Presented by: Tim Weiberg, CWA tweiberg@wealthcarecapital 877-883-7526 x429

transcript

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

MonitoringMonitoring

Presented by:

Tim Weiberg, CWA

tweiberg@wealthcarecapital.com

877-883-7526 x429

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 by

confidently 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 $5,050,000

Starting Value: $5,000,000 $4,800,000 $2,000,000

Net Contributions/(withdrawals) $0 $0 $1,500,000

$ Gain/(Loss) $50,000 $250,000$1,550,000

Total Return in % 1.00% 5.21% 44.29%

Custom Benchmark1 1.25% 4.88% 49.52%

Trailing Annualized Returns: Your Portfolio Custom Benchmark1 Difference

1 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 Difference

Large 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

Current Value $5,050,000 $5,050,000 $5,050,000

Starting Value: $5,000,000 $4,800,000 $2,000,000

$ Gain/(Loss) $50,000 $250,000$1,550,000

Total Return in % 1.00% 5.21% 44.29%

1 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:

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 ference

Large 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%

Current Benchmark

Current Value $5,050,000 $5,050,000 $5,050,000

Starting Value: $5,000,000 $4,800,000 $2,000,000

$ Gain/(Loss) $50,000 $250,000$1,550,000

Total Return in % 1.00% 5.21% 44.29%

1 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:

Is there ANYTHING on THIS report that even REMOTELY relates to:

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

Current Benchmark Dif ference

Large 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%

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 M

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

The One Page Close

Arvin & Alice Valued:

Jamaica Trips

Education For Arvin Jr.

Current Lifestyle

Retirement Lifestyle

Avoiding Investment Risk

Benchmark the client’s life notthe market!

» Introduce Monitoring

Not Future Values

Dashboard For Decisions

» Risk Of Changes =

Minor & Manageable

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?

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?

$2,244,509

$2,243,383

$2,244,509

$2,243,383

$2,210,393

$2,244,509

$2,243,383

$2,210,393

$2,034,459

$2,244,509

We go back to our original recommendation to

understand the client’s 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

What was important?

Comfortable Retirement, stays the same

Reduce Savings, stays the same

Educate Jr., stays the same

Travel, stays the same

$2,243,383

$2,210,393

$2,034,459

$2,488,630

$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 recommendations

Sept – ’03: Decided to sell 1999 Porsche Carrera for a new Maserati – New Advice

Nov – ’03: Unplanned two week trip to Italy – New Advice

Dec – ’03: Portfolio up 20%+, worried about market correction – New Advice

Jan – ’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:

Tim Weiberg, CWA

tweiberg@wealthcarecapital.com

877-883-7526 x429

Presented by: Tim Weiberg, CWA tweiberg@wealthcarecapital 877-883-7526 x429

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