PMFA Case Study Team 1 Zach Ball Connor Cloetingh Zhentao Zhong Alex Stansberry.

PMFA Case StudyTeam 1Zach BallConnor CloetinghZhentao ZhongAlex Stansberry

Client ProfileBasic InformationGoalsRisk Tolerance

Vehicle AllocationCurrent Vehicle Allocation

Current Asset PortfolioFuture Vehicle Allocation

Future Asset AllocationWithin:

Joint TrustSEP IRARoth IRA

Basic Information

•Age 30•Business Owners•Salary $125,000 each•Current Investments: $1,000,000

John and Jane Spartan

Client Information Profile

Retirement Age Ideal

John 60

Jane 60

Annual Retirement Spending

$150,000

Annual Savings

SEP-IRA $22,930

Roth IRA $5,000

Estate Goal $0

Goals• Retire: Age 60• Life expectancy:95 Years

▫ (35 years after retirement)

• Maintain Standard of Living▫ Live off $150,000 per year

• Obtain Financial Independence• Possess Financial Peace of Mind

$5,818,397

Risk Tolerance

Overall Moderate Risk:• Claim to be “aggressive” investors• Contradictions on some issues.

▫ Cannot tolerate more than 10% losses▫ Can tolerate short – term declines to maintain

purchasing power▫ Unwilling to wait several years to recover from

losses due to extended down market.

Income Tax Considerations

•Based off 2012 Tax Rates•Married Filling Separately•Net Total Income $177,930 at a Rate of

28.83%•John able to contribute $22,930 in SEP IRA

per year •Jane able to contribute $5,000 in Roth IRA

per year •Tax rates likely to increase in future•Contributions likely to decrease

Current Vehicle Allocation

Account

Asset Market Value

John and Jane

Joint Trust

CashFidelity U.S Bond IndexFidelity Fund

$500,000$280,000$20,000

John IRA Fidelity U.S. Bond IndexFidelity Fund

$20,000$80,000

Jane Roth IRA

Fidelity U.S. Bond Index

$100,000

80%

10%

10%

Current Investment Vehicle Allocation

Joint Trust

IRA

Roth IRA

Strategic Investment Vehicle Allocation

10%10%

80%

New Investment Vehicle Al-location

Roth IRASEP IRAJoint trust

Current Allocation Plan

10%

40%50%

Current

Large CapFixed incomeCash

Average Return 4.5% Downside Risk -0.5%

Asset allocation

Current Portfolio Analysis

•Past performance does not guarantee future performance •Portfolio is not well diversified

20%

16%

16%15%

21%

4%

8%

Moderate Growth Large Cap

Mid Cap

Small Cap

Equity with div-idends

Fixed Income

Cash Equivalent

Commod-ity

Future Overall Strategic Allocation Plan

Average Return 7.72%Downside Risk -12.02%

Capital Market

Vehicle Deposits Growth Withdrawals Deposit Cap

IRA Tax-deductable

Tax-free Taxed $5,000

Roth IRA After-tax Tax-free Tax-free $5,000

Joint trust After-tax Taxed Tax- Free N/A

SEP-IRA Tax-deductable

Tax-free Taxed $50,000

Investment Vehicle Analysis

Joint TrustCurrent Allocation Future Allocation

• $800,000

63%35%

3%

CashFBIDXFFIDX

$800,000

20%

10%

5%25%

20%

20%

Joint trust Fixed incomeCommodityCash Equiva-lentslarge Cap EquityMid Cap EquitySmall Cap Equity

IRA- John SEP IRACurrent Allocation Future Allocation

• $100,000

20%

80%

FBIDXFFIDX

$100,000 With yearly contributions of $22,930

75%

25%

SEP-John

EquityFixed Income

Roth IRA- JaneCurrent Allocation Future Allocation

• $100,000

100%

Amount

FBIDX

$100,000With yearly contributions of $5,000 per year

80%

20%

Roth IRA- Jane

Equity with dividendsFixed Income

Possible Investments Ideas

•Equities▫Money Managers▫Mutual Funds▫ETFs

•Fixed Investments▫Bond Mutual Funds▫U.S Treasury Notes

•Commodities ▫Gold

Equity Investment Recommendations

• Money Managers▫Confluence Increasing Dividend Equity Account

2.8% Annual Dividend Returns 15.3% Standard Deviation Higher Growth Option

▫ Vireo Alpha Sector Alphadex Equity Plus Invests in ETFs Primary Focus on Protecting Downside Losses Has ability to re-allocate assets to all cash in down markets 9.82% Standard Deviation

Recommendations Cont.

•Mutual Funds▫Davis New York Venture Fund (NYVTX)

Focus on Long Term Capital Appreciation Invests in Large Cap Equities Average Rate of Return 11.47% 20.3% Standard Deviation

▫ Calamos Growth and Income Fund (CVTRX) Invested 45% in Stocks 35% in Bonds 9.46% Return 13.19% Standard Deviation

Fixed Income/Commodities

•PIMCO Total Return Bond Fund (PTTRX)▫Great diversification to protect against

large downside swings▫8.34% Return Since Inception ▫Best in the Business Management Team

•SPDR Gold Trust ETF ▫Diversifies the Portfolio▫Safe Investment Tends to go up when

Equities go down

Summary of Cash Flows

Summary

Reallocated funds within each account• Diversified Portfolio• Protected against serious losses

Will need to evaluate funds periodically to remain current

• Reallocate funds in the future to meet needs

Other Considerations

•Life and Disability Insurance▫What if something tragic were to happen?

•Possibility of business failing▫What if the internet company goes out of

business?•What if they live longer than expected?

▫Will they have enough money to live 1 more year? 5 more years?

Questions?