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Volume 19 / Issue 1 www.figmarketing.com


Engage the small business owner market with these

7 must have conversations

Source: SBA, United States Small Business Profile, 2016

1 How to exit the business 6 Executive benefits 2 Protection from losing key person 7 Employee benefits 3 Estate & personal benefits Need help? 4 Getting money out 5 When you can’t work

You don’t have to be an expert to engage a business owner in the process of creating solutions to small business issues.

Contact your local Financial Independence Group representative or your AIG wholesaler. We can help you leverage these topics to grow your business and provide real value to your clients.

American General Life Companies, www.americangeneral.com, is the marketing name for a group of affiliated domestic life insurers, including American General Life Insurance Company and The United States Life Insurance Company in the City of New York. AGL and USL are members of American International Group Inc., (AIG). AGLC111440-FIG

©2019 AIG All rights reserved.

FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR DISSEMINATION TO THE PUBLIC


Introduction

WORK TOGETHER TEXT BY KEVIN BURTON

What a wild ride we experienced in 2018! The U.S. equity markets rose as quickly as they fell—and by a large margin—as volatility crept back into normal long-term ranges. In the second half of the year, we soared from all-time peaks to surpassing 52-week lows while interest rates nearly rose to decade highs. The best news during volatile markets comes to financial advisors in growth mode. Whether selling, serving, or promoting investment or insurance products; clients look for answers during volatility. Potential clients that are do-it-yourself investors begin to question themselves during volatile markets. Uncertainty can compel clients already being advised to question their counsel and begin to shop for another advisor. Those that keep the status quo are losing business while advisors that are focused on growth gain steam. Market turbulence can be good for business. Navigating these stormy waters can be difficult. Strong partnerships in any business ensures that when the high tide arrives, it raises all of the vessels! It doesn’t matter if you’re with a broker-dealer, a registered investment advisory (RIA) firm, or a hybrid of the two. The co-existence and support of an advisor’s insurance business allied with investments go hand-in-hand with developing plans or allocations for clients. Ever since Alphastar Capital Management (ACM) was created back in 2011, the focus has been to deliver the service level that our advisors are already used to with Financial Independence Group (FIG)—which is unheard of in the investment world. We’ve added systems, technology, and a personal touch to accomplish this goal and are very excited about where we are and where we’re headed. More importantly, I believe our cohesiveness with FIG helps advisors tell a better story and share a better experience by understanding how both the annuity and investment worlds work together. This partnership helps elevate our advisors with service, planning, and support as they tackle the ever-changing client landscape. Over the past three years, Alphastar has invested in technology and people to expand how we can serve our advisors better. We’re doing this while lowering costs to stay viable in a competitive marketplace. Staying on the cutting edge in this industry while being flexible enough to work with many types of advisors is key to our success. Look for our articles in the pages to come for more information. We think you’ll like what you see! Kevin Burton, Director of Business Development, Alphastar Capital Management. Contact Kevin - Phone: 855-340-2514, Email: Kevin.Burton@alphastarcm.com

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Table of Contents

18 IN EVERY ISSUE 1 Introduction 2 Table of Contents 6 Credits 8 Executive Team 12 Contributors ARTICLES 1 WORK TOGETHER Over the past three years, Alphastar has invested in technology and people to expand how they serve their advisors better. – by Kevin Burton

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16 SEQUENCE OF RETURN RISK & ILLUSTRATION SOFTWARE FALLACIES Being mindful of how illustration software works so that projections can be made more accurately. – by Brian Bailey

22 GOALS THROUGH EFFECTIVE PLANNING A growing appreciation for asset management alongside financial planning that work in tandem for better wealth management. – by J. Wesley Knowles

18 TOMORROW, TODAY Demand for solid professional advice will increase as the financial marketplace becomes harder for households to navigate. – by Nicholas Ross

28 8 EFFECTIVE LEAD CONVERSION TIPS FOR FINANCIAL PROFESSIONALS These tips can help secure more clients and capitalize on the two largest generations in history needing financial expertise. – by Mark Stewart 30 ALPHASTAR TODAY Our advisors prefer to use an assortment of methods and strategies to achieve their clients’ investment and planning goals. – by Kevin Burton


ACM Mission Statement Alphastar’s mission is to lead the next generation of registered investment advisor (RIA) firms by providing unparalleled service & support to our investment advisor representatives in the field.

Independence

FIG Partnership

Alphastar’s unique business model provides flexibility to the advisor by combining a service model linked to investment management. In other words, Alphastar partners with advisors in ways other RIAs may not. We provide sales support and resources to ensure you’re able to focus on your core competency. Alphastar does all the heavy lifting so you may focus on client relationships and asset acquisition. Options of affiliation include becoming an IAR or via a sub-advisory agreement with your RIA to access our money management platform. Regardless, you have full access to all the services we provide.

Financial Independence Group strategically partners with Alphastar Capital Management, an SEC Registered Adviser. While these entities remain separate, we provide a strategic alliance with an independent RIA for those wishing to expand their business practices in representing managed portfolios.

To learn more, visit www.alphastarcm.com or call (855) 340-2514.


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ARTICLES 34 OUR COMMITMENT TO YOUR FIDUCIARY STANDARD: CASE STUDY The Financial Independence Group consultant knows what producers expect and at FIG, we pride ourselves on thinking outside the box. – by Matt Earhart 38 PORTFOLIO VS PLANNING The Managing Director of Schechter, Aaron Hodari, shares information on building a portfolio that takes both active and passive approaches into account. – by Aaron Hodari, CFP®, CIMA®

38

44

44 BETASHIELD™: MANAGING INVESTMENT RISK Framing client expectations in terms of investment loss provides a reference point to which gains and losses can be measured. – by Brooks Riley

50 COMPLIANCE CORNER 2019 FINRA & SEC EXAM PRIORITIES Each year, both FINRA and the SEC draft a list of key items their examiners will focus on in the new year. – by Paul Van Ginhoven

48 THE FIG UNIVERSE An overview of the network and support systems that FIG provides to their advisors and partners. – by Financial Independence Group

56 CALENDAR OF EVENTS Looking ahead to the year seeing what is up and coming, helping you save important dates to schedule, to learn, and improve your business. – by Financial Independence Group

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EDITORIAL Publisher Financial Independence Group Editor Liz Ross Executives Dr. William H. Cain Ericka Cain Brian Williams Jim Cooper Mike Mullan Nicholas Ross Tracia Cericola Art Direction J. Wesley Knowles Design/Production Alisa Agnew Danielle Harnish J. Wesley Knowles Jennifer Shephard Rashaad Bilal Copywriter Mark Stewart Editorial Assistants Carly Walker Jennifer Shephard Lindsey Forte Tara Salter Contributors Aaron Hodari Brian Bailey Brooks Riley J. Wesley Knowles Kevin Burton Liz Ross Mark Stewart Matt Earhart Nicholas Ross Paul Van Ginhoven Project Consultants Alisa Agnew Jennifer Shephard Jim Cooper Lindsey Forte Liz Ross Mark Stewart Project Manager J. Wesley Knowles PRODUCTION Design Team Financial Independence Group All Points Media 19520 West Catawba Ave Suite 200 Cornelius, NC 28031

Cover Concept J. Wesley Knowles CopyrightŠ 2019 by Financial Independence Group, LLC. All rights reserved. Printed in the United States of America. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Financial Independence Group, LLC.


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FINANCIAL INDEPENDENCE GROUP EXECUTIVE TEAM DR. WILLIAM H. CAIN Chief Executive Officer Bill received his undergraduate degree in Speech and a graduate degree in Theology. He received the degree, Doctor of Education, from the University of NC at Greensboro. Bill began his career in the insurance industry in 1976. For more than 25 years he has recruited and trained agents. He is an author, including training manuals for agents and a national speaker. As CEO of Financial Independence Group, Inc., Bill researches the market for the best products and directs his staff to give the best service in the industry.

ERICKA CAIN Executive Administrator Ericka’s passion for top-notch service has helped to streamline a multitude of contracts, new business, policy issues, commission accounting, and service challenges. Since joining her husband, Bill, at Financial Independence Group in 1987, Ericka has played a major role in the company’s development as the Office Manager and in 2000 as Chief Administrative Officer. In 2018 she moved into a new role as the Executive Administrator where she continues to add her expertise finding solutions for a variety of challenges that beset our industry and daily business.

BRIAN WILLIAMS Chief Operating Officer As COO and partner of Financial Independence Group, Brian is responsible for the overall business operations of the company. He works with his colleagues on the executive team to develop global strategies and direction for Financial Independence Group with a goal of providing opportunities for advisors while progressively integrating internal efficiencies for greater effectiveness. He also oversees all areas of IT as well as compliance.

MIKE MULLAN Chief Financial Officer Mike began his tenure in June 2002. Mike started as an annuity sales consultant where he was responsible for helping independent financial advisors increase their annuity production as well as helping to grow their overall practices. He quickly became one of the top annuity marketers and built a book of business that produced over $100 million annually in production. In January of 2009, he accepted the position of Chief Financial Officer. He is currently an owner and officer, and looks forward to continuing to help Financial Independence Group grow and succeed.

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JIM COOPER Chief Marketing Officer As CMO, Jim directly oversees All Points Media (APM), the marketing division of Financial Independence Group. Jim sees what he does on a day-to-day basis as relationship building. He feels advisors not only need to have a strong relationship with their clients, but also with their marketing organization. Jim believes the independent financial advisor is our client and we are never going to forget that. He continuously works to make our clients the best advisors they can be. “Our work today is better than yesterday, and our work tomorrow will be better than today,” is the motto Jim leads by.

TRACIA CERICOLA Chief Administrative Officer Previously, Tracia served as the Director of Administrative Services. In her current role as Chief Administrative Officer, Tracia is responsible for overseeing the operations of the administrative departments. These departments include contracting, case managers, and the front desk. She works with departmental team leads to assess current policies and procedures in the various departments and oversees the implementation of changes to ensure efficiency and the outstanding customer service for which Financial Independence Group is known.

NICHOLAS ROSS Chief Distribution Officer Nicholas has been in financial services for over 20 years and his passion for the financial sector is relentless. His experiences range from a retail financial advisor and executive at a registered investment advisor - broker-dealer, to ten years inside one of the largest privately-held brokerage general agencies in the world. For over five years, Nicholas has tailored solutions for entrepreneurial financial professionals with one goal in mind – to fulfill the vision of becoming the very best. Nicholas serves four verticals in his current role within Financial Independence Group: Surge Business Consulting, Next Continuity and Succession, leading managing directors, and institutional sales.

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Allianz Life Insurance Company of North America

Nine years of delivering on

INCREASING INCOME POTENTIAL

99

RECEIVED AN

INCOME INCREASE.1

Annuities are designed to meet long-term needs for retirement income by providing tax deferral, a death benefit during the accumulation phase, and a guaranteed stream of income at retirement. Our track record shows that income benefits for Allianz fixed index annuities (either built-in or via an optional rider for an additional cost) have provided clients with income increases. That’s important – because even guaranteed lifetime income needs the potential to increase to help your clients address inflation. And every time there’s an income payment increase, that new higher payment is guaranteed for the rest of that client’s life (as long as the terms of the contract are followed).

SEE THE COMPLETE 9-YE AR HISTORY AT www.allianzlife.com/theproof.

There is no guarantee that a contract will receive an increase in any given year.

Percentage of clients taking income who have received at least one increase. The total number of contracts used for this analysis was 13,732, and represents any increase of any amount in a given year. Income payments were elected from 1/1/2008 through 12/31/2016. Income increases are reflective of multiple products and income benefits that were available at that time. Individual contracts may have seen varying amounts of income increases. Past income payment increases are not a guarantee of future results. With the purchase of any additional-cost riders, the contract’s values will be reduced by the cost of the rider. This may result in a loss of principal and interest (gains) in any year in which the contract does not earn interest or earns interest in an amount less than the rider charge. Withdrawals will reduce the contract value and the value of any protection benefits. Additional withdrawals taken within the contract withdrawal charge schedule will be subject to a withdrawal charge and market value adjustment. All withdrawals are subject to ordinary income tax and, if taken prior to age 59½, may be subject to a 10% federal additional tax. For complete information about fixed annuities, ask your financial professional for a contract or Statement of Understanding that outlines the risks, fees, and expenses, as well as other information. Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America (Allianz). Products are issued by Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. 800.950.1962 www.allianzlife.com 1

• Not FDIC insured • May lose value • No bank or credit union guarantee • Not a deposit • Not insured by any federal government agency or NCUA/NCUSIF

This notice does not apply in New York. In New York, products are issued by Allianz Life Insurance Company of New York, New York City. Product and feature availability may vary by state and broker/dealer. ENT-1817-D (R-6/2018)


SALES IDEA

Asset-Care IV Good questions, better results Experience has shown that sales success often depends on asking the right questions. We have identified some of the most effective questions to ask advisors to generate leads and close more sales! Required Minimum Distributions (RMDs)

Do you have clients who don’t need to live on their RMDs at retirement? Nonqualified annuity

Do you have clients with nonqualified annuities you’re unable to move due to a high guaranteed interest rate? Surrender charges

Do you have clients with nonqualified annuities you’re unable to move due to surrender charges still in place? Guaranteed Minimum Income Benefit riders (GMIB)

Do you have clients who own old variable annuities with a GMIB they likely won’t need for retirement income? Sufficient income

Do you have clients with sufficient income that could be diverted to help protect your assets under management? Note: Products issued and underwritten by The State Life Insurance Company® (State Life), Indianapolis, IN, a OneAmerica company that offers the Care Solutions product suite. Asset-Care Form number series: L301 and R501. Not available in all states or may vary by state. Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice. NOT A DEPOSIT • NOT FDIC OR NCUA INSURED • NOT BANK OR CREDIT UNION GUARANTEED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • MAY LOSE VALUE

Please contact us for more information: Team Barnette 800-527-1155 teambarnette@figmarketing.com

The contact listed is not an affiliate of the companies of OneAmerica.

is the marketing name for the companies of OneAmerica | OneAmerica.com © 2017 OneAmerica Financial Partners, Inc. All rights reserved.

For use with financial professionals only. Not for public distribution. I-30045 11/16/17


CONNECTIONS CONTRIBUTORS LIZ ROSS

PAUL VAN GINHOVEN

KEVIN BURTON

BROOKS RILEY

Director of Marketing Liz leads an incredibly talented group of professionals at APM, our marketing division, who are committed to providing advisors with the marketing tools and strategies they need to grow their business and make a difference in the lives of their clients.

Director of Business Development Kevin leads both the sales and marketing divisions for Alphastar Capital Management (ACM). Kevin has over a decade of financial services experience across multiple focuses from leading operations to serving as a financial advisor. His extensive work in the sales and marketing divisions of various industries serves him well as he continues to promote and encourage the ACM value proposition to the clients and advisors that we serve.

MATT EARHART

Senior Vice President Institutional Accounts Before joining FIG, Matt successfully managed institutional account relationships with one of the largest Brokerage General Agents (BGAs) in the country. Matt focuses on educating financial advisors on incorporating risk management planning into their practice and the value of collaborating and leveraging industry resources. Matt concentrates on recruiting and managing FIG’s broker-dealer (BD), RIA, and bank alliances.

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Director of Compliance Paul collaborates with FIG’s advisors and internal staff to find solutions to their compliance questions and potential regulatory issues. He’s a member of the International Association of Risk and Compliance Professionals and has a Certified Risk and Compliance Management Professional designation. He currently holds FINRA Series 6, 7, 9, 10, 24, 26, 53, 63 and 66 licenses. Additionally, Paul has a North Carolina Life Insurance License and is a North Carolina Notary Public.

Investment Advisor Consultant A member of Alphastar’s sales & marketing teams with the primary responsibility of overseeing the Pathways new advisor training program. Brooks works to prospect, on-board, and coach newly licensed investment advisors to ensure that they are able to efficiently and properly build a productive advisory business. He brings 8+ years of sales experience in the investment management industry to the Alphastar team.

AARON HODARI CFP®, CIMA®

Managing Director of Schechter Aaron works with high net worth individuals, families, business owners, and their advisors to bring them advanced financial planning solutions. Aaron heads the firm’s branch of Private Capital, including deal sourcing, due diligence, deal structuring, and market opportunity identification. He’s also instrumental in the development of correlated and non-correlated investment alternatives, helping identify investment allocations, and manager selection.


BRIAN BAILEY

Vice President - Annuity Sales Brian believes that it is his duty to provide a unique relationship based service experience while recommending the best companies for performance, service, safety and commission. Brian works diligently with his producers to help them meet their personal goals within their yearly business plans and helps to make sure they stay on track with their marketing efforts so that they can continue to stay in front of new prospects.

MARK STEWART

Copywriter Mark’s “jack-of-all-trades” mentality has made him both knowledgeable and passionate in advertising, digital and social media marketing, and of course— copywriting. Responsible for creating captivating content and convincing copy across the board for Financial Independence Group, he has a knack for making the most complex financial topics simple to understand.

J. WESLEY KNOWLES

Marketing Media Specialist Wes has been involved as an artist & designer with the nationally recognized brands of Spectrum, The DNC, Amway, NBA Charlotte Hornets, AHL Charlotte Checkers, and the NFL Carolina Panthers. Wes joined All Points Media in 2014 and delivers his insight to an already strong group of designers and marketers with his many years of experience in publication production, copywriting, and art direction.

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“Don’t be afraid to give up the good to go for the great.” – John D. Rockefeller


I’m going to make a bold statement that I’ll bet many advisors in the financial industry have never thought about, but are guilty of showing their clients almost daily. TEXT BY BRIAN BAILEY

I

’ll bet that a majority of retirement income projections are overstated, misrepresented, and quite frankly, may be wrong.

at the time and needed their retirement assets to produce income to cover their Social Security gap—similar to many situations you see on any given day.

WHY YOU MIGHT ASK?

The other advisor showed something that seemed almost unbelievable. He showed an 8% average rate of return, net of all fees, based on past historical performance. Now you might be saying to yourself, “That doesn’t seem unbelievable.” Well, you’re right. It’s not believable. The net average return is not that farfetched. However; what’s implausible was the illustration showed the client taking an immediate 5% income from the annuity

Simply stated, it’s all about the math. It was some time ago that I came to this realization. Around 2010, I was having a conversation with one of my top advisors. He was in competition with another advisor; showing his client an illustration with a variable annuity. The client was nearing retirement

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and the account value doubled through their lifetime, making the illustration look like it was unbeatable.

WHY WOULD IT DO THAT? Because the illustration software showed a static 8% return every year. It didn’t show the ups and downs of the market. So, you can quickly see that if you are taking 5% out, but gain 8% each year, it’ll always increase. Sounds too good to be true, doesn’t it? That’s because it is. Return sequencing really doesn’t matter if you’re not taking withdrawals from your accounts.


can cause a long-lasting negative effect on account values in the future. It will also be detrimental for future income as well. This is the definition of sequence of return risk. What you may be thinking right now is, “What about my clients who are going to start taking income from their accounts today or in the very near future?” Where should that income come from? Should they take it from their managed accounts, or should they take it from an annuity contract that protects them from downside risk?

RETURN SEQUENCING EXAMPLE If you had $500,000 in the year 2000 and it was linked to the S&P 500 Index (and not adjusted for dividends), it would’ve been worth $1,276,105 at the end of 2017. If you completely reversed the returns from 2017 to the year 2000 and started with $500,000, the account value would be the exact same at $1,276,105. However, if you were to take a $25,000 (5%) distribution and increased it for inflation by 3%, the account values would be completely different. In the first scenario from the year 2000 to 2017, you’d run completely out of money in 2016. In the second scenario— reversing the returns from 2017 to 2000— the account value would be worth $636,228. What this tells us is during your retirement years, having a high proportion of negative returns in the beginning (or close to the beginning) of the initial withdrawal phase

It’s my opinion that it’s almost always more advantageous to the client to withdrawal money from an annuity contract that can protect them from high volatility and the potential for negative returns. Take the first scenario above for example. If during those same years of 2000 to 2017 your client had a fixed index annuity (FIA) with a 50% par rate and received “zeros” in the negative years of 2000, 2001, 2002, and 2008; their $500,000 would be worth $316,068 after taking $25,000 annually—inflation adjusted at 3%—for those same 18 years.

income and account values should look like during the drawdown years. In addition, the use of income riders could be helpful when projecting the client taking income longer than 20 years and past their life expectancy. Ultimately, the goal isn’t to have your client outlive their assets during retirement. This can be projected in many ways, but my advice is to be mindful of how your illustration software works so that 10 years later, you don’t have to readjust your projections because of software fallacies.

If you’d like additional information or have any questions, I’m always happy to discuss. Please reach out to me directly. s Brian Bailey, Vice President - Annuity Sales, Financial Independence Group, Inc. Contact Brian - Phone: 800-527-1155, Email: Brian.Bailey@figmarketing.com

LOOK TO VARIABLE ILLUSTRATION SOFTWARE This brings us to the concluding thought: What illustration software should we be looking for when showing retirement income projections? We should stay away from illustrations that show only a static average return and look for software that shows a variance in returns. A variable return illustration will give a client a clearer picture what their

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TOMORROW, TODAY TEXT BY NICHOLAS ROSS

The future of financial services is here. It simply hasn’t been widely accepted yet. Usually a laggard to innovation, financial services is drastically evolving. Looking at 2018, every advisor can construct a quick list of available advancements that alter the way financial advisors and retail consumers conduct business. This year, it’ll be another year of drastic change for financial services. Consumers will continue to scrutinize the value aspect of their financial services alliances. Technology will add efficiencies in everything from process competences, timing of transactions, and even the way we communicate with clients.

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Not to mention, demand for solid professional advice will increase as the financial marketplace becomes harder for households to navigate. This requires the financial professional to select optimal relationships for every vertical of their business to continue to offer the best planning, products, and processes to its clientele. It used to be efficient for financial professionals to isolate themselves into one or two offerings. The insurance agent was a specialist in life insurance. The retirement planner generally offered a few products

in and around retirement income. And the term broker or investment professional was commonly used for stock and bonds. However, as we deliver with conviction: the future is now. And the only way to thrive is to continuously adapt. At Surge, we label the financial advisor of the future The Wealth Counselor™, and they’ll be the key conduit for all household financial planning. Nothing will get to or from the retail household without them. The Wealth Counselor™ may not offer every household planning need, but will know exactly


where to go to get the right alliances for their business. The Wealth Counselor™ will have a great opportunity—and responsibility—to selectively align with the perfect partners for them and their clients. Is that how you envision yourself?

Requirements for Alignment Three specific requirements of your broker-dealer (BD), registered investment advisor (RIA), and IMO/ BGA include: guidance and pure recommendations, expertise in products and process, and regulatory and compliance comprehension. You’re hired to provide advice. And you remain hired if the client believes the advice is superior to other sources. Growing complexities in today’s households place greater emphasis on objective guidance and education in specific household planning recommendations. Wealth counselors like yourself must confirm who they choose to work with and through to construct the right solutions for any given plan. The alliance must be educated and able to be diverse in recommendations. You must not favor any institution. You must remain agile as new facts are discovered in the planning process. Any lesser result may cost time—and most importantly—the client relationship. Regularly test your strategic alliances for consistent expert planning output.

Nicholas Ross, Chief Distribution Officer, Financial Independence Group, Inc. Contact Nicholas - Phone: 800-527-1155, Email: Nicholas.Ross@figmarketing.com

Retail clients have access to product intelligence with single clicks. From health to hospitality, consumers are conditioned to do homework. Finance is no exception. Expect clients to come to you with questions and ideas of their own. Not to implement necessarily, but to seek your professional expertise to execute on their behalf. This forces you, The Wealth Counselor™ to ensure your alliances have superb and creative planning knowledge in their respective fields. You should never feel that you need to question outputs or be required to seek second opinions. You should have as much confidence in your strategic alliances as your own staff. Regulation and a client-centric authority are here to stay. Most of you will confidently state that you have and will always remain client-centric in all they conduct and recommend. That doesn’t mean regulators will agree and not fight for continued consumer protectionary methods and rules. This will be costly for your business and require you to continuously adjust business practices and processes.

Welcome to tomorrow, today. Your alliances should not only fully understand adjustments, they should be able to swiftly enact changes that make regulatory changes easy on your business model and protect you from issues. Some alliances may provide you with expert counsel on rules and regulation, while the best firms will be there with ongoing resources and processes to help make conducting business simplistic. As you decide how and whom to conduct business with, be certain to have a plan for your selection and ongoing diligence. The future of financial services will get easier in some ways and tighter in others. As you face your valued client base, be certain you have the very best behind you. s ©Surge Business Consulting 2019. All Rights Reserved. The thoughts and opinions expressed herein are those of its authors only. This is not tax or legal advice. This article is for educational purposes only. Written exclusively for Financial Independence Group. This article shall not be circulated without expressed written permission from Surge Business Consulting or Financial Independence Group.


TM

A market risk management strategy designed to benefit the dynamic nature of the market today

When it comes to your investment goals, limiting exposure to market downturns may be as important as capturing market appreciation. Alphastar Capital Management offers Betashield™ – a risk mitigation strategy designed to guard investment portfolios from catastrophic losses. The Betashield™ strategy is a globally diversified asset allocation model portfolio that uses portfolio value signals that when triggered, relocates a predetermined percentage of portfolio holdings in both times of market advancement and market downturns. The strategy allows you to participate in potential market appreciation while managing market risk. Portfolio values are monitored and trade signals are adjusted higher during periods of portfolio appreciation. This “adjusted floor” is designed to allow you remain invested while protecting part of the prior appreciation of the portfolio. Contact Alphastar Capital Management to learn more about Betashield™ and how these strategies may assist your current investment portfolio or investing needs.

support@alphastarcm.com

855-340-2514

www.betashield.io All investments involve the risk of potential investment losses. Past performance is not a guarantee or predictor of future results. Betashield™ portfolio strategies are not a guarantee against loss or declines in the value of a portfolio. Draw down targets can not be guaranteed. Advertisement is not an offer or solicitation for the sale or purchase of any security or other financial instrument or to adopt a particular investment strategy. Refer to www.betashield.io for more information. Investment advisory services are offered through Alphastar Capital Management LLC (“Alphastar”), a SEC registered investment adviser.


TEXT BY J. WESLEY KNOWLES

The investment management industry is taking notice of Horizon Investments and their goals-based approach to asset management. A client’s life and financial objectives should be determined as early as possible, so that effective plans can be implemented to achieve financial stability and success. Whether working toward financial independence, retirement, or some other monetary target, formulating a proper plan to reach financial goals during the different stages of life is essential. Developing a framework to achieve financial success can be simplified when consulting trained professionals. One firm that has created strategies to meet goals-based investment needs is Horizon Investments. Horizon was recognized for their work during the 2018 Envestnet Advisor Summit when their firm was awarded both Envestnet’s 2018 Manager of the Year and Strategist of the Year.

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They manage investment solutions that advisors adopt to help grow, preserve or distribute wealth for their clients. As a goals-based investment manager, Horizon believes investment problems and challenges are best addressed within the context of an investor’s objectives, helping align investment solutions with the investor’s goals. This approach also allows investors better opportunities to measure real-life outcomes. Horizon’s goals-based approach focuses on the individual investor as the client instead of an institution, creating a road map for the advisor to know when to use a particular strategy during a particular life stage. By developing focused strategies that meet an individual client’s needs, the advisor also lays a foundation for a stronger relationship along the investment timeline. Horizon has identified three unique stages that investors encounter along their financial journey: the Gain Stage, the Protect Stage, and the Spend Stage. In the Gain Stage, an investor works to accumulate wealth to meet life goals. In the Protection Stage, preservation is vital to guard against catastrophic losses so that goals can be adequately funded. The Spend Stage is the phase when accumulated wealth can be dispensed to meet retirement needs. Horizon Investments was featured in the July 2018 edition of Investment Advisor magazine with Robbie Cannon smiling on the cover, holding up the two

Envestnet awards for Manager of the Year and Strategist of the Year. While elated about the achievement, Robbie made the point that this honor was not an individual accomplishment. It was only made possible by teamwork and the numerous contributions from Horizon’s employees and partnerships. Robbie was inspired by his grandfather who was deeply affected by the Great Depression, given that he presided over community banks in the New York area in the years prior. After the Great Depression, his grandfather never made an investment in the stock market again. As a result, Robbie realized the importance of financial wellness. In addition, despite his setbacks, Robbie’s grandfather demonstrated strong character by remaining optimistic and steadfast. Robbie learned that good character is crucial in the field of financial services and wealth management. Absorbing his grandfather’s influence, Robbie has established culture—as well as integrity—as the fundamental attributes that Horizon Investments values above all others. Horizon’s key values are “Community,” “Unity,” “Ingenuity,” “Gratefulness,” and “Fun.” Robbie says, “It is rare for two cultures of two different firms to align to create a synergy that is greater than its parts. Especially when considering the variety of businesses that are consulted on by and work with Horizon. Alphastar and Financial Independence Group (FIG) share our very same culture. This likemindedness creates a synergy which generates an effortless work environment sparking collaboration and innovation.” CONNECTIONS MAGAZINE | 23


Horizon’s investment solutions address a variety of scenarios. Robbie explains, “One major concern for the investor, probably the most significant, is the question of loss. It is an interesting one, especially when looking at institutions versus individuals. Individuals obviously do not live in perpetuity like an institution, so their sensitivity for loss is more acute whether preparing for retirement or having achieved it.”

Robbie details his outlook for Horizon’s future, explaining, “Horizon Investments in 2019 and beyond wants to drive the idea of a modern-day asset manager. This manager looks like an investment manager embedded with purposeful technology. We believe that the partnership of the right technology along with strong investment products will drive investment firms in the future.”

The Horizon/Alphastar partnership has created Betashield™, a model targeted around maximum drawdowns. Utilizing the Betashield™ framework gives both an advisor and their client some information about risk in an absolute way. The cooperation among Alphastar, FIG, and Horizon Investments has created a great deal of synergy and innovation, which continues to strengthen.

Investment solutions that achieve investors’ financial objectives are far superior when allied with experienced, knowledgeable and trustworthy partners. There is now a new appreciation for asset management alongside financial planning that work in tandem for better wealth management. Goals-based investing is being recognized as an important piece of the financial wellness landscape. Setting goals and having a framework that strives to meet financial objectives will help in the attempt to achieve financial rewards while trying to minimize challenges.

Innovation is a necessary part of financial technology (fintech) in the modern financial planning marketplace. Horizon and Alphastar regularly make enhancements to their technology offerings to complement the investment strategies and products that they provide to their advisors. Robbie mentions, “One example is text alerts regarding risk for portfolios, this is something we are looking at. We have created a committee with members from the teams at Horizon and Alphastar. This committee is very successful in bringing disparate talents together to develop and operate the products. They also bring concerns to the council to ensure our products are functioning properly.” Horizon Investments provides financial advisors a full suite of cutting-edge goals-based investment management, risk mitigation, and practice management tools. Resources and solutions that strive to help advisors and their clients position wealth to reach life goals.

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Horizon Investments’ objective is to make their advisors successful by helping them help their clients reach their goals for wealth accumulation, preservation and stability in retirement. They are an industry leader and a solid manager with investment solutions for advisors who want to create realistic road maps for fulfilling their clients’ financial goals. s

J. Wesley Knowles, Marketing Media Specialist, APM Division, Financial Independence Group, Inc. Contact Wesley - Phone: 800-527-1155, Email: Wes.Knowles@figmarketing.com


Marketing Office Personnel

JULY 25-26 | CHARLOTTE, NC More information coming soon!


8 01

EFFECTIVE LEAD CONVERSION TIPS FOR FINANCIAL PROFESSIONALS

Make first impressions count

Nowadays, your first point-of-contact isn’t always controlled by you. It still can be, with phone calls or a quick meet-up with a referral, but often it happens when a prospect hits the “Enter” key on Google’s home page. “Best financial advisors in [insert location here]”, is a search that’s certainly performed often. So, when people conduct a search and find your website, what do they see? After all, there aren’t second chances on the Internet. Be sure to invest properly in your company’s website, so that prospects are more likely to say “Wow!” than “Next!”. That means have it designed to be user-friendly, have relevant business (and personal) content abound, and easily found calls-toaction to get them to the next step. The same goes for finding those little “Wow!” moments during in-person meetings. Whether it’s offering coffee, tea, or a soda instead of just water. Or offering a complimentary folder detailing your company, your people, and your services. Or perhaps even giving them a gas card on their way out the door, as a “thank you” for

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TEXT BY MARK STEWART

“I don’t really care about converting leads,” said no financial professional ever. Let’s face it: Converting your leads into prospects, and those prospects into clients, is the lifeline of your business. But, that doesn’t make generating leads and converting them easy. In fact, prospecting is one of the biggest challenges advisors face. It’s difficult getting strangers to stumble upon your website—or even better— your office. Especially when there are so many competitors out there. From Sally down the street to the newest robo-advisor, you must be on top of your conversion game to reign supreme in today’s advising environment. Follow this list of advisor lead conversion tips, though, and you’ll be on your way to securing more clients for your business. Let’s get started.

making the trip. Whatever small moments you choose, be sure to make that prospect feel like your most important client.

02

You need to be trusted

Integrity. Reliability. Credibility. Do those words describe you and your work? It’s easy to claim superiority and expertise, but can you back it up? And better yet, do you have proof to back it up? Here are some tactics that can quickly convey your trustworthiness to leads: • Provide a link to your CFP, PFA, or other professional certificates • Have quality content available throughout your digital channels • Construct a “Core Values” that you’ll abide by • Verify in writing you are a committed financial fiduciary (If you’re an RIA or IAR) • List all other credentials (education, designations, etc.) on your site

03

Utilize LinkedIn

Social media and digital marketing are excellent ways to draw in potential clients. The days of solely relying on brochures, referrals, and direct mailers have passed. LinkedIn is an especially great way to find new prospects and nurture relationships, due to its professional nature. Prospect connections, join groups, get involved, and reap the benefits of the goldmine that is LinkedIn.

04

What’s your niche? Find it

It’s fairly safe to say that as your net is cast wider, the more irrelevant you become. Niches work, especially in this industry. Take a long hard look at where you’re positioned now, where you want to be, and what the business opportunities in your area are. Do you see yourself working with doctors and lawyers, or salespeople and local business owners? Do you work well with


people who would rather golf and sail, or throw darts and bowl? There’s a plethora of different demographics to go after, so do your research and make a targeted approach. Focus on your niche and you’ll avoid many problems that can come with the one-sizefits-all advisor. Because at the end of the day, having an effective niche will see your conversion rates soar.

05

Give your prospects enough information (and time, and space)

Financial services are unique in the sense that you’re dealing with intangible products and services. It’s not like people are buying a new iPad from you—they’re giving you access to their hard-earned savings and assets. With that in mind, education is the name of the game for advisors who want long-lasting, trusted relationships with prospects. When you’re interacting with prospects, try educating them properly with—you guessed it—quality content. It’ll further your standing as a thought leader (especially if you wrote it) and will be more effective than what the often-misinformed Internet can provide. Then, give them time and space to think about their decision. Let them digest the information. They’ll be able to absorb it, learn something new, and that will eventually lead to their selection process. And if your content is good, your professionalism is known, and your accolades trusted; they’ll most likely return for your services.

06

Outcomes reign king

Processes definitely matter, but without seeing the outcomes, they aren’t all that useful. As an advisor, part of your job is to show prospects where their finances have gone wrong, or where they could be better—maybe they’re investing poorly, or perhaps they’re living a bit lavish. The point is, you shouldn’t just show them how you can help them. Instead, allow them to envision their possibilities.

Where do they want to be in life when they reach retirement age? How would they benefit if their financial worries were gone? Allow them to peek into their future, to look behind the curtain, to envision the life they’ve imagined. Once they can visualize it, then you can talk about the process to get them there. But if they can’t ever see the end of the road, they may be less likely to commit to your plan.

07

Understand diverse goals and ideals

Just in: People are different! Individuals and couples have vast differences in their retirement vision, investing goals, and finances in general.

their vision, and what they seek in their finances. Then, as a team, commit to a well thought out process that ends with their vision a reality. This will boost your closing rates.

08

Digital matters, but don’t forget people

By now, you should understand how important your website, search engine optimization (SEO), social media channels, and digital advertising (such as Google Ads) are for your business. Convincing the Internet and sites like Google and Bing that you’re the best the area has to offer is hard enough—let alone convincing actual people. And that’s a great reason why you shouldn’t overlook them. Engage with your local community, and you’ll engage with the people in it. Depending on your niche, go out and work with organizations that will help promote your business. Focusing on Baby Boomers? Create an event with your local AARP chapter. Going after the C-level folk? Talk to a local country club about hosting a social event there. Whatever it may be, the point is, don’t forget the grassroots efforts that can effectively create and secure leads in your community. s

An Opportunity Like Never Before

In retirement, a lot of people dream of golfing every day of their retirement in Florida or the Carolinas. Others envision a quaint mountain cabin deep in the Rockies. Yet others want to stay in their current homes, simply relaxing and living their lives how they please.

When it comes to converting leads, you should be following at least a couple of these tips. It’s a prolific time to be an advisor, with an average of 10,000 Baby Boomers reaching retirement age every day, and an even bigger generation right behind them (Millennials) who continue to seek out help with their finances.

And that’s just part of the equation as an advisor. Understand that each prospect is 100% unique, and there’s no one formula that rings true for all. Instead, the best route is to truly listen to each and every lead or prospect. Understand their pain points,

Indeed, advisors have opportunities they’ve never seen before—if they know where to look. By using these effective lead conversion tactics, you can secure more clients and capitalize on the two largest generations in history needing your financial expertise.

Mark Stewart, Copywriter, Financial Independence Group, Inc. Contact Mark - Phone: 800-527-1155, Email: Mark.Stewart@figmarketing.com

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ALPHASTAR TODAY TEXT BY KEVIN BURTON

Alphastar was founded in 2011 with a rigid focus and investment philosophy that has allowed us to further learn what advisors genuinely wanted. Over the years, our eyes have been opened to more opportunities in front of us which have highlighted affairs that are most important to a majority of advisors. Those discoveries confirmed what we always believed: that most advisors desire to develop a partnership with an experienced team. One they can trust and collaborate with to help them serve their clients better. There are many ways to address a problem, achieve a goal, or realize investment returns. Similar to the way Financial Independence Group (FIG) advisors utilize a variety of insurance products, riders, and indexes; Alphastar advisors prefer to use an assortment of methods and strategies to achieve their clients’ investment and planning goals. Our platform has opened up to accommodate a range of strategic and tactical methods: from algorithms to buy and hold to funds and ETFs versus individual securities. The Alphastar investment team (along with a multitude of investment partners) has constructed efficient and effective platforms equipped to address almost any client or advisor need.


WHAT WE OFFER Currently, we have over 60 different investment models to choose from and blend together to serve a variety of needs and objectives. Among those offerings is Betashield™. Launched in 2017 in partnership with Horizon Investments, Betashield™ is a risk mitigation strategy designed to lower a client’s downside risk. This plan of action has become one of our advisors’ preferred portfolios for retirees as we trek through an increasingly volatile marketplace. In early 2019, we launched another enthusiastic partnership with Madrona Financial Services. This alliance offers advisors access to the Delaware statutory trust (DST) 1031 real estate market. We’re always proactive in our search for opportunities that’ll serve our advisors’ clients. Alphastar is focused on pioneering ideas that remain grounded, while allowing our advisors to expand their practices to new and evolving areas. To remain efficient, it’s essential to incorporate technology in today’s financial environment. Our team has developed an advisor portal in order to simplify our advisors’ work, abilities, and business transactions. With our Orion integration, we can create unified management accounts (UMAs) that are specific to a client’s needs. This provides advisors, the client, and the back office a virtual interface rivaling any firm in the industry. This flexibility—blended with the consistency of our model approach—gives our advisors and their clients a fully scalable offering regardless of client size.

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A READIED AND EXPERIENCED TEAM Furthermore, our experienced team is always ready to assist our advisors to grow their overall success. Alphastar has a financial and investment planning team led by a chartered financial analyst (CFA) and a certified financial planner (CFP) that allows one-on-one client-specific discussion and analysis. This provision helps to ensure that our advisors’ clients are treated with the utmost care and respect. Alphastar also works directly with advisors to learn about the client’s goals and risk tolerance. Our team can build personalized reports utilizing some of the best tools on the market with Riskalyze, Hidden Levers, Morningstar, and YCharts, just to name a few. The Alphastar planning desk has proved to be an invaluable resource to our advisors. It’s not only a time saver, but is also a way to gain professional insight while striving to give clients the best chance of success. Our team of advisor partners is growing, too, and so is our home office team. We’re bringing on a chief compliance officer and chief investment officer to help Alphastar continue to grow in the right way. This asset growth and human capital happened solely from the growth and success of our amazing advisors. And we’re honored to partner with them each and every day. s Interested in exploring a partnership with us and joining the excitement at Alphastar Capital Management? Visit us on the web at www.alphastarcm.com.

Kevin Burton, Director of Business Development Alphastar Capital Management, Contact Kevin - Phone: 855-340-2514, Email: Kevin.Burton@alphastarcm.com

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Our Commitment to Your Fiduciary Standard: Case Study TEXT BY MATT EARHART

Financial Independence Group serves thousands of financial professionals annually, is partnered with over 25 broker-dealers and RIAs as a preferred insurance planning resource, and acts as a primary product distribution source for the top insurance companies in the nation—all with just over 150 employees. I’m sure you can only imagine the intense pace of a typical day at our office. When under pressure or feeling overwhelmed, it’s only human nature to rush, cut corners, or act as an order-taker when a request comes in. Not here! The Financial Independence Group consultant knows what producers expect from us and we pride ourselves on thinking outside the box, continuously learning product and concept knowledge, all while never losing sight of our partner’s top concern: doing what’s best for their client. Check out this case study that came across my desk and think about how it: 1. Illustrates the value and creative thought process an advisor receives when working with us 2. Is a case study that you can apply to your practice today

The Case Study

The Result

An advisor makes the call to Financial Independence Group to discuss a long-term care (LTC) need his 78-year-old female client has expressed interest in. This is a straightforward request we see daily; the client has some money on the sidelines to fund the LTC need with the desire to see a couple traditional options and an asset-based (or linked benefit) option.

The advisor was able to provide her with $5,025 of monthly LTC benefit for life. If the LTC benefits are never turned on, the client passes on $125,615 in death benefit to her heirs. The client is now saving thousands of dollars in taxes on gains in the VA. And finally, principal protection.

Right here is where our consultant could have gathered the specifics and taken the order, however she decided to dig deeper into the client’s financial situation and ask questions about other investment vehicles within her portfolio.

The advisor was ecstatic, as was the client. The dollars she had reserved for LTC are now working for her in other investment vehicles recommended by the advisor and he’s busy profiling his book of business for similar value-add situations where this concept works in the best interest of his clients.

Upon the advisor walking through what the client had in place, he was stopped after listing a couple variable annuities that were out of surrender with a low-cost basis and having significant gains that you don’t want your clients paying taxes on.

This could be considered a life-changing financial planning play, all from a consultant asking a few more questions and simply caring. This is the value of partnering with Financial Independence Group. s

Our consultant suggested leveraging monies in the VAs through a 1035 exchange into OneAmerica’s assetcare product. With this scenario, the advisor moved roughly $100,000 (non-qualified) into the asset-based LTC product and accomplished much more than just putting LTC coverage in place.

Matt Earhart, Senior Vice President - Institutional Accounts, Financial Independence Group, Inc. Contact Matt - Phone: 800-527-1155, Email: Matt.Earhart@figmarketing.com


RetireUp Pro integrates with Riskalyze software. We’re proud to announce the integration of RetireUp Pro with Riskalyze, a software aimed at financial professionals to get risk assessments for client portfolios. With a few clicks, RetireUp Pro users can integrate Riskalyze software in their RetireUp Pro account via our Agent Portal.

More than a sales tool, RetireUpPro is the industry’s first advisor-guided retirement decision platform. Designed to increase capacity, productivity, and profitability—you can guide your clients through a personalized retirement planning experience. With RetireUpPro, you’ll be able to: • Change the client conversation • Visualize retirement realities and solutions • Get approvals faster with clean and compliant apps

If you have questions or concerns about syncing the two programs, please call (800) 527-1155 to speak with our Marketing Program Specialist, Hamilton Morales; or email him at hamilton.morales@figmarketing.com


SM

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Provide more choices for your client’s accumulation solutions For more information on FG AccumulatorPlus® FIA, contact us at salesdesk@fglife.com. Any indexed interest credited is never taken away, due to market decline. Subject to change Hypothetical FG AccumulatorPlus performance from 12/31/07 - 12/31/17. 100% allocation to Barclays Trailblazer Sectors 5 Index. 2-year point-topoint crediting method with charge. 1

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Indexed interest rates are subject to a cap and/or a spread. Caps and spreads are subject to change at the discretion of Fidelity & Guaranty limitations, restrictions and additional charges. Volatility control seeks to provide smoother returns and mitigate sharp market fluctuations. While this type of strategy can lessen the impact of market downturns, it can also lessen the impact of market upturns, potentially limiting upside potential. responsibilities, obligations or duties to policy owners of fixed indexed universal life products. The Index is a trademark owned by Barclays Bank PLC and licensed for use by Fidelity & Guaranty Life Insurance Company as the Issuer of fixed indexed universal life products. While Fidelity & Guaranty Life Insurance Company as Issuer of fixed indexed universal life products may for itself execute transaction(s) with Barclays in or relating to the Index in connection with fixed indexed universal life products. Policy owners acquire fixed indexed universal life products from Fidelity & Guaranty Life Insurance Company and policy owners neither acquire any interest in Index nor enter into any relationship of any kind whatsoever with Barclays upon making an investment in fixed indexed universal life products. The fixed indexed universal life products are not sponsored, endorsed, sold or promoted by Barclays and Barclays makes no representation regarding the advisability of the fixed indexed universal life products or use of the Index or any data included therein. Barclays shall not be liable in any way to the Issuer, policy owners or to other third parties in respect of the use or accuracy of the Index or any data included therein. Subject to state availability. Certain restrictions may apply. Form numbers: API-1018(06-11), ACI-1018(06-11); et al. “F&G” when used herein refers to Fidelity & Guaranty Life, the marketing name for Fidelity & Guaranty Life Insurance Company issuing insurance in the United States outside of New York. Life insurance and annuities issued by Fidelity & Guaranty Life Insurance Company, Des Moines, IA. FOR PRODUCER USE ONLY – NOT FOR SOLICITATION TO CONSUMERS 18-0870


vs How to Win & Retain Ultra-High Net Worth Clients TEXT BY AARON HODARI, CFP®, CIMA®

Even when clients know what they want, it’s still pertinent to counsel them on the bigger picture. It deepens the conversation, increases trust and confidence, and makes it hard for them to go anywhere else. We had a prospect experience a significant liquidity event. He was a partner in a technology company and sold a portion of their business to a private equity firm. This gave him cash in the bank (for the first time) while also retaining a large amount of equity in the business going forward. The client was knowledgeable and had a firm understanding of investment concepts. That said, while interviewing us and other advisors, we were competing with him using an entirely passive investment approach he would do on his own. He was looking for a reason not to do that, but it seemed that was the likely outcome unless you could provide real quantifiable value. During our meetings, we focused on the benefits and downsides of passive investing. But more importantly, we focused on a broad look at his estate, wealth, goals, risks, and investment preferences (turns out, he hated equity investing). By taking a planning-based approach, we were able to win the client’s business, develop a great relationship with him, and get a referral to the partner.

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Active vs. Passive Investing Vanguard founder Jack Bogle started the debate of active versus passive investing when he created the first index fund in 1975. Hundreds of additional index funds, countless studies, and one historic recession later, passive investing has become a household concept and is accepted as the preferred method of investing for millions of investors.

Drilling Down Research has found that active managers are more likely to outperform their benchmark on a net-of-fee basis in certain asset classes. This is true in international equities, where the median active fund manager outperforms by over 1.5% per year. That’s a return well worth the fees of active management, and the same holds true in smallcap investing.

For many investors, the best solution might be a passive one. If they have a modest net worth and don’t require much financial planning, the diversified investment options provided by robo-advisors and passive options may be as cost-efficient and diversified as possible.

There are some asset classes where the median manager can’t even beat the benchmark on a gross-of-fee basis. Add fees on top of that and active management becomes hard to justify.

On the other hand, a high net worth individual is likely to have more needs. Optimizing a portfolio for complexities like estate planning and tax efficiency will likely require a more active approach to how assets are allocated. The high net worth clients we work with typically require a more diversified allocation beyond stocks, bonds, and cash into assets such as real estate, insurance, private equity, and other alternatives. 40 | CONNECTIONS MAGAZINE

Different portfolios and clients require different levels of customization, and both active and passive strategies can achieve a client’s objectives. We believe there’s no one-size-fits-all solution. A carefully planned approach specific to the client will yield the best portfolio—often including active and passive strategies.


Low Correlation Diversification for UHNW Investors Markets have ridden an exciting rollercoaster of activity, and current ambiguities on forward-looking market projections have forced the hand of many extremely high net worth investors to be entrepreneurial in their thinking.

We used this opportunity to put an insurance policy in place to cover this risk, bringing their attorney and accountant into the situation. By identifying the risk and bringing in other members of our client’s team, we solidified our place as the quarterback for the client’s financial life.

Depending on an investor’s risk tolerance, it’s generally recommended that a portion of their portfolio should have some correlation to the broader market, with the balance diversified into other asset classes that have low correlation. This diversification is necessary to avoid systematic risk or the chance of being over exposed into one type of asset class or market. How do investors achieve returns and diversification at the same time?

It started with investments, moved onto planning, and ended with a great client and a referral to their business partner. During the interview process, the client touched no less than seven people at our firm. We’ve found that multiple touch points, great interactions, and a holistic approach lead to great outcomes. Clients most often aren’t just looking for an investment, their looking for a plan.

There are many types of risks investors can take, and not all of them are stock market risks. When building a diversified portfolio, we look for diversification within each asset class but spend a lot of time looking for ways to diversify across different asset classes.

Schechter and Alphastar are excited about our partnership, and we look forward to being able to bring the full resources of our firm to the relationship to drive similar outcomes for advisors and their clients. s

Alternative investments provide the opportunity to get exposure to various risks different from the stock (economy) and bond (interest rate) markets. We look to private equity, private debt, real estate, merger arbitrage, quantitative, and other strategies to diversify the risks in a client’s portfolio. Our Solution: A Holistic Approach At Schechter, we’re believers in building a portfolio that takes both active and passive approaches into account. We’re even a bigger believers in the idea that no two investors require the same approach. Every one of the clients we work with has different sets of needs and goals. It’s our job to find that balance. By educating the client on the investment landscape, the way we develop portfolios, and our general thought process; we can add value from an investment perspective. The next step is to understand the big picture so we can design something tailored to those clients. Let’s go back to the story of our tech client. By identifying that he retained a large stake in the business going forward, we identified an estate tax and estate liquidity issue. If the client and his wife were to pass away, the entirety of the liquidity in their estate would go to pay estate taxes and it still wouldn’t be enough to cover the bill. Being in their late 70’s, there was a real chance this would occur and create issues for their heirs.

About Schechter: Schechter is a boutique, third-generation wealth advisory and financial services firm. For 80 years, our multi-disciplined team consisting of JDs, CPAs, LLMs, CLUs, PFSs, CAPs, MBAs, CFA® charterholders, CFP® practitioners and CIMA® consultants have been quietly advising wealthy families on financial matters including: Institutional quality investment advisory services, private capital and alternative investments, advanced life insurance planning, income and estate taxes, business succession and charitable planning. About Aaron Hodari, CFP®, CIMA®: Aaron Hodari, CFP, CIMA, is Managing Director of Schechter. Aaron works with high net worth individuals, families, business owners, and their advisors to bring them institutional quality investment management and advanced financial planning solutions. Aaron heads the firm’s branch of Private Capital, including deal sourcing, due diligence, deal structuring, and market opportunity identification. He’s also instrumental in the development of correlated and noncorrelated investment alternatives, helping identify investment allocations, and manager selection. Disclaimer: Securities for Schechter Wealth dba Schechter offered through Chalice Capital Partners, LLC (Chalice), member FINRA / SIPC. Schechter and Chalice are affiliated but do not share common ownership. Advisory Services for Schechter offered through Schechter Investment Advisors, LLC (SIA), a registered investment advisor. Schechter Private Capital, LLC (SPC), which concentrates on advising private funds, is also a registered investment adviser. Schechter, SIA and SPC are affiliated and share common ownership. Certain principals of SIA and SPC are also registered representatives of and sell security products for compensation through Chalice. Chalice is otherwise unaffiliated with SIA and SPC.

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BUSINESSCONSULTING In Partnership With

TM

EXTRACT MAXIMUM POTENTIAL

SURGE TO NEW HEIGHTS Surge Business Consulting engages with financial professionals to create tailored strategic and tactical business solutions that maximize growth in their respective businesses. Through the 20.20 process, Surge holds itself and the financial professional accountable to reaching new heights together. Three important questions: • Are you fully prepared to execute your five year business plan to become explosive by the year 2020? • Is your business vision clear and concise to execute change inside your business? • Are you willing to dedicate 20 minutes 20 days per month to be accountable and focus on your business? 20.20 becomes a ritual. With the help of Surge you’ll create new personal and business habits that will impact you for the remainder of your years in business as a financial professional.

EXECUTION VISION PURPOSE

COMMIT TO OUR PROGRAM

Let your business surge beyond your initial dreams.


TM

THE 20.20 PROCESS A CLEAR AND CONCISE VISION Discovery Meeting - This 30-minute call will introduce you to Surge and help you understand specifics and deliverables surrounding your Surge engagement. You’re invited to have key associates attend this call with you. GO | Gather and Observe - A one to two day on-site discovery meeting to gather and observe. Surge will spend time extracting information about your business. From people and processes to business psychology and future planning. Surge would like to meet all staff members and even core partners that are key to your business model. In certain cases, Surge will ask to meet family and significant others if they’re involved in your business life. The more that’s learned the stronger the solutions and output will be. DO | Developmental Output - Once the tailored GO process is complete, a developmental output (DO) is created specific to the theory and application necessary to stimulate your business. In this step, you’ll be given an outline and detailed specific strategic and tactical items to hold accountable to change. SUM | Reveal and Discover - Next step is a phone call with you and colleagues of your choosing, to disseminate the findings and discuss how to best turn ideas into practice. This conversation will last between one and three hours. Account | Staying on Course - How many times have you left a great seminar or meeting filled with ideas, only to implement none of them? This final step is to ensure that doesn’t happen. Each month an accountability call is hosted with your specific office to discuss where you are in the process of change and what’s needed to remain on course. Also as a member of Surge, you have an open invitation to a monthly call series hosted by Surge and other experts on various industry impacting topics.

TESTIMONIALS


BETASHIELD™: MANAGING INVESTMENT RISK TEXT BY BROOKS RILEY

The modern financial planner must consider many different factors when devising solutions for their clients. Among the most important is a client’s ability and willingness to take on risk. But how do you measure and manage risk? Traditionally, risk has largely been quantified using statistical analysis and measures of volatility or standard deviation. While probably the most familiar and popular metric in today’s environment, is volatility really the best measure to utilize with your individual clients? Well, maybe for some. However, for others there may be a simpler and more intuitive way to help clients understand the risk being taken in their investment accounts: maximum drawdown.

Understanding Maximum Drawdown Maximum drawdown refers to the most an individual can lose in their account from the highest previous account value. Adjusting the consideration of risk from volatility to maximum drawdown can produce some powerful insights on how to manage investment risk and help individual investors have a clearer understanding of the return expectations for a given account. So, how do we take the maximum drawdown method and utilize it in an easily implemented strategy that advisors can use with their clients? This was the driving question behind the creation of Alphastar’s Betashield™ Risk Mitigation Overlay (RMO) concept.

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Alphastar partnered with Horizon Investments to research and develop a model portfolio that would address an individual investor’s concept of risk in a thoughtful manner utilizing the notion of maximum drawdown. We begin by creating a base model portfolio and determining what asset class and geographic allocations will make up the base model.

Currently, Alphastar runs five models that allow for the Betashield™ RMO option to be applied to the strategy if it fits a client’s needs:

• Globally diversified - 100% equity • Globally diversified - 80% equity, 20% bonds • Globally diversified - 60% equity, 40% bonds • 100% U.S. equity • 100% International equity The Betashield™ rules are calibrated based on limiting investment losses to a pre-determined maximum level. That means framing client expectations in terms of investment loss are clearly set, and provides a reference point to which gains and losses are measured.


Ratcheting Up

Bottom Line

The pre-determined maximum drawdown level is also coupled with a “ratchet up” functionality. Each Betashield™ model’s performance is tracked on a daily basis. If any of the portfolios records a new high at market close then the maximum drawdown percentage is reestablished from that new value.

At its core, Betashield™ adopts the “lose less” philosophy by using the maximum drawdown measure of risk management. This is coupled with a tactical management strategy to systematically reduce the risk exposure in an account during periods of market downturns—and remain invested in a more aggressive allocation during times of prolonged market uptrends.

In other words, as the portfolio model increases in value over time, a client’s gains will be protected by the maximum drawdown risk mitigation strategy along the way. Once a Betashield™ portfolio is selected, with accompanying maximum drawdown, we can then look at the tactical management that the Betashield™ RMO provides. Betashield™ will move a client’s funds into or out of the base portfolio and a short-term treasury position in 25% increments of the account value. These triggers consider portfolio performance and volatility measures in the hope of avoiding shortterm market volatility and the change of being “whipsawed”—meaning selling out or buying in at the wrong time due to quick and considerable market movements.

Betashield™ can help with behavioral difficulties regarding retail investors by doing what the investor typically wants to do. That means reducing equity exposure in times of negative market movements, but in a methodical, thought-out manner. Betashield™ could be a valuable option to have in your financial planning solutions, especially for clients that are nearing or are in retirement that are more concerned about suffering a catastrophic loss in their portfolio than they are about achieving substantially high growth. You can institute the maximum drawdown concept of risk mitigation in the Betashield™ strategy to provide certain clients with a peace of mind that isn’t typically seen in traditional portfolio modeling. s

Brooks Riley, Investment Advisor Consultant Alphastar Capital Management, Contact Brooks - Phone: 855-340-2514, Email: Brooks.Riley@alphastarcm.com

CONNECTIONS MAGAZINE | 47


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CORNER

2019 FINRA & SEC EXAM PRIORITIES TEXT BY PAUL VAN GINHOVEN

One of the least favorite activities a firm goes through is a regulatory examination. Broker-dealers (BDs) and registered investment advisors (RIAs) know they’ll be examined by their regulatory authority. Ensuring their firms and their registered associates are prepared is key. Each year, both FINRA and the SEC draft a list of key items their examiners will focus on in the new year. These lists are better known as “examination priorities”. It’s important to note that while a regulator issues a specific list of exam priorities, it doesn’t mean in any way this is all one could expect an examiner to look into if an examination occurs. Examiners will look through everything, but they’ll pay particular attention to the items their regulatory authority called out in their annual exam priorities list. All that said, this article will cover the 2019 exam priorities for FINRA and the SEC and things you should be aware of, so you’re prepared in the event of a regulatory examination. 50 | CONNECTIONS MAGAZINE


FINRA Priorities Letter FINRA officially issued their 2019 Risk Monitoring and Examination Priorities Letter on January 22, 2019, which can also be found on FINRA’s website. It covers some ongoing issues where they’ll continue their focus, as well as some new items. FINRA’s primary focus, which is generally the primary focus of any regulator, is investor protection. I’ll cover some—but not all—of the ongoing and new areas of focus. Suitability Sales practice issues have long been on FINRA’s list of concerns. Under FINRA’s regulations, Rule 2111 states the following three obligations for firms and registered representatives: Reasonable-basis suitability: Requires a broker to have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. Reasonable diligence must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy. Customer-specific suitability: Requires that a broker, based on a particular customer’s investment profile, has a reasonable basis to believe that the recommendation

is suitable for that customer. The broker must attempt to obtain and analyze a broad array of customer-specific factors to support this determination. Quantitative suitability: Requires a broker with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed in isolation, is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. In a nutshell, both the firm and the registered representative have obligations from a suitability perspective. Representatives must gather all of the necessary data from the customer in order to perform adequate due diligence to reasonably believe a transaction is suitable. The firm must then verify this recommendation is suitable, but also have an obligation to conduct a broader surveillance of a rep’s recommendations to ensure suitability. While a particular recommendation may appear to be suitable for one investor at the time of the transaction, it’d be problematic if a broader review found that the same recommendation is made over and over for all customers. FINRA would question how this could be so. CONNECTIONS MAGAZINE | 51


CORNER Communications with the Public The applicable FINRA rule for this topic is Rule 2210. FINRA will continue to: • Review communications for content • E nsure proper internal review procedures are followed • If applicable, proper filing requirements are followed • Adequate books and records are maintained Anti-Money Laundering Firms must continue to review and develop their antimoney laundering (AML) programs as well as their AML policies and procedures as criminals are becoming more sophisticated. As a reminder, an independent auditor must review AML programs. Firms should continue to require their associates to complete annual AML training. This training ensures associates have skills to identify and escalate issues related to money laundering. Fraud This comes in all shapes and sizes. Firms must ensure their compliance departments have the resources necessary to conduct adequate oversight of trading and customer account activities. Risk Management Most examinations nowadays are risk-based examinations. This means that regulatory authorities use data such as regulatory filings, customer complaints, litigations, product mix, and business strategies to determine risk levels and risk areas to focus on. A firm that has minimal or no customer complaints, no past regulatory findings, and has a simple business model, may have lower perceived risk from a regulatory perspective than a firm that does have or has had these types of issues. Firms should also look at their compliance activities (surveillance, reporting, and audit) and take a risk-based approach in reviewing the activities of their associated individuals as well as the firm as a whole. 52 | CONNECTIONS MAGAZINE

Additionally, firms have their own business risks to consider. These risks include operational risks, sales practice risks, market risks, and financial risks. Firms should identify all risks and incorporate a risk management process to ensure their risks are understood and mitigated where they can be. Past Regulatory History FINRA has long focused on individuals who’ve had past regulatory issues and will continue this focus in 2019. Specifically, FINRA will focus on how firms address the risks associated with hiring individuals with U4 (interpretive questions and answers form) issues and how they manage those risks. Any firms who employ individuals with U4 issues can expect FINRA to dig deeper for information. Sales to Senior Investors We all know the US population is aging at a rapid rate. The Baby Boomer generation represents a large chunk of our overall population and most are at or nearing retirement. In the next five years, all of this generation with be over the age of 60 and the majority will be over the age of 70! Seniors are more susceptible to fraud, abuse, exploitation, and high-pressure sales tactics. That said, FINRA will continue to focus on the ages of one’s clients.


SEC Priorities Letter The SEC Office of Compliance Inspections and Examinations (OCIE) issued their 2019 Examination Priorities letter on December 20, 2018. Similar to FINRA, they too will focus on AML and sales to seniors. As it related to senior investors, the SEC will key in on ensuring firms have adequate disclosures and calculations of advisory fees. Additionally, the SEC will take a look at FINRA this year to ensure their examination process is fulsome and adequate. The SEC has also had concerns regarding digital assets and cryptocurrency, and will focus a great deal of energy in this area.

What This Means Firms must conduct due diligence of their third parties to ensure they handle customer data appropriately. This topic is never going away. As we become more dependent on technology to get our business done, we have to ensure our firms have tested safeguards in place to protect customer data from security breaches. Regulators spend a lot of time in examinations assessing the risks a firm and its individuals may present. By understanding what your regulator is looking for and being prepared to address their concerns will put you on the right path for a successful examination.

As you may know, FINRA reports directly to the SEC, so it should come as no surprise that both regulators would be aligned on many of their exam priorities. There’s one topic that regulators from all corners of the financial industry are keeping an eye on and that’s cybersecurity.

When in doubt, firms should engage compliance and legal consultants and, if necessary, get a second opinion to ensure they’re prepared not only for an examination, but most importantly, to protect their customers from risks that could’ve been mitigated—or eliminated. s

Both the SEC and FINRA have identified cybersecurity as a priority for many years now. Even other industries, such as the insurance industry, are showing much concern over cybersecurity. Firms must ensure that the systems they use and the systems their associated individuals use are locked down, tested, and vetted to ensure customer data is protected. It’s not enough to outsource technology to a third-party and point the finger at the third party if something goes wrong.

Paul Van Ginhoven, Director of Compliance Financial Independence Group, Inc. Contact Paul - Phone: 800-527-1155, Email: Paul.VanGinhoven@figmarketing.com

CONNECTIONS MAGAZINE | 53


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2019 FINANCIAL INDEPENDENCE GROUP

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January 1: New Year’s Day January 10–11: CLTC Master Class January 21: Martin Luther King, Jr. Day January 30–Feb 1: Waste Management Phoenix Open – Talking Stick Resort, AZ

Feb. 7–8: CLTC Master Class – Crowne Plaza, Phoenix Airport Hotel, Phoenix, AZ Feb. 18: Presidents’ Day Feb. 21–22: ElevateU – Renaissance MCO Hotel, Orlando, FL

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December 22–30: Hanukkah December 25: Christmas Day


SEPTEMBER

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SEPTEMBER

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FIG Connections Winter 2019  

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