Eric C Hagen Professional Wealth Management brochure

ERIC C. HAGEN create. grow. preserve

WEALTH CONSULTING | INVESTMENT MANAGEMENT

Securities and advisory services offered through NEXT Financial Group, Inc., member FINRA/SIPC,

a Registered Investment Adviser and registered broker/dealer. Copyright 2009. Eric Hagen LLC. All rights reserved.

financial

group

®

N EEEE XXXX

TTTT

- www. Eric C Hagen .com -

*Research Declarations: As with any research or recognition program, it’s important that we provide you the following declarations: The 2009 Five

Star Wealth Managers do not pay a fee to be included in the research or the final list of Five Star in Client Satisfaction Wealth Managers. The over-

all evaluations score of a wealth manager reflects an average of all respondents and may not be representative of any one client’s evaluations. Also,

please keep in mind that working with a a Five Star Wealth Manager or any wealth manager is not guarantee as to future investment success.

Contents Summary of Services 3

Wealth Consulting 4

Investment Management 5

Wealth Management Process 6

Company Philosophy 7

About Eric C. Hagen 8

About NEXT Financial Group, Inc. 9

Investment Philosophy 10

Important Disclosures 16

WEALTH CONSULTING

Successful wealth management is an ever-changing ideal. It demands an in-depth consultative process that delivers

customized solutions across a broad array of financial needs. We believe every household is different and view your

situation as unique to best help you achieve your specific goals.

INVESTMENT MANAGEMENT

By taking a global perspective of your overall financial situation, we provide investment management solutions specific

to your individual situation. Applying the academic principles of Selective and Expanded Diversification*, we utilize a

sophisticated open architecture investment management platform to give you an institutional-like portfolio at an

individual investor level.

CASH MANAGEMENT

Through a leading, nationwide, financial services institution—we are able to make available to you a full range of high-

yielding, FDIC-insured bank accounts, including money market and certificates of deposit…with yields pledged to

remain in the top 5% of competitive accounts1. With this one-of-a-kind pledge, you will never again question if you’re

getting one of the best yields available. We can also offer you checking with a free, user-friendly online banking

experience, plus optional online bill pay, free check writing, a consistently great yield, and much more.

TOTAL CONSOLIDATED REPORTING

Embracing technological advances, our total consolidated reporting capabilities gives you one statement summarizing

every account you have with us. This gives you a “global view” of every aspect of your portfolio such as allocations and

balances. 24/7 online access means you are always “in the know”.

CLIENT COMMUNICATION

Weekly Economic Updates via email Quarterly Performance Reports

Regular Financial Articles of Interest via email ”24/7” Online Account Access

Quarterly Economic Updates by mail Regular Client Appreciation Events

Quarterly Financial Articles of Interest by mail Regular Educational Workshops

*Diversification does not eliminate the risk of market loss.

1- EverBank pledges to keep the yield on your account in the top 5% of competitive accounts as tracked in the Bankrate.com National Indextm of leading banks and thrifts. For the Yield Pledge CD this pledge applies

at the time of purchase, or when rolling your expiring CD into a new CD with EverBank.

ERIC C. HAGEN PROFESSIONAL WEALTH MANAGEMENT

SUMMARY OF SERVICES

WEALTH

CONSULTING

SERVICES

You are unique. Are you preparing for retirement? Maybe you are

currently retired. Maybe you’re on to your second career. Do you have kids?

Grandkids? Do you want to leave a legacy? Or enjoy what you’ve earned? Or

both? How did you attain your wealth? What are your values? Do you want

to pass those values on?

Successful wealth management is an ever-changing ideal. It

demands an in-depth consultative process that delivers

customized solutions across a broad array of financial needs.

Heir Distribution Plans Roth Conversion Planning*

Estate Planning Lifetime Income Modeling

Long Term Care Protection Charitable Planning/Giving

Wealth Preservation Planning Legacy Planning

Tax Efficiency Planning* Independent Financing

Retirement Planning Self Insuring

Health Care Funding Tax Preparation*

Cash Flow Analysis Small Business Planning

* We work closely with other independent CPA firms to provide a virtually seamless approach. NEXT Financial Group, Inc. does not provide tax advice.

ERIC C. HAGEN PROFESSIONAL WEALTH MANAGEMENT WEALTH CONSULTING SERVICES

equities

large growth

mid growth

small growth

large value

mid value

small value

industrial

healthcare

utilities

energy

cons cyclical

real estate

gold

network

telecomm

technology

financial

basic materials

cons non-cyclical

financial services

biotechnology

software

semiconductor

transportation

emerging markets

Japan

Pacific ex-Japan

Europe

Latin America

bonds

government

treasury

municipals

corporate

fixed instruments

cash

certificates of deposit

money market funds

commodities

softs

grains

livestock

precious metals

industrial metals

energy

currencies

Australian dollar

British pound

Canadian dollar

Euro

Japanese yen

Swiss franc

U.S. Treasury Bonds

U.S. Treasury Notes

global REITs

130/30 funds

inverse strategies

market neutral hedging

leveraging

momentum

absolute returns

options/derivatives

equity futures

managed futures


Taking a global perspective of your overall financial situation, we

provide investment management solutions specific to your individual

situation.

Applying the academic principles of Selective and Expanded

Diversification, we utilize an open architecture investment

management platform* to give you an institutional-like portfolio at an

individual investor level.

Most investment managers are specialists; focusing on big companies,

small companies, companies in Asia or Europe, companies in the

banking sector or in the retail sector. As an Investment Strategist, we

research, hire, monitor and replace investment managers on your

behalf.

To do this, we use a platform called the

Global Management Account (GMA).

The GMA is one of the most flexible,

comprehensive and sophisticated

investment management programs available. And, because GMA is

not a commission based product, but rather a fee-based platform,

both our goals come into alignment.

“How much did your portfolio grow? Why didn’t it grow more?” *An open architecture investment management platform gives investors with low

investment amounts access to large institutional managers.

INVESTMENT MANAGEMENT

Your perception of what it means to be successful, and what success should provide, has changed dramatically

over the past decade. Our approach to wealth management is built on the philosophy that your wealth should

enable your life.

Enabling your life through the successful management of your wealth...

Our consultative process consists of the following 5 steps:

The Discovery Meeting At this session, we gather in-depth information on seven key areas: values, goals, relationships, assets, advisors, the

investment process and interests.

Wealth Management Solutions Meeting Only after we fully understand you can we go to work to put together a custom Wealth Management Solutions Plan

tailored to your personal situation. It’s at this meeting that we’ll show you the best way to accomplish your goals.

Follow-Up Q&A A follow-up to the Wealth Management Solutions meeting, this meeting is designed to address any

questions you have. After discussing your questions and working out the details, we will move forward with the

appropriate paperwork to establish & fund your plan.

45-Day Review After initial implementation is complete, we’ll meet again to review what has taken place, review your personal

service requirements and answer any further questions you may have.

Regular Communication & Reviews Maintaining regular contact is important and essential to your success.

Monthly Account Statements Weekly & Quarterly Economic Updates

Quarterly Consolidated Performance Reports Regular Financial Articles of Interest

Regular Reviews on Phone, in Office and/or via Internet Client Appreciation Events

24-Hour Access to Accounts on Secured Website Educational Workshops

ERIC C. HAGEN PROFESSIONAL WEALTH MANAGEMENT WEALTH MANAGEMENT PROCESS

At NEXT FINANCIAL GROUP, INC., our commitment is to our clients; a commitment to exceed expectations. The following highlights the quality of care and service we continually strive to provide. A FIDUCIARY STANDARD

A Fiduciary is anyone legally responsible for managing or making decisions on behalf of someone else’s money or

property; such as retirement plan sponsors, trustees of private trusts and members of investment committees. This

relationship is highlighted by standards of good faith, loyalty and trust; standards we embrace, with or without the legal

responsibility. With the incredible complexities in today’s financial environment and so much at stake, we believe it is

the only standard by which any type of financial service should be provided.

PERSONALIZED EXPERTISE

By organizing, facilitating and managing a team of professionals who all work together for your best interests, we are

able to provide exceptional expertise in all areas of your personal situation.

CLIENT-CENTERED SERVICE

Committed to maintaining long-term relationships, vital to doing so is communication. You can take advantage of one,

two or all of the following forms of communication we offer:

Weekly Economic Updates via email Quarterly Performance Reports

Regular Financial Articles of Interest via email ”24/7” Online Account Access

Quarterly Economic Updates by mail Regular Client Appreciation Events

Quarterly Financial Articles of Interest by mail Regular Educational Workshops

Annual Tax Updates

COMMON MOTIVATION

By embracing a fiduciary standard, it’s important to minimize potential conflicts of interest. One way we

accomplish this is to offer our investment services for a fee; or a percentage of assets under management. This means

that no matter what the investment recommendation, our fee (as a percentage) remains constant. This structure further

allows you to always feel rest-assured that we are not persuaded by any underlining reason other than to meet your

goals & objectives.


COMPANY PHILOSOPHY

“The best advisers understand their clients are their business.” - Eric Hagen Eric Hagen is a Twin Cities based wealth manager providing investment management

solutions and comprehensive financial advice to many private investors who desire to

create, grow & preserve wealth. Eric is an Investment Advisor Representative with NEXT

Financial Group, Inc and maintains an office in Eden Prairie and St. Louis Park. His clients

often refer to him as their head coach for whom he manages a team of professionals, each

suited for a different position, to work together for his clients best interests.

Eric grew up in Excelsior, Minnesota spending most of his time on Lake Minnetonka. After going through the

Minnetonka School system, he spent 4 years at Bethel College in St. Paul, Minnesota after which he attained a

degree in Business. He met his wife Kelly at Bethel and now reside in Eden Prairie with their daughter Ava and

son Micah. Along with spending time with his family; he enjoys golfing, boating, hunting, fishing and flying.

Named a “FIVE STAR: Best in Client Satisfaction Wealth Manager for 2009SM”, Eric was featured

in the January 2009 issues of both Mpls./St. Paul Magazine and Twin Cities Business Magazine.*

Eric has served on NEXT’s Investment Advisory Committee since 2007.

Eric is a General Securities Representative after having pursued and passed the Series 7 securities examination. The

exam topics include: Equity Securities, Debt Securities, Municipals, Options, Trading Markets, Margin, New Issues,

Investment Companies, Retirement Plans, Regulations, Taxes and Tax Shelters, and Investment Analysis.

Eric has also pursued and passed the FINRA Series 66 Uniform Securities Agent/Registered Investment Advisor

examination. This exam includes study in Uniform Securities Act and Federal Securities Laws, Regulatory

Oversight, Penalties, Provisions, Securities Exchange Act of 1934, Investment Company Act of 1940, Securities and

Exchange Release IA-1092 and Registration of Securities and Licensing Requirements.

Eric is also licensed by the State of Minnesota as a life, health, long-term care and variable annuity insurance

producer. He is also a notary.

*RESEARCH DECLARATIONS: As with any research or recognition program, it’s important the following declarations are made; The 2008 Five Star Wealth Managers do not pay a fee to be included in the research

or the final list of Five Star Best in Client Satisfaction Wealth Managers. The overall evaluation score of a wealth manager reflects an average of all respondents and may not be representative of any one client’s

evaluation. Also, please keep in mind that working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success.

ERIC C. HAGEN PROFESSIONAL WEALTH MANAGEMENT ABOUT US — ERIC C. HAGEN

NEXT FINANCIAL GROUP, INC.

NEXT was founded in 1999 by several enterprising financial

services professionals who were unable to find a broker/dealer who met their

exacting standards. They wanted to create a place where they, and representatives

like them, could have a voice, decision-making ability, independence and freedom.

Since that time, NEXT has emerged as one of the fastest growing independent broker/dealers in the financial

services industry, and has at times been listed as the fastest growing broker/dealer. From these humble beginnings,

and despite considerable odds against them, NEXT has struck accord with representatives nationwide and grown

to over 1,200 affiliated registered representatives; all the while doubling annual revenue every other year since

inception. That revenue grew to over $100 million in 2007.

Today, top financial professionals that affiliate with NEXT find themselves with the same opportunity to have a

voice, independence and freedom; coupled with cutting edge technology, a highly experienced transitions team,

a visionary new fee-based platform, a comprehensive products list, no corporate parent and no proprietary

products.

NEXT HAS WON INVESTMENT ADVISOR MAGAZINES PRESTIGIOUS “BROKER/DEALER OF THE YEAR AWARD”1 FOR

SEVEN OF THE PAST EIGHT YEARS – 2001, 2002, 2003, 2004, 2005, 2006 AND 2008; AN INDUSTRY RECORD.

In the June 2006 issue of Financial Planning magazine, NEXT was ranked the #1 fastest growing Broker/Dealer in

terms of percentage revenue growth for 2005.

NEXT was also listed in the May 2006 issue of Investment Advisor magazine as the #1 fastest growing fee-based

firm in terms of percentage growth of fee-based advisors over five years.

*2001-2006, 2008; Based on a poll of registered representatives conducted by Investment Advisor magazine. Broker/Dealers rated highest by their representatives are awarded “Broker/Dealer (B/D) of the Year.”

ERIC C. HAGEN PROFESSIONAL WEALTH MANAGEMENT ABOUT US — NEXT FINANCIAL GROUP, INC.

Long-Term Determinants of Investment Results

Brinson, Singer, Beebower (1991)

Asset Allocation

91.5%

Other

2.1%

Market Timing

1.8%

Stock Selection

4.6%

In 1991, a landmark study2 by

Brinson, Singer, & Beebower seemed

to validate Markowitz’s theory. The

study found that 91.5% of a

portfolios long term performance

was attributed to how a portfolio is

allocated among the various asset

classes (such as stocks, bonds and

cash); while market timing and

security selection typically account

for a smaller percentage.

1– Source: Markowitz, Harry M. (1952). "Portfolio Selection". Journal of Finance 7 (1): 77-91.

2- Source: Brinson, Singer, Beebower, "Determinants of Portfolio Performance II: an Update," Financial Analysts Journal, May-June 1991

*Diversification does not guarantee against market losses. It is a method to help manage investment risk.

INVESTMENT PHILOSOPHY– By Eric Hagen Professional Wealth Management

Academic Study & Findings 2000-2002 1991 1992 1952 2006

If you would understand anything, observe its beginning and its development. -Aristotle

In 1952, Harry Markowitz formally presented1 what we now know as Modern Portfolio Theory. Rather than

viewing risk on an individual security level, Markowitz proposed that you measure the risk of an entire portfolio. When

considering a security for your portfolio, don't base your decision on the amount of risk that carries with it. Instead,

consider how that security contributes to the overall risk of your portfolio. His work teaches us that through

diversification, it's entirely possible to build a portfolio that has a much higher average return than the level of risk it

contains*. He later won the Nobel Prize.

Strategic Asset Allocation

Expanded DiversificationEquities

Alternatives

Cash

Bond/Fixed

Alternative Investments

Commodities Currencies

Global REITs Equipment Leasing

Alternative Investing

130/30 Funds Inverse Strategies

Leveraging Market Neutral Hedging

Momentum Absolute Returns

Options/Derivatives Equity Futures

Managed Futures

Step One: Application of

Expanded Diversification

through Strategic Asset

Allocation

Determine Allocation

by Broad Asset Class

During the years 2000-2002 and 2008, many people experienced substantial portfolio losses. I believe this came as a

result of many investors (or their advisors) assuming greater portfolio risk than they should have; and in many cases,

unknowingly. Increased risk comes from a lack of diversification*. However, the rules of diversification weren’t forgot-ten; they just weren’t applied properly. To mitigate this risk, we adapt the application of Modern Portfolio Theory to to-day’s investment environment; an environment that consists of more than stocks, bonds & cash.

Since 1952, we’ve seen market globalization, alternative financial instruments and sophisticated risk-management

techniques. Combine these developments with extraordinary technological developments and even the ‘average’ investor

is now able to apply sophisticated investment strategies to their own portfolio.

These sophisticated investment strategies have been used and validated by large institutions and institutional investors

for years. Knowing of and understanding that such sophisticated investment strategies exist is one thing;

implementation is entirely different.

We apply to our clients portfolios the techniques once limited to, and

currently used by, large institutional investors.


* Diversification does not guarantee against market losses. It is a method to help manage investment risk.


2000-2002 1991 1992 1952 2006

Expanded Diversification

The essence of diversification is to incorporate non-correlating assets;

investments that don’t react the same relative to each other. Attempting to

better diversify by adding non-correlating investments; investors have

traditionally integrated international stocks into their portfolios. However,

as the global economy becomes increasingly more integrated, the

correlation of domestic & foreign investments (as seen in the chart to the

right) becomes more closely tied making it more difficult to use together

for purposes of diversification. As such, a traditionally allocated portfolio

does not offer the downside protection it once did.

David Swensen grew the Yale endowment fund to over $22 billion in 2007 from $1.3 billion in 1985*; an annualized

return of over 18%. Today, just % 15of the endowment is committed to U.S. stocks & bonds... 85% isn’t.

You see, diversification means “not having all your eggs

in one basket”. We all know owning various, say, tech

stocks does not provide diversification; but did you ever

think about looking outside the stock market itself for

diversification? Well, diversification simply stated

involves owning non-correlated asset classes. I believe

David Swensen understood this when he first started

looking outside the realm of the stock and bond markets.

Up until a few years ago, the tools didn’t exist to allow

individual investors the opportunity to follow suit and as

a result, many investors only utilize a few of the many

asset classes.

*www.Yale.edu/investments. Other Data Source: Calculated by using information from Bloomberg.com. All correlations are measured vs. the S&P500 Index (the S&P500 Index is an un-

managed index used as a general measure of market performance. You cannot invest directly in an index). Past performance is no guarantee of future performance. The index returns do

not include any management fees, transaction costs or expenses. The indices are unmanaged and are not available for direct investment. Chart/graphic used with permission from

AlphaSource Investment Counsel; a WE2 Company: www.alphasourceportfolio.com. Diversification does not eliminate the risk of market loss.



2000-2002 1991 1992 1952 2006

Step Two: Selective Diversification*

According to another landmark study3 conducted by Dr. William Sharpe of Stanford University, up to 88% of equity

returns are determined by the chosen equity style (or asset class category), not the specific stock selections of the

portfolio.

Unpredictably, the various asset class styles perform differently as compared to their counterparts. Just as you build

a large-growth portfolio, small-value comes into favor. Technology is hot, then takes a back seat to real estate. On the

international market, Asia gives way to Latin America – and cycles back again. Yesterday’s winners become today’s

losers.

This is called “rotation,” and it occurs constantly within the market’s styles, sectors and international regions; driven

by changes in economic, financial and political climates. Along with fast moving markets and endless alternatives,

these rotations present daunting choices.

After the strategic allocation is determined, we apply a Selective

Diversification strategy to the equity portion of your portfolio.

With Dr. Sharpe’s findings as a solid foundation, the focus is on

asset class category selection, not individual stock picking.

This tactical strategy strives to allocate assets toward the

prevailing styles, sectors and international regions and away

from the poorer performing groups.

Should I own growth or value? Large cap or small?

Should I own Biotech? Real Estate?

Should I own Japan? Latin America?

When should I rebalance? When should I sell?

3– Source: Asset Allocation: Management Style and Performance Measurement by William F. Sharpe, Journal of Portfolio Management, Winter 1992, pp. 7-19 http://www.stanford.edu/~wfsharpe/art/sa/sa.htm

* Diversification does not guarantee against market losses. It is a method to help manage investment risk. Graphic above used with permission from Quantitative Advantage, LLC.


Academic Study & Findings


2000-2002 1991 1992 1952 2006

Unlike single-style investing (buy & hold), you’ll be more broadly diversified; and

unlike blended-style investing, your portfolio will be leaner — designed

to let higher-performing investments carry the day.

Selective Diversification* — Taking advantage of market volatility

Selective Diversification describes a mathematically based system that gives your portfolio the ability to change as the

markets change. And since the markets are constantly changing, Selective Diversification specializes in turning those

changes into potential opportunities for you — while seeking to reduce your downside risk.

This system proactively monitors the market to determine what styles, sectors and international regions are moving in and

out of favor. In the process, your portfolio is proactively steered away from lower-performing choices, and toward market

segments gaining strength. The attempt is to reduce the drag effect of low performers by selling them off in a timely way.

To do this, the system constantly collects, sorts and analyzes thousands of “strength markers” in the stock market on a

monthly basis. The results are used to evaluate the contents of your portfolio to make the changes you need to reap today’s

market opportunities. Your holdings are updated and rebalanced every month, if necessary, to help ensure your portfolio

stays on track.

Chartgraphic used with permission from Quantitative Advantage, LLC.

* Diversification does not eliminate the risk of market losses.

Example: Markets Change Large-cap, growth & technology stocks dominated the

market in the late ‘90s and into early 2000. Then, in the

Spring of 2000, a massive rotation emerged. Selective

Diversification is an analytical process designed to identify

trends like these and to transition portfolio holdings into

the prevailing market segments. Portfolios are updated

and rebalanced monthly.




2000-2002 1991 1992 1952 2006

Investing is an emotional activity. You hear that something is hot in a magazine and it’s hard not to want to jump on the bandwagon. You hear the latest negative news on TV and you want to get out completely. Unfortunately, allowing your emotions to control your investment decisions is anything but prudent investment advice. In fact, a study4 released in 2006, found that on average, equity investors far underperformed the S&P500 Index* as a whole during the greatest bull market in history; 1986-2005. To help mitigate the risk of allowing your emotions to control your investment decisions, you can apply our investment services to your portfolio using various investment products. We can help you focus on cost-efficient products or products that offer additional risk protection.

4- SOURCE: Dalbar, Inc. Quantitative Analysis of Investor Behavior - 2006. Represents average annually compounded returns of equity indices vs equity mutual fund investors; based on the length of time share-holders actually remain invested in a fund and the historic performance of the funds appropriate index. Past performance is no guarantee of future results. Investors cannot invest directly in an index. * The S&P500 Index is an unmanaged index used as a general measure of market performance. You cannot invest directly in an index. Past performance does not guarantee future results.

Step Three: Platform/Product Selection

Stocks Bonds Exchange Traded Funds Mutual Funds Unit-Investment Trusts Separately Managed Accounts Alternative Investments Fee-Based Brokerage Accounts Hedge Funds Multi-Manager Accounts REITs Currencies Fixed & Variable Annuities Commodities/Managed Futures Certificates of Deposit Options/Derivatives




2000-2002 1991 1992 1952 2006

SOURCE: Dalbar, Inc. Quantitative Analysis of Investor Behavior - 2006.

IMPORTANT DISCLOSURES:

Securities and advisory services offered through NEXT Financial Group, Inc., member FINRA/SIPC,

a Registered Investment Adviser and registered broker/dealer.

Diversification does not guarantee against market losses. It is a method to help manage investment risk.

The information contained herein does not constitute investment, tax or legal advice. Before making an investment, always read the prospectus and all relevant

information thoroughly. Most importantly, seek the advice of a skilled financial professional who can let you know how such investment could impact your

personal situation.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE

Embracing a fiduciary standard does not deem legal Fiduciary duty. A legal Fiduciary relationship must be established in writing.

Copyright 2009. Eric Hagen LLC. All rights reserved.

Registered Branch Office

12100 Singletree Lane, Suite 171

Eden Prairie, MN 55344

Office: (952)746-1321

Fax: (612)392-8612

Email: [email protected]

Online: EricHagen.NextFinancial.com

ERIC C. HAGEN create. grow. preserve.

- www. Eric C Hagen .com -

financial

group

®

N EEEE XXXX

TTTT

Eric C Hagen Professional Wealth Management brochure

Economy & Finance

star wealth managers

financial group

investment managementby

overall financial situation

eric c hagen

eric hagen llc

registered investment

overinvestment philosophy