The Cogent Advisor Wealth Management Guide

white paper | November 2011

The Cogent Advisor Wealth Management Guide:

How Chicago Exchange Professionals Can Prevail Through Financial and Personal Transitions

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TABLE OF CONTENTS

Executive Summary 2

Part I: Wealth Challenges Unique to Our Chicago Trading Floor Community 2

From the Floor to the Computer: Before and After 3

Part II: Trader Transitions 4

The Chicago Exchange Trader’s “Trilemma” 5

Part III: Wealth Management for Financial Professionals 8

Defining Wealth Management 9

Working with a Wealth Manager 11

1. The Discovery Meeting 11

2. The Investment Plan Meeting 11

3. The Mutual Commitment Meeting 12

4. The 45-Day Follow-up Meeting 12

5. Regular Progress Meetings 12

Conclusion 13

About The Cogent Advisor 15

The Cogent Advisor Wealth Management Guide: How Chicago Exchange Professionals Can Prevail Through Financial and Personal Transitions

The Cogent Advisor Wealth Management Guide: How Chicago Exchange Professionals Can Prevail Through Financial and Personal Transitions. © Copyright 2011 The Cogent Advisor. All rights reserved.

The Cogent Advisor LLC is a registered investment advisor. The Cogent Advisor LLC provides individual client services only in states in which it is filed or where an exemption or exclusion from such filings exist. This White Paper is provided for informational and educational purposes only.

No part of this publication may be reproduced or retransmitted in any form or by any means, including, but not limited to, electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees.

The information contained herein is accurate to the best of the publisher’s knowledge; however, the publisher can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof.

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EXECUTIVE SUMMARY

For financial professionals in general — and especially for the Chicago exchange community — the past decade has been nothing short of a quiet revolution, swept along by the dual forces of the worldwide shift away from open outcry on the floor to electronic trading as well as ongoing global and domestic market volatility. Those of us caught in the force of change have faced significant transitions in both our professional and personal lives.

With only a sliver of the community remaining within traditional trading roles, the rest of us have moved on, whether willingly or not: shifting elsewhere within the financial industry, changing careers and/or fields entirely, retiring, or continuing to consider our next move.

As an illustration of both the pain and potential found among survivors of the Chicago trading floor heyday, I offer my own, initially unwelcome transition from trader to wealth manager. If there is a largest lesson to learn from the experience, it’s the value of accepting a team approach in your life and your career — moving from a “winner takes all” to an “all can win” mindset. I can attest, it’s a rough, but rewarding shift for a trader to experience.

At first blush, it may seem counterintuitive to think that a former trader or other financial professionals could benefit from the services of a wealth manager and a team approach, when we are so very accustomed to relying on our own wits to succeed. In reality, our community faces challenges resulting from our distinct, “insider” perspective. An additional set of eyes, preferably those of a wealth manager who has walked in the trader’s same shoes, can be an important asset in helping trading floor professionals not only survive but thrive amidst the transition.

Collectively and individually, former trade floor professionals share a “trilemma” of challenges specific to our industry and its relationship with our wealth, our career/earning potentials, and our lives. As professional traders, we often find it painful to separate our career-driven, transactional and individualistic mindset from goal-driven, team-oriented wealth management needs. Essentially, the financial professional-turned-investor must be adept at accommodating two mindsets, one for his or her trading, entrepreneurial pursuits and another for the accumulation and preservation of long-term wealth.

A wealth manager should be sensitive to these distinctions. He or she should offer an initial and ongoing process based on discovering and achieving personal goals, with solutions and specialized alliances to equip financial professionals with the clarity needed to make sound, informed decisions about their long-term wealth.

PART I: WEALTH CHALLENGES UNIQUE TO OUR CHICAGO TRADING FLOOR COMMUNITY

What if the National Football League decided to emulate the

Chicago exchanges, filling the stadiums with wide-screen monitors and white-sleeved computer programmers, and converting its star players to those who could code the best touchdowns? Imagine asking Chicago linebacker Brian Urlacher what he would do with his newfound free time. “What do you mean, ‘What would I do’?”

This was exactly the response I received when asking “Joe,” a former Chicago Mercantile Exchange (CME) floor trader, what he would do if someone else were to manage his wealth for him.

“ If there is a largest lesson to learn from the experience, it’s the value of accepting a team approach in your life and your career ...”


© 2011 The Cogent Advisor

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Mind you, Joe is an extremely bright, talented and energetic fellow who has routinely traded millions of dollars on a typical day. So it’s not as if he can’t imagine the possibilities. The problem is, I’m asking him to consider what seems like an impossibility. A professional linebacker intercepts real pigskin. A professional floor trader trades with real body and soul. As far as his career is concerned, trading isn’t what he does; it’s who he is.

Or at least, who he was. For Chicago’s professional exchange community — the CME, the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) — the impossible has happened. In fact, it was even self-inflicted. When the CME became the first U.S. exchange to go public in December 2002, it was a member-driven decision, in recognition of the accelerating transition from the floor to computer trading2. If Chicago were to remain the premier center for global derivatives activity, its members had to agree to take it on the chin. The CME was the first, with the CBOT following

suit in 2006 (and then merging with the CME)3, and the CBOE issuing its IPO in March 20104.

When computer trading took hold as expected, many former members and other shareholders in the Chicago exchange community profited handsomely from the companies’ improved positions. But the benefits were bittersweet — in some respects, blood money for the demise of our livelihood. Not only did we lose our proverbial skin in the game, but the game of open outcry as we knew it was over.

Few outside of the financial industry can fully appreciate the magnitude of this silent, startling revolution that swept across the Chicago trading floor community during the first decade of the 21st century. For those who were directly involved, it was no minor speed bump in the road; it was Lake Shore Drive hurtling itself off the edge of Navy Pier during rush hour.

There had been more than 10,000 traders supported by 1,000 computer programmers in a 10:1 ratio, with the best and biggest action coming straight from the floor — and, aside from growing numbers, that’s how it had been for 150 years.

Before

From the Floor to the Computer: Before and After1

After

Within a handful of years, the tables turned, with 10-fold programmers for every trader, and the majority of the 1,000 trades per second blazing in across the Internet. The final blow arrived in October 2008, when the Great Recession rendered 9 out of every 10 traditional floor traders permanently obsolete and left Chicago’s trading houses as quiet as a locker room after season’s end.



As a veteran CME commodities trader myself, one of the things I loved the most about my CME career was its equalizing entrepreneurialism. I could have been anyone from a Harvard-educated lawyer to a former Chicago policeman with a GED, a descendant of George Washington to a first-generation American. Bottom line, our staying power mattered a whole lot more than any credentials. Those who were good enough, loud enough and, yes, lucky enough could make money. Lots of money.

I happened to be the kid of a member of the Chicago Fire Department, equipped with the luck of the Irish and some financial coursework from DePaul University. I began as a filling broker and switched to being a local floor trader, trading my own capital and thriving on the jostling, yelling and hand signals; the rewards that came from being able to stand out, outshout and outmaneuver my adversaries in this zero-sum game of capitalism in the raw. If I won, someone — a bank, a hedge fund or just another floor trader — had to lose.

I admit, I found that kind of action addictively appealing. The physical effort energized me to play the game with gusto, and the competitive sport fed my energy. Most days, enough days, I returned home to my family tired, satisfied. Happy.

After a while, I’d built up a comfortable nest egg, larger than most other sons of Chicago’s city workers. And I’d earned it doing something I loved. If things had stayed that way forever, that would have been fine by me. It was me against the world, and that’s the way I liked it.

But of course we know how this story ends, and it wasn’t happily ever after. As a result of the upheaval, thousands of Chicago floor traders, brokers, hedge fund managers and other financial professionals share a trio of distinct wealth, career/earning and life challenges.

In short, more cleanly separating and prudently managing each of these — long-term wealth accumulation, business capital and sustainable personal spending — is increasingly critical as the traditional trading floor culture has been restructured, and issues regarding total as well as liquid wealth loom considerably larger than before. I cannot overstress the importance of recognizing

these distinct and overlapping trio of challenges, and sooner than later. As a financial professional, your ability to address each and all is key to achieving a successful transition into your new future. It’s key to you as an individual and a family steward. It’s also critical to transitioning into a respected player at the forefront of any number of enterprises and opportunities that await both the elite skill sets you’ve honed on the trading floor as well as the new talents you’ll develop for your next career.

M.C. Escher, a master of depicting seemingly visual impossibilities in his artwork, once asked, “Are you sure that a floor cannot also be a ceiling?” For traders-turned-investors who can recognize the possibilities within seeming impossibilities, the sky can indeed be the limit as you plan for your future wealth.

Next, let’s consider some specific illustrations, including my own experience in making the adjustment. It wasn’t always the smoothest of rides.

PART II: TRADER TRANSITIONS

Where have all the traders gone? A small group, approximately 10 percent of 1997 floor traders5, continue in some semblance of their former floor careers, either remaining in the dwindling pits or entering the cool, quiet world of computer trading, as distant from the hurly-burly glory days as is implied by the jargon that describes the shift: “moving upstairs.”

4 © 2011 The Cogent Advisor


“ Chicago trading floor professionals, nearly to a person, have seen our traditional roles come to an end, one way or another.”

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The vast majority of those from the traditional Chicago exchanges have moved on:• Shifting elsewhere within the financial industry• Changing careers and/or fields entirely• Retiring • Still considering their next significant move

Regardless of what the future holds, Chicago trading floor professionals, nearly to a person, have seen our traditional roles come to an end, one way or another. Some were better than others at finding new, satisfying situations for themselves and their loved ones. I can thank (and sometimes curse) the industrywide changes for my own shift from



CAREER/EARNING — Traditional avenues for dramatic wealth accumulation within the trading floor profession no longer exist. But financial professionals are an entrepreneurial, risk-tolerant community. This can work in favor of identifying new earning opportunities for former floor traders who want and/or need to remain professionally engaged for years to come. Still, even as former traders find and embrace new career opportunities outside of the trading profession, diminished incomes typically demand challenging adjustments in spending habits and lifestyles.

LIFE — It’s critical to remember that many of life’s greatest rewards are found in family, community and personal aspirations outside of our careers. Former floor traders facing personal and professional redefinition can turn to new sources for meaningful living as part of an evolving definition within their own lives. However, when the identity of “trader” has served so well for so long, these kinds of emotional shifts can be easier said than done.

WEALTH — Past wealth accumulation has often been significant, but large swaths of wealth have been ravaged by the combined forces of our industry’s transformation, the Great Recession and ongoing market volatility. As described in a white paper sponsored by the University of Chicago’s Graduate School of Business (today, the Booth School of Business), “The futures trading industry generates the most individual wealth of any industry in Illinois. … However, with the restructuring of an industry, there are also challenges.”6

THE CHICAGO EXCHANGE TRADER’S “TRILEMMA”

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trader to wealth advisor and Registered Investment Advisor firm CEO. To determine the challenges and opportunities we’ve faced along the way, I prepared for this paper by interviewing more than two dozen colleagues, primarily Chicago filling brokers and floor traders, CME board members, and clearing firm owners. I sought to determine: Are there applicable ideas we can share?

The concept of sharing in itself represents a fresh mindset for many of us. And of course there is no single story that captures the countless ways each of some 10,000 individuals made his or her very personal transition to a new life. But we’ve certainly seen and experienced some common threads that characterize the experience. In his book, Transitions: Making Sense of Life’s Changes, William Bridges aptly describes a roughly three-stage process:

1. The Ending — Our old way of life has ended. We’ve shed many of our past connections and have gradually stopped expecting or hoping for their return.

2. The Neutral Zone — As the ending sinks in, many of us experience a “What’s next?” period — sometimes brief, sometimes lengthy — during which we recognize that the “good old days” are gone, but the future remains ill-defined. For most, this fallow period is filled with more fear and anxiety than excitement or optimism. Still, just as soil needs time to recover between growing seasons, so too do most people need time to work things out at the root level prior to meaningful renewal.

3. The Beginning — We eventually emerge from the neutral zone no-man’s-land to form specific plans for the future — plans that guide us into new relationships, new opportunities … a new life.

So, to circle back to our earlier question: Where have all the traders gone? Slap on an “under construction” sign, because most of us are busy transitioning. Some are still grappling with their former career ending; some linger in the neutral zone. The most successful have made it through to the beginning of their new beginning.

In my own transition, I faced the fear and uncertainty as well as the intriguing excitement of each uncomfortably overlapping stage. Despite my optimism about and enjoyment of the CME, a skeptical part of me had always figured it was too

good to last. I and my fellow CME members could see the inexorable advance of global electronic trading. It didn’t take a genius to recognize what this would eventually mean to our world.

Even so, when the end finally did come after a few years of trading off the floor, when it was time to consider a new career, I was better prepared for it by having routinely set aside a portion of my earnings into a separate portfolio. My investment activities weren’t yet optimal. I engaged a different money manager, but the relationship felt shallow and lacking. I’d not yet learned the important role a wealth manager can play in overseeing the many moving parts. But the efforts had reduced the

Leaving homeculture

Starting life innew culture

Neutralzone



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temptation to treat all of my wealth as spendable cash, fully available for the immediate needs of business and pleasure.

Still, on an emotional level, it was a trying time. As I endured my own “neutral zone,” I found myself pulling away from former colleagues, and even from my wife and children. As cliché as it may have been, I would sit in Starbucks for hours, reading or continuing to study for the nighttime, graduate-level classes I was taking at DePaul University. Sometimes, I would use the time to stay in shape physically by taking long bicycle rides alone in the mass of Chicago traffic, all bustling to and from their chosen pursuits. Sometimes I used the time to think and reflect. Sometimes I used it to curse and worry. Sometimes I used it for nothing at all.

Eventually, through the combi-nation of continuing education, self-reflection, physical activity and the simple passing of time, plans emerged for the next phase in my life. Hazy at first, they were based on a few early revelations that have served as my guideposts through the fog. I realized that, for me, the first guidepost was my family. The second was my community. Spending time with them was the most important thing I had. My money and career would intersect, but I realized they weren’t the “it” of it.

Striving for balance offered me the flexibility I needed to make an appropriate career choice, which became my third guidepost. I needed a career that would enable me to engage financial professionals and their families who are enduring similar journeys and overcoming similar barriers to their own successful transitions. I was ready to make the move from “me” to “team.” An essential

ingredient I could bring to the table was the following personal understanding:

Trading and wealth management require two distinct mindsets — within one and the same person.

One former trader colleague described it as having to “rebrand” himself and his trading skills:

You know, it’s not easy. There are plenty of days I wish I could wake up, go down to the pit, make 40 grand and come home. But you have to move away from that because it just messes with your head. I think traders, when they are exiting, should be handed some sort of 90-day course in wealth management, to convince them to not beat the market. Do you really think standing on the floor and trading futures has anything to do with beating the market in stocks? It just flat out never has and never will. If you

want money to trade, take whatever you need and do it. And put the rest into a portfolio that you have predetermined for the risk and the time frame you like.

In a way, a trader-turned-investor must be able to dream in two languages: the native tongue of entrepreneurial pursuits, born on the trading room floor, as well as the foreign lingo of long-term wealth accumulation and preservation. To explore this final — critical — point, we turn to solutions for addressing the unique wealth management challenges faced by the “bilingual” financial professional. I have learned the new language myself, in my personal pursuit of how to manage my own wealth and how best to build a world-class wealth management business.

“ ... professionals often fail to provide a full spectrum of advice to encompass a financial professional’s unique needs and problems, hopes and dreams.”




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PART III: WEALTH MANAGEMENT FOR FINANCIAL PROFESSIONALSSo how do financial professionals resolve the distinct “trilemma” of conflicting forces generated by our wealth, career/earning paths and personal lives? How do we become comfortably bilingual, able to converse in both the solo financial entrepreneurialism that makes life interesting, as well as the team-oriented wealth planning that makes life’s goals achievable?

Many have no doubt worked with various investment advisors, retail brokers or hedge fund managers of one kind or another. However, these professionals often fail to provide a full spectrum of advice to encompass a financial professional’s unique needs and problems, hopes and dreams. These distinctions are important, as a 2007 CEG Worldwide study shows that, although nearly half of all advisors (46.3 percent) call themselves wealth managers, only 6.6 percent practice true wealth management.

Financial professionals — and Chicago trading professionals especially — need wealth managers who understand what they’re going through, with apt processes and far-reaching solutions to encompass their complex financial, career and life pressures.

To benefit from wealth management, financial professionals need to shift their mindset from immediate, independent and transactional to long-term, team-oriented and systemic. They must move from the perspective of treating all their wealth as a single, liquid source of ATM-style cash for every facet of their lives, to assigning different roles for different portions of their wealth. By deliberately structuring each portion for the distinct role it plays, we can shift from ad hoc, reactionary spending to more sustainable, goals-based wealth management, that addresses the full trilemma of our complex personal and professional lives.

To illustrate, as much as I loved the trading floor, in setting aside a portion of my profits into a globally diversified portfolio, I understood that there was a difference between the high stakes I willingly accepted in my career, versus planning for the reliable assets my family depended upon for achieving long-term financial goals such as college and retirement funding.

At the same time, I initially believed that I could fly solo with my personal portfolio management, just as I had done in my trading activities. A do-it-yourself approach worked to a point; I fared better than many other fellow traders who had failed to establish any sort of investment portfolio separate from their trading accounts.

But the more involved I became in the investment world, the more I appreciated the benefits of a team approach to wealth

management. Here, unlike on the trading floor, I discovered the importance of working in alliance with rather than in opposition to respected, like-minded colleagues.

One of my learning experiences occurred when a “boring” short-term municipal bond fund holding I’d selected plummeted 44 percent overnight. Without the benefit of advice from a specialized bond portfolio expert, I had not seen that the fund managers had been mishandling the account compared to its stated goals. When the discrepancy came to light, the bottom fell out.

For me, it represented a tolerable loss compared to my overall wealth; a lesson learned on how to properly manage fixed income risk. But it was a severe blow to many of the fund’s shareholders — teachers and public service retirees and other everyday investors whose life savings had vanished in what amounted to a collapsed Ponzi scheme.

“ I want enough information, a firm grasp going in, so I don’t lose control, so I can make informed decisions.”



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This made me mad. Mad enough to become lead plaintiff in a class-action suit against the fund, and mad enough to be instrumental in successfully recovering more than half of the assets lost by my fellow plaintiffs, even though it took seven years of my life.

Both the insights into appropriate fixed income investing as well as the aftermath of successfully defending my fellow investors’ interests in the subsequent class-action suit were a significant influence on my wealth management career to come. It was one of my first tastes of what it was like to make financial decisions on behalf of and along with others. As lead plaintiff, you make the decisions that affect everyone, after consulting a variety of specialized subject matter experts. I was gathering all available information from a wide and diverse team, and then acting as a fiduciary for everyone else in the class. I kept stressing to our attorneys, “Tell me what’s best for everyone in the class.” And that’s what we’d do. At its essence, these are the same skills that a wealth manager brings to force for his or her clients.

After the dust had settled, I continued with my trading career for several more years, but I also resolved to educate myself on the intricacies of asset management. This is the period during which I began to attend nighttime classes at DePaul University, culminating in a graduate certificate in Financial Planning and Asset Management. To guide my decisions, I also sought out informational interviews with a number of financial advisors and wealth managers across the country, attended several key industry technology and practice management conferences, and generally explored the gamut of possibilities that shaped my next move.

When the time came to shift careers, this and other early experiences (such as having championed the addition of low-cost, index-style funds to the

state’s Bright Start 529 college savings plan — what a thrill it was to be invited to share the podium with then-Treasurer Alexi Giannoulias when the announcement was made) paved the way for my decision to become a wealth manager, to position so many more families like mine to invest in the right way, using the right approach.

Defining Wealth ManagementWhat is the right approach to wealth management? It’s neither a legal nor regulated term, so how do you know it when you see it? Sometimes, it’s easier to define what something is by eliminating what it is not. The hallmarks become clear when the wealth manager is compared with other advisors.

Advisors tend to fall into three broad categories: investment generalists, product specialists and wealth managers.

Investment generalists offer a broad range of products but do not specialize in a single type. While they offer their clients many different products, they do not make consulting an essential part of their business model. They are focused on the transaction (and the resulting commission paid by the product provider).

Product specialists focus exclusively on an investment-oriented product niche and offer a single type of product as a potential solution. They often offer products such as managed accounts, stocks, fixed income or alternatives. Like investment generalists, these advisors do not have a consultative orientation and tend to be transactional.

In either case, transactional advisors are assisting with parts but not the whole, often failing to address key needs of the financial professional/investor. After all, professional traders don’t need extensive help with transactions. If that’s all there were to it, they’d already feel confident that their lives’ goals were on track, with little need for additional consideration.



“ During the discovery meeting, you and the wealth manager will explore your values, wants and needs ...”

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But that’s not what I heard as I interviewed my two-dozen-plus financial colleagues. I found a common theme of unmet concerns, such as:

• Uncertainty on how to bridge the gap between trading versus building wealth — how to balance safeguarding accumulated wealth and allocating portions of it to support ongoing entrepreneurial aspirations

• Additional unanswered questions about how to plan for their personal and professional financial future

• Holes in the levels of far-reaching wealth advice they were currently receiving

• Missing or misapplication of advanced planning tools to complement earning and investment activities

As one trader described it: “I want enough information, a firm grasp going in, so I don’t lose control, so I can make informed decisions. That’s what you pay somebody for — his advice and his research, to parse out all the information. I don’t have to be ‘that guy,’ but I want to be at that comfort level about where I’m putting my money.”

Wealth managers take a comprehensive approach to meeting clients’ needs. We use a consultative approach to construct integrated strategies for clients’ specific problems. We take the time to deeply understand the client base we serve. Although many advisors call themselves wealth managers, the following are hallmarks of those who walk the walk:

• They use a consultative process to establish a close relationship with each client, to gain a detailed understanding of his or her most important goals, financial wants and financial needs.

• They offer informed expertise, customized choices and recommended solutions to fit those specific needs. They take into account a range of interrelated financial services, such as investment management, risk management, estate planning and retirement planning.

• They deliver these customized strategies working

closely with the client (and his or her family), upfront and ongoing. They identify specific needs, design custom strategies and track ongoing implementation to ensure that plans remain on target.

“Working closely” means exactly that: Wealth managers stay in touch. A wealth manager will offer a wide range of services and will coordinate with specialized strategic alliances to help with a wide array of financial needs. Below are some of the essential ones:

• Cost-competitive asset management services— mutual funds, managed accounts, brokerage accounts, custom bond portfolios and alternative investments

• Planning services — financial planning, education planning, retirement planning

• Charitable gifting services — including private foundations, donor-advised funds, charitable remainder trusts and charitable lead trusts

• Wealth transfer services — identifying and facilitating the most tax-efficient ways to pass assets to succeeding generations

• Wealth protection services — shielding wealth from litigants, creditors, children, in-laws and ex-spouses

• Risk management services — covering everything from protecting the mundane (autos, homes) to the exotic (rare artwork, top-end yachts), and elevating risk management to also serve in an advanced planning capacity to enhance liquidity, estate transfer and more

• Credit services — including mortgages and personal and business loans

In my case, I additionally layered on a variety of outsourcing solutions, ranging from select operation and marketing support professionals, to investment strategy and solutions from Dimensional Fund Advisors, to a collaborative think tank of like-minded advisor community found at BAM Advisor Services. After carefully choosing my alliances, I left the island to join the mainland.



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Working With a Wealth ManagerBecause wealth managers are focused on a consultative process, they use a system that often differs from the traditional, transaction-based advisor. From a client’s first meeting to the time an agreement is reached and throughout the months

and years of the relationship, the wealth manager will likely arrange a series of meetings designed to encourage questions, interaction, conversations and understanding.

Exhibit 1 is a brief outline of the meeting structure we have adopted at our firm. Of course valid variations exist, and our own processes are intentionally flexible to accommodate clients’ unique circumstances, but these are typical of the kinds of meetings you can expect in a wealth management environment.

1. The Discovery MeetingAt the first meeting, the wealth manager uses a systematic, detailed interview process to define an investor’s true financial needs, goals and current position. This process will provide the advisor with the information he or she needs to create a total client profile. This profile becomes a key tool for communicating the broad financial picture to a network of specialists to whom the advisor will turn for help in creating customized wealth management strategies.

During the discovery meeting, you and the wealth manager will explore your values, wants and needs; collect information to assess the suitability of working together; and gather the details necessary to initiate structured planning, should the relationship continue.

2. The Investment Plan MeetingThe second meeting should build on initial discovery. Continued collaboration between you and the wealth manager should lead to a customized investment plan that reflects you and your specific goals. In this meeting, the wealth manager proposes a draft investment plan to describe your needs and risk tolerances, and offer benchmarks as well as a road map for tracking progress toward your expressed goals. Your custom investment plan should be guided by these important discussion points:

1. Establishing a clear definition of long-term needs, objectives and values, such as forming a new enterprise, retiring early or purchasing additional homes

2. Identifying levels of risk tolerance for various assets

Exhibit 1The Consultative Client Management

(CCM) Process

CCM1: Discovery MeetingDuration: 1.5 hours

Interval to next meeting: Two weeks

CCM2: Investment Plan MeetingDuration: 1–1.5 hours

Interval to next meeting: One week

CCM3: Mutual Commitment MeetingDuration: 1 hour

Interval to next meeting: 45 days

CCM5: Regular Progress MeetingDuration: 1 hour

Interval to next meeting: Regular/Periodic

CCM4: 45-Day Follow-upDuration: 1 hour

Interval to next meeting: 90+ days

Source: CEG Worldwide



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3. Assessing expected time horizons for your investments

4. Exploring expected rate-of-return objectives that complement personal financial goals based on your unique ability, willingness and need to take market risk

5. Understanding the evidence-based tenets of applying low-cost, globally diversified, asset-class investing as the recommended strategy for long-term wealth accumulation or preservation

6. Ensuring a strategic implemen-tation plan that is aligned with individual goals

7. Continually monitoring, tax managing and rebalancing to remain within planned risk targets

It’s important to emphasize that your well-drafted investment plan should not be a document handed to you “from on high,” so to speak. Rather, it should represent a consultative exploration in which you are deeply involved, to provide that “comfort level” articulated by our financial colleague on page 10 — a sense that the wealth manager is making smart decisions in concert with you. A well-designed investment plan further serves as the foundation for an entire financial picture, establishing the framework for bringing in a professional network of top providers to help with specialized financial challenges.

3. The Mutual Commitment MeetingAt this meeting, if both you and the wealth manager are pleased with the discussions and relationship

so far, you both likely commit to establishing a formal advisor-client relationship. Together, you execute the necessary documents and proceed

with finalizing and implementing your investment plan.

4. 45-Day Follow-up MeetingAs implementation unfolds, it makes sense for you to set aside time for a formal follow-up meeting with your wealth manager. This ensures that your wealth manager has the opportunity to update you on any important details regarding your portfolio implementation, continue the collaborative, educational process, and discuss questions or concerns.

5. Regular Progress MeetingsMoving forward, you continue meeting with your wealth manager as appropriate, to address issues, questions, changes and performance assessments. The overarching objectives are to:• Ensure your plan is on track relative to your

particular long-term goals, and to assist with adjustments as those goals evolve.

• Discuss and implement advanced planning solutions; if your investment plan is the found-ation of your financial house, then advanced planning represents additional, important structure. As appropriate, we’ll engage our select team of expert “engineers,” and co-ordinate their activities in addressing your particular risk management, estate planning, tax mitigation and charitable giving goals.

“ To put it simply, wealth management might be considered a fancy term for quality of life.”



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CONCLUSION

To put it simply, wealth management might be considered a fancy term for quality of life.

This is true for investors in general. It’s just as true for Chicago financial professionals who are transitioning from the floor-trading world that no longer exists in its traditional form. Like anyone who is undergoing a life transition — accepting an ending, enduring a period of fallow contemplation, and embarking on a new beginning — a helping hand can make all the difference between surviving versus thriving.

“I’m certainly not a savvy investor,” observed one of my colleagues. “When all was said and done, I should’ve found a wealth management group that said, ‘Look, let’s protect your purchasing power, let’s diversify it.’ I want to outsource all of this asset allocation to you guys, and I want to be left with some money so I have an opportunity to do something with it — if it’s trading, if it’s whatever. I’ll do my thing and you guys do your thing.”

My colleague was not a client of our firm, but rather he was expressing his thoughts on the role he felt any wealth manager should play. A wealth manager frees financial professionals and their families to identify, and then do, “their thing.” A wealth manager should free one’s wealth for something more.

Today, through the power of collaboration, I’m CEO of my company and CEO of my life. But the

transition did not occur without loss. On the trading floor, everyone knew me as “MJ,” and if I had a suit coat at all, it spent most of its time in the back of my closet. As CEO of The Cogent Advisor, I’m Michael, and I wear my business attire proudly, to respect and honor the time my clients agree to share with me.

Making the leap from one-man show on the floor to forming — and being formed by — a personal wealth support team has been one of the most daunting, yet rewarding personal makeover moves ever. It’s been a little like the television show “Survivor” in reverse, where I’ve discovered that getting voted off my own little island was actually the best thing that could have happened. It’s enabled me to harness all of my past experiences and tightly focus my present energies on building the strongest personal relationships needed to serve as my clients’ wealth manager and Personal Chief Financial Officer.

As my colleague above observed, achieving quality of life means giving up some financial control into the hands of a wealth manager. This is an intimidating prospect for any individual. It’s a particular challenge for financial professionals, since we are used to calling all our own shots for a living. There’s no question that, as a trader turned wealth manager, I’m a different man than I used to be. But I have regained one key ingredient in my career. Once again, I return home to my family at the end of the day, tired but happy.


This Article does not intend to make an offer or solicitation for the sale or purchase of any securities or products. Investment in securities involves the risk of loss. Nothing in this Article should imply that past results are an indication of future performance. Information provided is for education purposes only and in no way is intended to be viewed as, or a substitute for, personalized investment advice. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed in this article. Independent advice should be sought in all cases.


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ENDNOTES

1. The 2009 movie documentary “Floored” offers an intriguing chronicle of the events. 2. “Exploring Entrepreneurship: The Chicago Futures Trading Industry,” Polsky Center for Entrepreneur-

ship, The University of Chicago Graduate School of Business, April 2006. Page 10. 3. Ibid.4. “CBOE Holdings, Inc. Files Registration Statement for Proposed Initial Public Offering,” CBOE

Holdings, March 11, 2010. 5. Phil Morehart, “Hit the Floor,” Chicago Journal, January 13, 2010.6. “Exploring Entrepreneurship,” pages 3–4.



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ABOUT THE COGENT ADVISOR

Before founding The Cogent Advisor, Michael J. Evans was a veteran commodities trader on the Chicago Mercantile Exchange, executing his own and other customers’ trades for more than 20 years. Michael’s experiences as a trader honed his skills for identifying and managing investment risk — a critical attribute that paved the way for him to dedicate his expertise to helping fellow financial industry professionals manage the future of their long-term wealth. Michael remains a proud member of the Chicago Mercantile Exchange. A Chicagoan to the core, he is easy to get to know and will tell you plainly what needs to be said.

In addition to his professional experience, Michael attended DePaul University, receiving his B.S. from the College of Commerce. He also completed the graduate certificate program in Financial Planning and Asset Management at DePaul. He is husband to Colleen and father of their three children.



Documents

The Cogent Advisor Wealth Management Guide