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IAR - Read this first!

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Title: Slide 1 Author: Skidone Created Date: 5/20/2003 11:29:03 PM Document presentation format: On-screen Show (4:3) Company: LPL Financial Services – PowerPoint PPT presentation

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Title: IAR - Read this first!


1
IAR - Read this first!
  • This presentation is for advisory clients and
    prospects only. You must be a Investment Advisor
    Representative (IAR) to use this presentation
    with clients/prospects. All slides and speaker
    note scripts must be used in the format provided
    and cannot be altered. Slides may not be provided
    in any form to clients and/or prospects. Any
    modifications to this presentation must be
    submitted to LPL Financial Advertising Review for
    approval prior to first use. Speaker notes are
    accessed by going to View gt Notes Page. Microsoft
    PowerPoint (not Viewer) required to see Notes
    Pages.

2
S T R A T E G I C A S S E T M A N A G E M E N
T (SAM)
A TIME-TESTED INVESTMENT STRATEGY
The LPL Financial family of affiliated
companies includes LPL Financial, UVEST Financial
Services Group, Inc., IFMG Securities, Inc.,
Mutual Service Corporation, Waterstone Financial
Group, Inc., and Associated Securities Corp.,
each of which is a member of FINRA/SIPC.
3
Strategic Asset Management
  • Asset Allocation and Diversification
  • My Role as an Advisor
  • The Consulting Process
  • My Advisory Platform
  • Strategic Asset Management

There is no guarantee that a diversified
portfolio will enhance overall returns or
outperform a non-diversified portfolio.
Diversification does not ensure against market
risk.
4
Charting the Course for your Financial Future
5
Strategic Asset Allocation
Divide your portions between seven or eight for
you do not know what misfortune will come to this
world.
6
Asset Allocation Drives Performance
Market Timing 1.8
Other Factors 2.1
Security Selection 4.6
Asset Allocation Decision 91.5
Source Determinants of Portfolio Performance
II An Update - Brinson, Singer,
Beebower, Financial Analysts Journal, May / June
1991
7
How Many Baskets Do You Have?
BestPerforming
WorstPerforming
Sources Bonds LB Aggregate Bond Index L Growth
Russell 1000 Growth Index L Value Russell 1000
Value Index S Growth Russell 2000 Growth Index
S Value Russell 2000 Value Index Intl MSCI EAFE
Index HFRI HFRI Equity Hedge Index
Indices are unmanaged and cannot be invested into
directly. See attached page for disclosures.
8
How Many Baskets Do You Have?
  • Disclosure Treasury bills are backed by the
    full faith and credit of the United States
    Government. Please note that the value of bonds
    generally have an inverse relationship to
    interest rates. Stocks will experience market
    fluctuations which can include loss of principal
    value while bonds offer a fixed-rate of return.
    Small-cap stocks may be subject to a higher
    degree of market risk than large-cap stocks, and
    the illiquidity of the small-cap market may
    adversely affect the value of these investments
    so that when redeemed, shares may be worth more
    or less than their original cost. High-yield
    securities inherently have a higher degree of
    market risk and there are credit risks associated
    with the underlying issuers. In addition, lack of
    liquidity associated with high-yield securities
    may impair their value. International and
    emerging market securities are also subject to
    additional risks such as currency fluctuations
    and political instability. Prior to investing in
    any security, consult with your financial
    professional.

9
A Tale of Three Investors
  • Our first investor, Peter, employs an investing
    strategy known as chasing performance. He
    invests a hypothetical 10,000 at the end of each
    year into the best-performing market segment of
    that year and continues this process for twenty
    years.

For purposes of this comparison, the overall
market has been divided into six separate indices
Lehman Agg. Bond Index, M.S. Capital
International, Russell 1000, Russell 1000 Growth,
Russell 1000 Value and Russell 2500. It is not
possible to invest directly in an
index. Beginning 12/31/82 and ending 12/31/02,
Peter invests 10,000 on January 1 of each year
for twenty years into the best-performing market
segment of the previous year. The money is left
in the specific sector for the duration. This is
a hypothetical illustration and not
representative of any specific investment. Your
situation will vary. Past performance is no
guarantee of future results.
10
A Tale of Three Investors
  • Our second investor, Rhoda, is always hoping for
    the rebound. She invests at the end of each
    year in the worst performing segment of that year
    and continues this process for twenty years.

For purposes of this comparison, the overall
market has been divided into six separate indices
Lehman Agg. Bond Index, M.S. Capital
International, Russell 1000, Russell 1000 Growth,
Russell 1000 Value and Russell 2500. It is not
possible to invest directly in an
index. Beginning 12/31/82 and ending 12/31/02,
Rhoda invests 10,000 on January 1 of each year
for twenty years into the worst-performing market
segment of the previous year. The money is left
in the specific sector for the duration. This is
a hypothetical illustration and not
representative of any specific investment. Your
situation will vary. Past performance is no
guarantee of future results
11
A Tale of Three Investors
  • Irvin is the insightful investor. He allocates
    and diversifies his 10,000 by investing equally
    in six different market segments each year for 20
    years. And not only does Irvin allocate and
    diversify, but at the end of every quarter, his
    portfolios assets are rebalanced so that they
    are equally distributed among six segments.

For purposes of this comparison, the overall
market has been divided into six separate indices
Lehman Agg. Bond Index, M.S. Capital
International, Russell 1000, Russell 1000 Growth,
Russell 1000 Value and Russell 2500. It is not
possible to invest directly in an index. Irvin
follows this process from 12/31/82 12/31/02,
investing an addiional 10,000 every January 1.
This is a hypothetical illustration and not
representative of any specific investment. Your
situation will vary. Past performance is no
guarantee of future results.
12
A Tale of Three Investors
Maintaining a well-diversified portfolio worked
  • Irvin may be onto something. His strategy
    combining asset allocation and rebalancing
    significantly outperformed the other two
    approaches.

Peter
Rhoda
Irvin
  • This is a hypothetical illustration designed to
    demonstrate the effects of diversification and
    rebalancing and is not intended to project
    performance. No strategy assures success or
    protects against loss. Past performance is no
    guarantee of future results.
  • The Lehman Brothers Agg. Bond Index is a measure
    of the U.S. bond market. The MSCI EAFE Index is a
    measure of the international stock market. The
    Russell 1000 Index measures the performance of
    large-cap U.S. stocks. The Russell 1000 Growth
    Index measures the performance of large-cap U. S.
    growth stocks. The Russell 1000 Value Index
    measures the performance of large-cap U.S. value
    stocks. The Russell 2500 Index measures the
    performance of U.S. small-cap stocks

13
Consistency, Consistency, Consistency
  • Investor B Invests 100,000
  • Disciplined, Diversified Portfolio
  • Goes up 10 one year, up 10 the next.
    Continues this pattern for 20 years.
  • Investor A Invests 100,000
  • Chases Returns
  • Goes up 30 one year, down 10 the next.
    Continues this pattern for 20 years.

Average Annual Return, Investor A 10 Average
Annual Return, Investor B 10
Account Value after 20 years 480,674
Account Value after 20 years 672,735
This is a hypothetical illustration. Your
results will vary. Diversification is an
investment strategy that seeks to reduce risk an
provide competitive returns. No investment
strategy guarantees against a loss. The
hypothetical rates of return do not reflect the
cost inherent in investing.
14
How Diversified Are You?
15
Many Assets, Little Diversification
  • Large Company Growth Stocks

Stock investing involves risk, including loss of
principal.
16
A World of Noise
17
Dont Be That Guy!
Stuart and Mr. P
Catch the wave of the future, mman!
Source Ameritrade
18
My Role as AdvisorQuiet the Noise and Remain
Disciplined
Determine Objectives
Asset Allocation
On-Going Review
You
Security Selection
19
Step 1 Determine Your Objectives
20
Step 2 Build Asset Allocation Framework
Growth with Income
21
Step 3 Select Underlying Investments
Investors should consider the investment
objectives, risks, charges and expenses of the
investment company carefully before investing.
The prospectus contains this and other
information about the investment company. You
can obtain a prospectus from your financial
representative. Read carefully before investing.
22
The Fund Selection Process
  • Management Team
  • Investment Philosophy
  • Risk
  • Expenses
  • Adherence to Style

Investing in mutual finds involves risk,
including loss of principal. Investments in
specialized industry sectors have additional
risks, which are outlined in the prospectus.
23
Step 4 Ongoing Portfolio Review
  • Discuss Account Performance
  • Revisit Client Objectives
  • Review Asset Allocation
  • Explain Rebalancing
  • Implement Decisions

24
Staying in Balance
  • Source LPL Financial. Values represent the total
    return of unmanaged indices assuming full
    reinvestment of capital gains and dividends.
    Equity allocation represented by the Russell 3000
    Index Bonds represented by the Lehman Brothers
    Aggregate Bond Index Cash represented by the
    Lehman Brothers 3-month T-Bill. Past performance
    is no guarantee of future results. Indices may
    not be invested into directly. No strategy
    assures success or protects against loss. This
    hypothetical example is intended to demonstrate
    the effects of rebalancing and is not intended to
    project performance.

25
My Advisory Process
  • By building a relationship based on advice,
    rather than transactions, my success is directly
    linked to that of my client.

26
Benefits of Strategic Asset Management
  • Multiple Investment Choices
  • Flexibility
  • World Class, Unbiased Research
  • One Account, One Statement, One Fee

27
Multiple Investment Choices
  • 6,250 No-load /Load Waived Mutual Funds
  • Individual Stocks Bonds
  • No-Load Variable Annuity
  • Previously Purchased Investments
  • Certain funds in SAM pay 12b-1 fees. Nominal
    transaction charges apply.
  • Stock investing involves risk, including loss
    of principal. Bonds are subject to market and
    interest rate risk if sold prior to maturity.
    Bond values will decline as interest rates rise
    and are subject to availability and change in
    price.

28
Sample Fund Families
  • AIM
  • Allianz
  • American Funds
  • Dreyfus
  • Fidelity
  • Franklin/Templeton
  • Janus
  • MFS
  • Neuberger/Berman
  • Oppenheimer
  • PIMCO
  • Putnam
  • RS Funds
  • Scudder
  • TCW
  • Transamerica
  • T Rowe Price
  • Vanguard

Investors should consider the investment
objectives, risks, charges and expenses of the
investment company carefully before investing.
The prospectus contains this and other
information about the investment company. You
can obtain a prospectus from your financial
representative. Read carefully before investing.
29
Flexibility
  • Change Asset Allocation as Your Objectives Change
  • Aligned Interest
  • Trade Without Paying Commissions

Certain funds in SAM pay 12-b1 fees. Nominal
transaction charges occur.
30
LPL Financial World Class Research
  • One of the Largest Independent Investment
    Research Organizations
  • Analysts Covering Individual Securities and
    Mutual Funds
  • No Investment Banking, No Proprietary Products

31
LPL Financial Resources
LPL Financial Research
32
One Account, One Statement, One Fee
  • Consolidated, Quarterly Report
  • Consolidated Tax Statement
  • Predictable Expenses Linked to Portfolio
    Performance

33
The End Result
  • Consistent, Risk-Adjusted Investment Returns

Ongoing Review
Security Selection
Asset Allocation
Determine Objectives
34
Strategic Asset ManagementA Time-Tested
Investment Strategy
The only thing new in this world is the
history you dont know. -Harry S. Truman
35
Your Next Step
  • Schedule a meeting for a more in depth look at
    my practice and receive a complimentary
    investment analysis.
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