presented by: david b. loeper, cima ® , cimc ®

©Copyright Financeware, Inc., d/b/a Wealthcare Capital Management 2004-2008 All rights reserved

P r o v i d i n g W E A L T H C A R E

W E A L T H C A R EW E A L T H C A R E

Monitoring and Ongoing Monitoring and Ongoing AdviceAdvice

Presented by:David B. Loeper, CIMA®, CIMC®

©Copyright Financeware, Inc. , d/b/a Wealthcare Capital Management 2004-2008 All rights reserved

P r o v i d i n g W E A L T H C A R E PAGE 2

Your Value Proposition With Wealthcare:

“I make the most of the one life you have byconfidently achieving the goals you personally value,

without undue sacrifice to your lifestyle and avoiding any unnecessary investment risks.”



Your Service Commitment With Wealthcare:



OBSERVE THAT IT IS THE SAME!



Does a performance report help you deliver this?



HOW???



Sample Performance Report:Last Quarter YTD Since Inception

Current Value $5,050,000 $5,050,000 $5,050,000Starting Value: $5,000,000 $4,800,000 $2,000,000Net Contributions/(withdrawals) $0 $0 $1,500,000$ Gain/(Loss) $50,000 $250,000$1,550,000Total Return in % 1.00% 5.21% 44.29%Custom Benchmark1 1.25% 4.88% 49.52%

Trailing Annualized Returns: Your Portfolio Custom Benchmark1 Difference1 Year 31.65% 29.92% +1.73%3 Years 1.07% 1.17% -0.10%5 Years 3.20% 2.99% +0.21%Inception (6.5 years) 5.80% 6.38% -0.58%

1Custom Benchmark Allocation:Current Benchmark DifferenceLarge Cap Core 39.44% 37.00% 2.44%

Mid Cap Core 0.00% 0.00% 0.00%Small Cap Core 19.19% 18.00% 1.19%

Large Cap Value 4.80% 4.50% 0.30% Mid Cap Value 4.80% 4.50% 0.30%

Small Cap Value 2.13% 2.00% 0.13% Large Cap Grow th 3.92% 4.50% -0.58%

Mid Cap Grow th 3.92% 4.50% -0.58%Small Cap Grow th 1.74% 2.00% -0.26%

Large Foreign 11.34% 13.00% -1.66%Long Term Fixed 0.00% 0.00% 0.00%Inter. Term Fixed 8.72% 10.00% -1.28%

Short Term Fixed 0.00% 0.00% 0.00%Cash & Equiv. 0.00% 0.00% 0.00%

Current Benchmark






1Custom Benchmark Allocation:

Your Conversation…“Last quarter we were a little behind your benchmark due to the overweighting in value stocks that occurred due to their strong performance in the prior quarter.

Despite that, we are still ahead of your benchmark YTD, for the last year and also the trailing 5 years and only slightly behind your benchmark for the last 3 years

and since inception.”

Current Benchmark Dif ferenceLarge Cap Core 39.44% 37.00% 2.44%




Current Benchmark






1Custom Benchmark Allocation:

Is there ANYTHING on THIS report that even REMOTELY relates to:“I make the most of the one life you have by

confidently achieving the goals you personally value, without undue sacrifice to your lifestyle

and avoiding any unnecessary investment risks.”

Current Benchmark Dif ferenceLarge Cap Core 39.44% 37.00% 2.44%




Current Benchmark



Most clients, when I first meet with them and ask about their financial goals say something like:

“What is really important to me, is to have a portfolio that over at least a 5-10 year time horizon produces a greater mean return with less standard deviation than a passive index blend comprised of 37% large cap core, 18% small cap core, 4.5% to both large and

mid cap value & growth, 18% small cap core, 2% small cap value & growth, 13% foreign and 10% intermediate bonds.”

THEN WHY IS THAT WHAT YOU ARE MEASURING?

True or False?



Connecting to clients…This?

- Target allocation to 37% Large, 19% Small, X% Value, Y% Growth?- Efficient portfolio for standard deviation tolerance?- Efficient portfolio for 95th %-tile downside risk tolerance?- Specific return along with 10 or more years of patience?

- AND, assuming YOUR benchmark is somehow tied to their goals, the client was clairvoyant so they never change their goals or priorities and everything in their life AND the markets go according to plan?



Connecting to clients…This?

- Target allocation to 37% Large, 19% Small, X% Value, Y% Growth?- Efficient portfolio for standard deviation tolerance?- Efficient portfolio for 95th %-tile downside risk tolerance?- Specific return along with 10 or more years of patience?

- AND, assuming YOUR benchmark is somehow tied to their goals, the client was clairvoyant so they never change their goals or priorities and everything in their life AND the markets go according to plan?

Or this?

- Comfortable Retirement- Educate Jr.- Travel- Buy a beach house- Golf (reduce savings)

- AND, contemplating their life and the markets may not go perfectly according to plan and their goals and priorities will change over their life

Making the Most

of “Their Life”



Clients are not paying you for the REPORT!!!

They are paying for your ADVICE.

Providing Advice with Wealthcare…» It’s easy» Focus on progress and the impact of markets on goals» Answers with ‘therefore’» Identify when changes are necessary due to markets» Make adjustments when goals and/or priorities change»REPROFILE CONSTANTLY – If markets behave well then…Or if markets behave poorly…



The One Page Close

Arvin & Alice Valued:Jamaica TripsEducation For Arvin Jr.Current LifestyleRetirement LifestyleAvoiding Investment Risk



Benchmark the client’s life notthe market!

» Introduce MonitoringNot Future ValuesDashboard For Decisions

» Risk Of Material Goal Changes = Minor & Manageable

» Risk of markets misbehaving= ALMOST CERTAIN!!!



Portfolio Value > $2,400,000, Comfort Level will be >90% = Sacrifice Portfolio Value <$1,750,000, Comfort Level will be <75% = Uncertain

Preventing random market returns risking your relationships!



Ongoing service still making the most of their life

What was important?Comfortable Retirement, Educate Jr., Travel, Reduce Savings (for Golf)

So what do we talk about in our review?

THIS STUFF!!

Comfortable Retirement

Reduce Savings (for Golf)Educate Jr.

Travel



Are Any Decisions Currently Needed?

>> Where they currently stand based on the markets & their goals AS LAST DEFINED

>> What to watch out for… Potential future decisions based on market results and THEIR choices



Are These The Right Goals?

>> Does this still make the most of your only life?

>> If we have strong markets, what would be the next priority to add?

>> If we have weak markets, what would be the most acceptable adjustment?

>> Are your ideal and acceptable goals still your ideal, and acceptable goals?



Are we still “spending” the lowest priorities?

>> Still retire later and compromise estate to reduce risk?

>> Still retire later and compromise estate to keep savings low for golf?

>> Still reduce estate to retire a bit earlier?

>> Still take more risk, retire later and compromise estate to spend more & travel?



Arvin & Alice Life Change #1: EDUCATION

Advisor: “You valued sending Arvin Jr. to the local university. Is that something you continue to feel strongly about?”

Client: “Actually, Junior has performed better than expected in his school work. We found out last week that he has received a full academic scholarship. Thus, the costs for education will be much less than we anticipated. How might this affect our other goals?”



Initial Report



New Report

If we remove the education expenses…

Now at 83% Comfort

NOT A MATERIAL IMPACT



Arvin & Alice Life Change #2: NO BONUS NEXT YEAR

Advisor: “When we last met, you felt comfortable with your current level of savings. Has anything changed since our last meeting that would cause you to save more OR less next year?”

Client: “Well… I will not receive my annual bonus next year due to my company’s restructuring. We are concerned about our ability to make our annual trip to the Caribbean. We would prefer to continue our trips to Jamaica, but that would result in less savings next year. How would this impact our comfort level?”



Initial Report



New Report

If we remove next year’s savings…

Now at 80% Comfort

NOT A MATERIAL IMPACT



Jay & Peggy Retirement Life Choice: Home in Florida

Advisor: “When we last met, you felt comfortable with $30,000 a year for travel, is that going to be enough? You recently went to Italy, I bet that was a great trip, did you make it to the Coliseum?”

Client: “Well… You know what, I stopped in Florida on the way back to visit an old friend. He is having a great time down there, lives on a golf course and just bought this fabulous boat. I had so much fun we actually called a realtor and I looked at a few properties. Could I purchase a home in Florida?”



Initial Report

Confidence at 87%



New Report

Paying for the home, furnishings, and a country club membership they estimated around $650,000

They also wanted to factor in annual expenses of around $25,000

Confidence was at 61%



To give the client rational confidence of being able to buy the home, what will the cost be in terms of lifestyle???

What does it mean to client?

Florida Home = $20,000 reduction of retirement spending $15,000 reduction of travel budget

Giving the client choices in terms of what they understand and value



New Report

Client did not want to reduce their retirement spending and cut their travel in half, but wanted to be in Florida in the winter to golf and spend time with their friend.

Because purchasing the home presented excess uncertainty we recommended renting for the next five years.

We told them to update us with how they feel about Florida and we will continue to evaluate the purchase.



What if we had this process in January 1998?

1999$2,244,509




2000$2,243,383

1999$2,244,509




2000$2,243,383

2001$2,210,393

1999$2,244,509




2000$2,243,383

2001$2,210,393

2002$2,034,459

1999$2,244,509

NOW WHAT?



We go back to our original recommendation to

understand the client’s ideal goals and acceptable

compromises among them.



Arvin had said he loved his job and would be willing to work until age 68. I do a analysis showing

that a one year delay in retirement will put them back in

the Comfort Zone.

Spend the low priorities

Retirement Age, 1 year later, but 1 year earlier than acceptable

What was important?

Comfortable Retirement, stays the same

Reduce Savings, stays the same

Educate Jr., stays the same

Travel, stays the same




2000$2,243,383

2001$2,210,393

2002$2,034,459

2003$2,488,630

1999$2,244,509



Obvious “Major” Life Changes Requiring New Advice

New Goals… New Priorities…

*New Events allow for new advice! And all new advice facilitates the same value as before.

>> Major Change in BonusOr Income either up or down

>> Inheritance

>> Change in HealthClient, Spouse, Children or Parents

>> Catastrophe - Personal

>> New Child – Education Change

>> Divorce

>> Early Retirement Opportunity



Less Obvious Life Changes Requiring New Advice

New Goals… New Priorities…*New Events allow for new advice! And all new advice facilitates the same

value as before.

>> Finds a “Cause”Political, Religious, or Personal…i.e. write a book

>> One Time Special…Kid can study in France for year, Unexpected Wedding

>> Military Service

>> LawsuitEither for or against

>> Isolated change in valueHome, company stock, etc.

>> Itching for a Porsche

>> New or Expanded Hobby – Photography, Scuba, Golf, Pilot License, Skiing, Boating, Gambling, etc…

>> New Business/Career Opportunity

>> New 401k Option

>> Refinance Home or New Home

>> Antique Pool Table



“But, I’ve been doing quarterly reviews with clients for 15 years and they HARDLY EVER talk about that kind of stuff!”

REALLY? Honestly??? No Kidding?

I can’t imagine why…Do you think that is because “that stuff” is not really all that important to them?

Or, do you think it may have something to do with the performance review agenda, YOU SET…?

And the content of all the reports you go over?

LOOK AT YOUR PERFORMANCE/PORTFOLIO REPORTS – WHERE IS THERE ANYTHING THAT WOULD FACILITATE A DISCUSSION OF GOALS AND PRIORITIES!!!



Maybe my experience is weird and the clients of advisors that I’ve been doing this with are strange…

Client of advisor – August ’03 – Designed and accepted recommendationsSept – ’03: Decided to sell 1999 Porsche Carrera for a new Maserati – New AdviceNov – ’03: Unplanned two week trip to Italy – New AdviceDec – ’03: Portfolio up 20%+, worried about market correction – New AdviceJan – ’04: Wants to join Country Club and buy second home – New Advice

What do you think is more likely?This client is very atypical, because most clients make up their minds and stick exactly according to plan, or…This client is fairly typical and the advice we are giving is atypical?



Just as Wealthcare clients have a lifetime of choices…

You can:Define benchmarks your client doesn’t connect to…Talk about things that cannot be changed…Risk your relationship on what the markets may randomly produce…Bully your clients to “hang in there” and “stick with it long term”

Be a Reporter…Be a Reporter…Which DO YOU CHOOSE?Which DO YOU CHOOSE?

Make the most of the one life your client hasAdvise them of the choices they have to improve their lifeAnd control excess uncertaintyRespond to their changing goals and priorities with new advice

Be an Advisor…Be an Advisor…

You have the choice as to how you service clients…



Questions?

presented by: david b. loeper, cima ® , cimc ®

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