranges

he increase in oil prices last week, and the resultant surge in

domestic gasoline prices at the pump, may hit U.S. consumers hard over the course of the summer driving season.

A 2014 price increase of over 10%, with an approximate 4% rise last week alone in global crude prices, is significant. Some analysts are calling for as much as a $30 spike in West Texas Intermediate and Brent crude if the overall Mideast situation heats up to extreme levels.

According to USA Today, the International Energy Agency (IEA) has forecast that Iraq, which has the world’s fifth-largest proven oil reserves, might account for 60% of production growth from the Organization of Petroleum Exporting Countries (OPEC) for the rest of this decade. Iraq is now producing about 3.3 million barrels a day and has become OPEC’s second-largest producer, after Saudi Arabia.

T

Source: Bespoke Investment Group

Others disagree with the severity of the real, not sentiment-driven, impact a disruption in Iraqi oil production and shipments may have on the world’s oil prices. Bespoke Investment Group argues that while Iraq may represent close to 4% of global oil-producing capacity, the likelihood is that increased production from other OPEC nations

and elsewhere would reduce the “net loss” to a decrease of about -1.6%.

When global oil prices are looked at from a longer-term perspective, says Bespoke, price levels have been fairly range-bound since 2010, with resistance and support in the tightening wedge pattern seen in the accompanying chart.

OIL PRICES: 2010 TO PRESENT

7June 19, 2014 | proactiveadvisormagazine.com

TOPPING THE CHARTSText only

Just as every client has a distinctive personality,

so do investment strategies, says Carla Zevnik-Seufzer, founding member of ClearPath Financial Partners in Greenfield, Wisconsin. Finding the right “personality” fit is critical to client satisfaction and retention.

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MAKINGTHEMATCH

CARLA

ZEVNIK-SEUFZER

Bringing client personality and investment strategy together

8

Proactive Advisor Magazine: What is your overall client philosophy, Carla?

Carla Zevnik-Seufzer: Maybe it stems from my early background as a teacher, but I find that one of the most important factors in developing a sound financial and investment plan is taking the time to truly get to know each and every client. What are their values? What is their fi-nancial literacy? What is important to them in a broad sense? What are the family dynamics, religious faith, dreams for the future?

How does this help you put together a plan?

It plays out in many ways, perhaps most im-portantly in ascertaining risk profiles for clients. Numbers are valuable, but each individual is not just a number. Has someone made a major financial mistake in the past? Are they afraid of another Black Swan market event?

I tell clients that it is never too late to get on a sound financial path. We all have stumbling blocks in our lives and we can learn from them, overcome obstacles, and make our lives and our finances stronger and more effective.

How does your investment approach play into this?

Active management can be made up of many different strategies and combinations of strategies that are designed to work over a full market cycle. Active strategies, in the right allo-cations, can work well in any investment envi-ronment, but they can react differently in roar-ing bull markets, down markets and sideways markets. It is important for clients to know they are working with a firm that can refer them to third-party money managers that specialize in active management and know how to properly set expectations.

Can you give a few examples of how you match client “personalities” with the right active management approach?

Let’s take Client #1. She is extremely con-servative. She is in her 50s, has significant liquid assets, but is afraid of the stock market. She is not really financially savvy about the markets, but she is well aware of the two major crashes over the last fifteen years, as she lost money in each of those. When she came to us, she had all of her money in CDs.

Over time, we were able to convince her to look at a very conservative, actively managed combination of bond strategies. Really just a step above CDs in terms of risk, but miles ahead in terms of expected returns. She is thrilled to be seeing some progress with her account growth.

Client #2 is a little older, also has significant assets, and is male. He is much more attuned to the stock market. He understands the need to see portfolio growth that will outpace inflation and provide income down the road in retire-ment. He reads all of the headlines about the bull market in stocks but has not participated the way he feels he should have.

So, he falls about in the middle of the risk spectrum. We have been able to construct an actively managed, well-diversified multi-strate-gy portfolio that emphasizes risk management while trying to achieve competitive market re-turns. He is pleased to be “in the market” in a controlled sense, and not worrying 24/7 about the risk he is exposed to.

Client #3 is at the far end of an aggres-sive risk profile. He fancies himself a bit of a market expert and has just enough knowledge to be dangerous. Within our array of active strategies we can build out a more aggressive portfolio, even including some leveraged, trend-following elements.

We have had extensive conversations around market cycles, volatility and potential drawdowns in unfavorable market conditions. He is comfortable with that and so are we.

So, bottom line, very different personalities matched up with different strategies, all under an active management umbrella.

continue on pg. 10

9June 19, 2014 | proactiveadvisormagazine.com

When we tell this story visually, it sends a powerful message about market cycles and how to manage a portfolio through them. As I said, this can work for more conservative and more aggressive clients through the use of proper active strategy allocations. That can be through a single manager or multiple managers.

The art—where we add value—is matching up clients with the right active management approach, consistent with their goals, which can lead to shared expectations we all are happy with and some very solid relationships.

Great examples. In a broad sense, how do you describe active management to clients?

Since our focus is on growing our firm around active management, we do have a “storyline” we share with clients and advisors we are bringing into the practice.

I like to go through a little history of the market, using simple charts. These show side-ways, bull, and bear markets.

From the early 2000s through today, if you look at the S&P 500, most people are just gain-ing back what they lost in one or both of the most recent bear markets. If they stuck with it, they are possibly a little bit ahead now.

The point is, we don’t know what the major trend of the market is going forward, but we do know how hard and how long it takes to recover from losses in a portfolio.

Buy-and-hold simply does not work. The average annual rate of return has slipped over the years. But, what is worse is the unpredict-ability and severity of the two most recent market crashes.

So when I show what I call the “mountain chart,” with the peaks and valleys of the S&P,

I ask clients, “Wouldn’t it be smarter to try and avoid those deep valleys? Perhaps even profiting during a bear market using inverse strategies? And to be more exposed to equities when market indicators are heading back up again?”

With active management, the timing will never claim to be perfect, but it has demonstrat-ed that it can smooth out returns and volatility. Third-party active managers are dedicated to monitoring portfolios on a daily basis, so we, as a team, can rely on their models and not on personal emotions or predictions.

continued from pg. 9

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.

10 proactiveadvisormagazine.com | June 19, 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

Discover Investing Flexibility with Guggenheim’s Rydex Funds

+ 55 Rydex funds that offer exposure to today’s most popular benchmarks

+ Unlimited exchange privileges among equivalent share classes of the Rydex funds. Certain share classes may impose sales charges on new purchases or for early redemptions.

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Gregory Gann is a Registered Representative with, and securi-ties are offered through, LPL Financial. Member FINRA/SIPC.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or rec-ommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Asset allocation does not ensure a profit or protect against a loss. There is no guarantee that a diversified portfolio will en-hance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

The tactical use of leveraged strategies might be appropriate during strong bull market trends.

Furthermore, the market has allowed the bond component of the pie chart models to remain relatively static over the last 30 years because interest rates have consistently declined from the high rates prevalent in the early 1980s. Now that the market is operating in an environ-ment of historically low interest rates, irrespective of whether they are real or contrived, it is inevitable that the trend will reverse. A rising interest rate environment after such extended low levels may wreak havoc to models that have rarely confronted such a phenomenon.

ACTIVE MANAGEMENT OFFERS AN EVOLUTIONARY STRATEGIC APPROACH

Duplicating benchmarks is fine in strong markets, but simple math dictates that minimizing losses during steep corrections is far more im-portant. Compounding can work its magic best when it does not have to overcome periods of severe portfolio drawdown, which inevitably occur over market cycles.

Allocating with an eye to current market conditions requires one to invest tactically, on an active basis, utilizing multiple asset classes. The harnessing and sophisticated use of computing power is now at the fingertips of active managers—for creation of models, for strategy backtesting and for algorithm-based indicators and tactical trading sys-tems. Active management helps eliminate the bias of emotion-based

investing decisions, encouraging investors to stay the course when appropriate and move out of harm’s way when needed. Active management plays offense and defense.

While taking responsibility for actually navigating markets might be intimidating, it is hard to argue with the logic of active management. Which makes more sense: loading a client into a pre-fabricated, static investment model or utilizing the most so-phisticated active strategies attuned to the current market environment? The choice seems simple to me.

continued from pg. 5

11June 19, 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 WritersGreg Gann

David Wismer

Graphic DesignerRoger Ackerman

Contributing DesignerTravis Bramble

Contributing PhotographerSara Stathas

June 19, 2014Volume 2 | Issue 11

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.

Rethinking traditional risk questionnairesSubtle changes in how questions are framed and focusing more heavily on cash flow needs may yield more appropriate risk profiles for clients.

Is the economy really picking up? Signals mixed, at best.

Commentary: This doesn’t feel like a real recovery.

Black Swans love a low VIXAs the VIX tumbles to lows not seen since before 2008, what are the implications of an almost complete disappearance of volatility?

Introducing a new way to talk about working in retirement

One of the greatest challenges for today’s modern retiree: Trying to strike the perfect balance between vacation and vocation, as the percent-

age of “retirees” who go back into the workplace remains high.

Formula for market extremesJohn Hussman says market extremes generally share a common formula:

One part reality is blended with one part misguided perception.

When CPAs and wealth managers come togetherWhile the advisor and accountant might seem like an odd couple, there are synergies to be had.

Stay connected

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