Session OneDate

Location

VICK & ASSOCIATES, INC.

SPONSORED BY:

CONTACT INFORMATION

Dave Vick dave@vickassociates.com

630-456-4401Vick & Associates, Inc.300 S. County Farm Rd.

Suite GWheaton, IL 60187

DisclaimerThe ABCs of Conservative Investing Workshop is an educational program, and is not intended to sell investment or insurance products, nor is it intended to provide tax or legal advice. Consult with your tax advisor and/or legal counsel for suitability for your specific situation.

Hypothetical and/or actual historical returns contained in this presentation are for informational purposes only and are not intended to be an offer, solicitation, or recommendation. Rates of return are not guaranteed and are for illustrative purposes only.

Projected rates do not reflect the actual or expected performance within any example or financial product.

Dave Vick is an Investment Advisor Representative with Redhawk Wealth Advisors, an SEC Registered Investment Advisor. Insurance and annuity products are offered through Vick & Associates, Inc.

Course Introduction• Attendance is good, but participation is

better.• You have my dedicated time for the next

three weeks.• We will start and stop on time with 10

minute breaks on the hour.• Course based on “Bat-Socks, Vegas &

Conservative Investing.• Includes ABC’s of Conservative Investing

Workbook.• ABC’s of Conservative Investing – DVD by

the author.• Fill out Workshop Goals sheet.

Chapter One

Conservative Investing

What is it…?

RISK•TYPES OF RISK – p.13•Risk vs. Reward•Upset-ness•Risk Tolerance Scale – p.13

iN

HOW TO BE A CONSERVATIVE

INVESTOR

(“Life in the Slow Lane”)

Chapter Two

What the Heck Just Happened?

Changes are coming…

So, What the Heck Just Happened?Investing Paradigm Shifts

S&P 500 Chart 1980 - 2010

Welcome to the M Times

Looking back from Reagan

Looking backward from ObamaWelcome to

the M Times

Welcome to the M Times

The Times They Are A Changin’

•Gambling vs. Investing – p.19•401(K) Plans – p.20•Supply vs. Demand•Changing Technology•The Bears are Growling – p.20

• Every 3 years you have a bear market.

• Every 8 years you have a significant bear market.

• If you hold your money for 17 years you won’t have a problem.

• This bear started in 2000.

On Average

“The Anatomy of a Bear” Napier 2005

We Live in Perilous Times!

Chapter Three

Santa & Six WallStreet Myths

Myths or Maxims, You Decide.

1.“You haven’t lost until you sell.”

SIX WALL STREET MYTHS

2. “The Large Wire Houses (Wall Street and it’s big

firms and media outlets) are the Best Place to get Professional Advice.”

SIX WALL STREET MYTHS

3. “A Diversified Portfolio of Stocks, Bonds, and Mutual Funds are Safe Over the Long Haul”

SIX WALL STREET MYTHS

4. “Buy & Hold is an Effective Conservative Strategy”

SIX WALL STREET MYTHS

5. “Just Buy a No-Load Index Fund”

-

SIX WALL STREET MYTHS

S&P – p.27

6. “Index Annuities are Dangerous”

SIX WALL STREET MYTHS

Tom Cochrane - p.28

They’re like great white sharks…they’ll jump out of the water and swallow you whole!

Chapter Four

Jump In theThe Water’s Fine

The Need for a New Model

THE NEED FOR A NEW INVESTING MODEL

• Status Quo Bias – p.31• Wall Street is Disconnected with Main Street

• Information Overload• Long-Term Market Returns

Dow Jones S&P 500

40 Year – 6.95%20 Year – 6.98%15 Year – 4.35%10 Year – 2.00% 5 Year - 0.40%

40 Year – 6.73%20 Year – 5.82%15 Year – 3.78%10 Year – 1.19% 5 Year - 1.84%

* Source: S&P500 returns from financial.yahoo.com, as of 12/31/2011. DJI returns from http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm, as of 12/31/2011. Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.

REAL HISTORICAL RETURNS

YOUR HOMEWORK!

FOR NEXT WEEK READ CHAPTERS 1-9

ALSO…

Complete Appendix One, Asset Review Forms; Appendix Two, Retirement Budget Worksheet;

and Appendix Three, Risk Tolerance Questionnaire

DateSession Two

Why Are We Here?

• Do you know how all of your assets (stocks, bonds, mutual funds, annuities, REITS, Life Insurance, etc.) work together to achieve the amount of risk you want in your total portfolio?

• How does your current portfolio protect you in a bear market?

• How does the average person determine which assets to use in a conservative portfolio?

• What is your plan to manage risk?• Do you need a degree in finance to

know how to manage risk?

What Did You Get Out of Last Week?

• What is Conservative Investing?• Perilous Times to be an Investor?• Wall Street (Investment Community)

Disconnect?• Technology has Created a New ‘Ball

Game’?• We Can’t Keep on Doing the Same Thing?• Perhaps There is a Need for a New Model?

Chapter Five

Lego’s, Train sets,& the ABC’s of

Investing

The ABC Model Defined• Wall Street Pyramids and Risk Tolerance

• A Conservative Investor’s Dilemma - How do you, the conservative investor, know where to

allocate your money to avoid the volatility which cost you sleepless nights?

How do you know which assets to use and why you might use them?

Can an average investor really understand why his or her money is placed in one investment or another?

Do you often wonder if you need a degree in finance to understand it? Explain.

Is there a simple way you use to understand how to allocate your assets to accomplish your goals? Explain.

The ABC Model of Investing-

Cash Assets

The ABC Model of Investing-

Fixed Principal Assets

The ABC Model of Investing-

Risk Assets

10% 60% 30%

SAMPLE CONSERVATIVE MODEL

10% 30% 60%

SAMPLE MODERATE/AGGRESSIVE MODEL

What is Your Greatest Priority?

What are you willing to give up?

Gains?Liquidity?

Protection?

Let’s Review…

• Rule of 100

• Sleepless Steve’s Allocation

• Major Differences between Wall Street and the ABCs

Chapter Six

WHO’S THE KING?Yellow Money Savings

• The goal of Yellow Money?• How much Liquidity is right for you?• The Two Yellow Money Categories

–Accessible with no penalties–Accessible with minimal penalties

IS HAVING THE MAJORITY OF YOUR MONEY LIQUID IMPORTANT TO YOU?

If not, then how much is right for you?

(No right or wrong answers)

“They are who we thought they were”

Green Money Premium

Chapter Seven

FIXED INCOME OR FIXED PRINCIPAL ASSETS?

• What are Fixed Income Assets?• Do Fixed Income Assets have

Protection of Principal?• Have you or anyone you know ever

lost money in bonds?• In the past have you thought that

Bonds guaranteed principal?• What is the ‘Bond Bubble’?

Is Protecting Your Principal, or some of your Principal, important to you?

‘Green Money’ Rules For Choosing Assets in

Column Green Money Rule #1: It Protects Your Principal Green Money Rule #2: It Retains Your GainsGreen Money Rule #3: It Guarantees Your Income

Types of ‘Green Money’ Assets

• Variable Annuities, Yes or No? Why?

• Fixed Annuities• Fixed Indexed Annuities

Year FourYear One Year Two Year Three

Items to Consider:

___Surrender Duration ___Liquidity Options ___Caps ___Income Riders ___Crediting Methods ___Other

10%

4% cap

-40%

0%

6%

4%

8%+ 4%

12%+

15%

An FIA Simple Four Year Graph

FIA Basics

• How does the structure of an Indexed Annuity protect your principal and retain your gains?

• Would you be upset with “0%” in year two?

• Would you be upset if you did not get a greater return in year four when the market went up 15%?

Actual FIA Historical Performance*

Fixed Index Annuity

*DISCLOSURE: This is a Hypothetical Graph that reflects the actual interest crediting methods used by a specific insurance company from a time period beginning 09/30/1998 and ending on 09/30/2010. Individual results may vary and be dependent upon crediting methods, caps and participation rates. This is for illustration purposes only to show how a Fixed Index Annuity may have performed over a specific period of time.

FIA CREDITING METHODS

• FIA Guarantees • Annual Point to Point with a Cap• Annual Point to Point with Participation

Rate• Monthly Point to Point with a Cap• Monthly Average with a Cap or

Participation Rate• Multi-Year with a Mix of Interest and 100%

of the Market

Additional FIA Points

• Taxes• Fees with FIAs• Liquidity with FIAs

– Compare an Indexed Annuity’s liquidity to other assets?

• Laddered Maturities–What advantages or disadvantages

do you see in using laddered maturities?

Additional FIA Points • Planning for Income - Pension

Payments• Guaranteed Withdrawal Benefits

– Accumulation Values– Income Account Values– Current Surrender (Cash) Values– Guaranteed Minimum Surrender Values

• In what ways would you see a GWB enhancing your situation?

What is your take on the value of Green Money Column B?

Do you think it is important to protect a portion of your assets?

If so, how much is the right percentage for you?

Chapter Eight

“How’s the Weather?”Red Money Investing

What is the Big Deal With Column C?

Why Even Bother With it?

Red Money Language

• Systematic Risk, Volatility, and Variance– How does Systematic Risk make you feel?– Explain what “Volatility” is…– What is “Variance”?

• Beta, Standard Deviation, and R-Squared– What are they? – How would you think these are helpful in evaluating your

investments?• The Lipper average

– Average level of performance for all mutual funds, as reported by Lipper, Inc.

p.71

“Hulberts’ data shows more than 84 percent of newsletters underperform the market over 5-years. Over ten y“Hulberts’ data shows more than 84 percent of newsletters underperform the market over 5-years. Over ten years, that number rises to 90 percent.” ears, that number rises to 90 percent.”

“Hulbert’s data shows that more than 84 percent of mutual Funds underperform the market over a 5-year period. Over ten years, that number rises to 90 percent.”

Morningstar Publications

Stock Type Risk vs. Bond Type Risk

“I also have a rule for Red Money that unless you have over two million dollars in investible assets you probably want to stay away from individual stocks… Unless you are market savvy you don’t want in this game as a conservative investor.” Dave Vick, page 75.

Do you agree or disagree with this statement? Why?

WHO CHOOSES YOUR ASSETS?

• Yourself, through self-directed accounts?• Financial Advisor/Broker?• Charles Swab, Fidelity Investments, etc.? • Registered Investment Advisor?• Why?

Buy and Hold Management

• What is a “Buy and Hold” style?• What are the positives and negatives

about the ‘”Buy and Hold” Style?• How did “Buy and Hold” do over the last

ten years? Five years?

Tactical Management Style• What is Tactical Management, or

Tactical Models?• How does this differ with a ‘Buy and

Hold’ Strategy?• Do you feel that Tactical Management

may be the future of investing, as the author suggested?

What is your take on the value of Red Money Column C?

Do you think it is important to protect your purchasing power?

If so, how much of your assets do you feel you should have in column C?

Chapter Nine“A Negative Neighbor”

What if it Happened Again?

WHAT IF IT HAPPENS AGAIN? ‘s in a Bear Market

“The way to make money is to buy when blood is running in the streets.” John D. Rockefeller

“We simply attempt to be fearful when others are greedy and to be greedy with others are fearful” Warren Buffett

• Every 3 years you have a bear market.

• Every 8 years you have a significant bear market.

• If you hold your money for 17 years you won’t have a problem.

• This bear started in 2000.

On Average

“The Anatomy of a Bear” Napier 2005

The Anatomy of a Bear

USING THE ABC MODEL IN A BEAR MARKET

If the next ten years saw a 20% loss in the market, how would it affect your retirement?

USING THE ABC MODEL IN A BEAR MARKET

“The first rule is not to lose. The second is not to forget the first rule.” Warren Buffett

ABC Difference39%

Looking Forward…

The decade from 2010 and forward does not look any more promising than the “lost decade”. With government bailouts, increasing mortgage defaults, the bond bubble, the commercial real estate bubble, escalating taxes, government controlled healthcare, increasing deficit spending, fourteen trillion dollar national debt, and low interest rates, some things may get ugly.

What Do You Think?

Do you see the markets over the next decade doing better, or worse, or about the same as the last decade?

Considering the ABC Model’s performance in a bear market, is it something that you would use in your portfolio?

Next Week

Date 6:30PM – 8:30PM

Read Chapters 10 – 14Also…

Complete Appendix One, Asset Review Forms; Appendix Two, Retirement Budget Worksheet, and Appendix Three (if not already done)

DateSession Three

What Did You Get Out of Last Week?

• A New Model, The ABCs• Yellow Money, Cash is

King• Green Money, Protection

is Powerful• Red Money, Do it Right,

Tactical over ‘Buy and Hold’.

• What if it Happens Again?

Chapter Ten“The Cowboy

Preacher”Biggest Need for Retirees: Income

Planning

THE BIGGEST NEED… INCOME

• So… when will you need income?

• What is your plan to make your income last up to three decades?

• What affect would market losses have on your retirement income?

Accumulation on $500,000 Inverse Returns Effect

Year Annual Return End of Year Value

Inverse Return End of Year Value

1 +28% $640,000 -38% $310,000

2 -10% $576,000 -12% $272,800

3 +15% $662,400 +2% $278,256

4 +17% $775,008 +15% $319,994

5 +1% $782,758 +26% $403,193

6 +26% $986,275 +1% $407,225

7 +15% $1,134,216 +17% $476,453

8 +2% $1,156,901 +15% $547,921

9 -12% $1,018,073 -10% $493,129

10 -38% $631,205 +28% $631,205

Income on $500,000 Inverse Returns Effect

Year Annual Return

Annual Withdraw

End of Year Value

Inverse Return

End of Year Value

1 +28% $35,000 $605,000 -38% $275,000

2 -10% $36,225 $508,275 -12% $205,775

3 +15% $37,493 $$547,023 +2% $172,398

4 +17% $38,805 $601,212 +15% $159,452

5 +1% $40,163 $567,061 +26% $160,746

6 +26% $41,569 $672,928 +1% $120,785

7 +15% $43,024 $730,843 +17% $98,294

8 +2% $44,530 $700,930 +15% $68,509

9 -12% $46,088 $579,730 -10% $15,570

10 -38% $47,701 $306,151 +28% (-$27,772)

Green Money Income Plans

• Split Annuities – What are they? What is appealing about them? What is not?

• Guaranteed Withdrawal Benefits – Again, what are they? Why would they be good? What could be the downside?

Split Annuity$500,000

10 Year Income Bucket 10 Year Growth Bucket

$220,000

$2,106 per month, or$25,271 per year for 10 years. Value after 10 years $0.00

$280,000

Plus 8% Bonus,

GWB 6.5%

Guaranteed Income Account Value: $577,783. Could yield between $30,000 to $40,000 for life.

Maximum Income, but Delayed?

10 Year Guaranteed Income Account: $1,012,654 (Pays out between $50,000 - $70,000 per year for Life)

$500,0008% Bonus

GWB

Key Questions: Is Guaranteeing Income Important to You in Retirement?

Would it still be important if you had to liquidate principal? Eliminate heirs?

Chapter Eleven“I Should Have

Listened”401(k) Plans

I Should Have Listened – Seven Problems with Your 401(k)

• Problem #1 – Is your 401(k) compliant? Is it at risk by IRS Standards?

• Problem #2 – Roth Accounts in a 401(k) have issues. Do you have a DRAC?

• Problem #3 – Limited Choices. Does your plan have the choices you wish they had? What choices would you like to add to your plan? Are you confident in choosing assets? What’s your experience?

I Should Have Listened – Seven Problems with Your 401(k)

• Problem #4 – The 20% withholding trap• Problem # 5 – Limited Beneficiary Options.

When was the last time you checked the beneficiaries on your qualified plans? How would you arrange them?

• Problem #6 – Required Minimum Distribution Errors. Rules, Rules, Rules?

• Problem # 7 – 401(k)s: The Non-Stretch Plan. Do you desire to leave Qualified $s to family?

Understanding Your 401(k) Options

Consider In-Service, Non-Hardship Withdrawals to:1.Create Better Income Solutions2.More Investment Options3.Plan Consolidations4.More Beneficiary Options5.Stretch IRA 6.Protect Principal7.Get Professional help

Key Question: Is Having More Options and Control of your 401(k) Important to you Right

Now? In Retirement?

Chapter TwelveYou Need a Sherpa

You Probably Need a Sherpa

• Trust• ‘Likeability’• Understands the

ABCs• Longevity – are

they going to be around when you need them?

• Client-Partner?

Chapter ThirteenDeal or No Deal

Three Elements of a Financial Decision

• Logic – Do you agree that Wall Street Greed is a good philosophy?

• Belief/biases – Are you aware of any bias you hold regarding your investments? Media Bias? Do you have any beliefs about assets or groups of assets that need to be changed?

• Emotions - Greed

Despair Despair

Confidence

Denial

Key Question: In what ways do you think an ABC Plan can help you avoid the emotional

ups and downs of investing?

Process, Process, Process• Investigation• Recommendation• Implementation• Review and Adjust

Chapter Fourteen

Seven Steps to an ABC Plan

Seven Steps to an ABC Plan

• Step One – Get Your Assets Together (App. One)• Step Two – Write Down Retirement Goals and

Budgets• Step Three – ABC Your Assets (Know your Risk

Tolerance, App. Three)• Step Four – Choose an Advisor• Step Five – Process, Process, Process• Step Six – Review and Adjust• Step Seven – Sleep at Night!

In what ways have you resonated with the ABCs of

Conservative Investing?

Please complete our Evaluation Form…

CONTACT INFORMATION

Dave Vick dave@vickassociates.com

630-456-4401Vick & Associates, Inc.300 S. County Farm Rd.

Suite GWheaton, IL 60187

Thank you for Attending!