This document provides information on active investment management strategies. It discusses how one financial advisor, Steve Miller, transitioned his practice over 20 years to focus on managing volatility and risk through active investment management. Miller works with third-party managers who use sophisticated strategies and constant market monitoring. The transition was gradual as Miller validated the effectiveness of active management, especially during market downturns. He works closely with clients to develop goals and specific risk profiles that the active strategies aim to address.

1. TRIED &TRUE
Short-lived
VIX spike pg. 7
A thriving
succession plan
pg. 3
Active management
in plain English pg. 4
July 24, 2014 | Volume 3 | Issue 4First magazine focused on active investment management
S T E V E M I L L E R
Managing volatility and risk
pg. 8

3. ohn and I are in the fourth year of our long-term plan for
gradually transitioning the practice to John. One of the key
things we are doing is allowing for the transition to take place slowly
over a long period of time. The goal for our first five years together
was to really grow the business with new clients and have John fully
introduced to my current clients. As they have become comfortable
with John and his contributions, it has been natural for referrals from
current clients to flow to him.
For me, a priority outcome of the succession is the assurance that
my clients will be well taken care of. I looked for someone who would
care for my existing client base with the same diligence that I do.This
succession is not about simply selling out to another firm or advisor.
One of the mistakes I have seen other advisors make is selling
their business to someone who is perhaps a very competent advisor,
but does not make a total commitment to the transition. Your clients
are your clients because of the trust you have earned over time.
Your successor needs to pay his dues, so to speak, to build those
relationships for himself and the future of the practice. Otherwise,
clients see little reason to stick around.”
e have the same investment
discipline centered around
active management, so that piece has been
a seamless transition. It is not only about
having the clients getting to know me and
vice versa, but them feeling confident that
the relationship and their investments will be
handled in a similar manner moving forward.
The transition plan has worked especially
well with our small business clients. Debra
and I have both been able to focus on our
particular strengths in those relationships.
I can be the 401(k) specialist for the busi-
ness owner and his employees, while Debra
can handle the financial planning, buy/sell
agreements if needed, and insurance needs.
Debra and I both are involved, however,
with every aspect of the business, especially
asset management.”
Making a 10-year
succession plan work
John Gutfranski, CFP®
, AIF®
, CRPC®
Debra White Stephens, CFP®
Houston, TX
Cetera Advisor Networks LLC
Houston, TX
Cetera Advisor Networks LLC
J W“ “
Securities and investment advisory services offered through Cetera Advisor Networks LLC, member FINRA, SIPC. Cetera is under separate ownership from any other named entity.
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3July 24, 2014 | proactiveadvisormagazine.com
TIPS & TOOLS

4. AN ADVISOR’S PERSPECTIVE
NOW
Active management
in plain English
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By Greg Gann
4 proactiveadvisormagazine.com | July 24, 2014

5. he word “active” certainly has a
much more positive connotation
than its counterpart, “passive.”
But when it comes to investment
management, we in the financial services
arena use this terminology thinking that
our clients understand the meaning
behind this jargon. It is my contention
that few investors really appreciate the
significance of these terms because we
do a poor job describing them in ways in
which they can relate.
As an advocate and practitioner of
active management, I will share a couple
of ways I have found most successful to
communicate the rationale and benefits
of active management. First of all, active
management has become the term du jour.
It has become a hot buzzword. Because so
few investors know its meaning, financial
advisors can profess to utilize an active
investment management approach without
being called on it or having to prove it.
The first thing that I do when I describe
active management is describe passive
management and how they differ. Besides
investing in an index, passive management
assumes that no one can really beat the
market over an extended period of time. It
also assumes that the correlation of certain
asset categories will remain fairly uniform
over time. Based on these two fundamental
assumptions, a strategic but static model
is proposed that incorporates a variety of
“style box”-type investments. In making
allocations, the model is virtually the same
in all market cycles and doesn’t evaluate
risks in real time.
ALMANAC VS. CURRENT
WEATHER FORECAST
Active management, on the other hand,
evaluates current risks and stages within
market cycles in order to make more timely
allocations. I describe this distinction using
weather analogies. Passive investing is like
using a weather almanac rather than a cur-
rent forecast to determine what clothing to
pack for a trip. In packing, it would not
make sense to rely on the almanac because
the almanac is a long-term forecast based
on averaging years and years of data. For
example, the almanac might indicate that
weather conditions in Manhattan in July
would be sunny and humid with tempera-
tures during the day reaching 85-90 degrees.
However, a current five-day forecast could
track a big storm moving into the area with
unusually cold and wet conditions.
Just as I wouldn’t pack my suitcase with
clothing based on the almanac, I do not
think it is wise to allocate an investment
portfolio based on long-term historical
averages, ignoring current “weather con-
ditions” in the market such as current
trends, breadth, volatility, or risks of loss.
Howard Marks of Oaktree Capital
advises, “Never forget the six-foot tall
man who drowned crossing the river that
was five feet deep on average.” Passive in-
vesting deals with data based on averages,
and allocates based on those averages.
The problem is that very few years follow
averages. Moreover, averages ignore the
impact of large losses, and the challenges
and difficulties associated with making
up those losses. Minimizing drawdowns
is arguably much more critical than cap-
turing all or most of the upside. Current
economic and geopolitical factors enhance
risk and the likelihood and magnitude of
drawdowns, but are ignored and margin-
alized by passive investors.
Because passive investing deals with
averages, and over extended periods of time
markets tend to move in a northern (pos-
itive) direction, passive investing typically
recommends allocations from a long-only
perspective. All investing is essentially a
bet. Long-only investors bet that the value
of an enterprise or indices in which they
are investing will increase. Current stages
within market cycles, P/E ratios, technical
factors and sentiment all impact the overall
investment climate and whether the chang-
es in that value are likely to move north or
south in the foreseeable future.
This data and other factors are usually
modelled by active managers to determine
whether to make trades in real time and/or
how to size the trade. By utilizing this data
rather than relying exclusively on long-term
averages, the active manager might con-
clude that the overall market or value of an
enterprise is overly extended and therefore
ripe for a pullback. In reaching this conclu-
sion, the active manager analyzes a larger
universe of investment opportunities, and,
for instance, might allocate to inverse in-
vestment strategies which typically increase
in value when the market decreases in value.
continue on pg. 11
T
Passive investing is like using
a weather almanac rather than
a current forecast to determine
what clothing to pack for a trip.
July 24, 2014 | proactiveadvisormagazine.com 5

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Risk Gold Risk, Wholly-owned Corporation Risk, Risk of Non-Diversification and Interest Rate Risk. “Gold Risk” includes volatility, price fluctuations over short periods,
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7. he bull market’s continued run
in 2014 has been marked by a
sustained period of low volatility,
with the VIX trading below 20
for most of the year.
In fact, last Thursday’s 1.2% decline in
the S&P 500, triggered by geopolitical
concerns out of Ukraine and the Mideast,
was the first 1% move either higher or
lower for the index in 62 trading days.
According to Bespoke Investment Group,
runs like this are infrequent, coming “few
and far between” over the course of the
last seventy years. The move down was
VOTE
Managing risk
Managing volatility
Producing income
Last week’s results
VIEWER RESPONSE
Is there a need to replace tradi-
tional diversification and portfolio
construction techniques with
new products to achieve results?
-Vote to see results
This week’s poll
What is most important to
you in selecting investment
strategies/products?
59% of advisors globally agreed,
according to NATIXIS/Core Data
Research 2013 Global Survey of
Financial Advisors
POLLS
75%
25%
Yes
No
173
154
95
38
0
62
40
80
120
160
200
‘44 ‘54 ‘64 ‘74 ‘84 ‘94 ‘04 ‘14
-3.64
Day Of VIX Spike Next Day Next Week One Month Three Month
0.73 0.77 -0.63 1.23
66.7 61.9
Average all occurrences: 22 occurrences
61.9 61.9
-2.02 0.35 0.51 2.56 2.83
71.4 71.4
Average - VIX below 20: 8 occurrences
85.7 71.4
S&P 500 Performance (%)
Spike in VIX briefly
shatters market calm
T
Source: Bespoke Investment Group
Source: Bespoke Investment Group
immediately followed by last Friday’s 1%
rebound in the S&P, with traders buying
the dip—as has happened so often in the
2012-2014 period.
This brief bout of volatility brought
with it a 32% spike in the VIX, as it
moved from 11 to 14.5. Bespoke notes
that this was only the 22nd one-day
move of over 30% in the VIX since 1990.
Over two-thirds of the time when such
one-day spikes occur (including last week),
the broad market has snapped back the
following day, averaging a gain of 0.7%
on the next trading day.
S&P 500: TRADING DAYS WITHOUT A 1% GAIN OR LOSS
1944–2014
S&P 500 RETURNS AFTER LARGEST ONE-DAY VIX INCREASES (30%+)
1990–2014
7July 24, 2014 | proactiveadvisormagazine.com
TOPPING THE CHARTS
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8. Have you seen many changes in the
business since then?
A tremendous amount of change.
Probably the two most important things
relate to market volatility and the develop-
ment of strategies to overcome that.
Could you explain that?
Since I started in the business, there have
been two major market downturns, as we all
know. The preparation and readiness for such
an event has a much higher priority now than
when I first started, which were fairly benign
years until 2000. Sure the markets have been
performing well for the past four or five years,
but that cannot last forever.
So the next part of the equation is how do
we, as advisors, make sure our clients are pre-
pared for the next downturn? When I started
in the business, just about everyone was using
I work closely with my own client base on
their financial and investment needs, but also
manage, ultimately, over 175 financial profes-
sionals across several different states. I have an
excellent team of leaders in my organization
who are essential to that management process.
When and how did you get started in
the business?
I grew up on our family farm in Ohio and
received an undergraduate degree in Biology
and later a Masters in Real Estate. As I was
pursuing a couple of different career options
after college, I first became a client of World
Marketing Alliance Securities, WMAS,
which became TFG. I was intrigued by the
opportunity to help individuals and their
families, so I transitioned into becoming a
full-time representative in 1994. It also fit
very well with the real estate and sales and
marketing background I had acquired.
Proactive Advisor Magazine: Steve,
can you tell me a little about your
current advisory practice?
Steve Miller: I am an Investment Advisor
Representative and Branch Office Manager
for Transamerica Financial Advisors, Inc.,
Transamerica Financial Group Division,
TFG, based in Alpharetta, Georgia, a suburb
of Atlanta.
BY DAVIDWISMER
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Steve Miller’s career in financial
services began more than 20 years
ago—long enough for him to
have endured two major market
downturns. Still, transitioning
his practice to focus on volatility
and risk-managed returns didn’t
happen overnight.
TRIED &TRUE
S T E V E M I L L E R
Managing volatility and risk
proactiveadvisormagazine.com | July 24, 20148

9. a traditional asset allocation model relying on
“buy and hold” principles.
That is not the case anymore, at least in our
practice. For our clients, but especially pre-
retirees and those already in retirement, we are
focused on risk management first. We collab-
oratively develop sound goals and objectives
with our clients and a very specific risk profile.
From an investment perspective,
how do you implement that?
We use active investment management and
third-party managers. We want to make sure
our clients have money managers involved
who can bring the most sophisticated strate-
gies and a constant market and strategy watch
to the table. I am focused on serving my cli-
ents in a broad planning capacity and making
sure the right strategies are in place, but active
managers are the true experts when it comes
to the implementation of that. They can help
us analyze the specific risk orientation of each
client and select strategies for the appropriate
portfolio construction. Once the strategies are
in place, they continually review and make
adjustments as market conditions call for.
How did you transition your practice
to active management?
Frankly, it was a pretty long process. It
is hard to just leave traditional practices
overnight. And I needed to make sure, in
my own fashion, that this was something
well-validated and effective.
It is interesting that early in my career I
had heard of an active manager who coinci-
dentally was doing a terrific job for a relative
of mine who had a rather sizable portfolio.
Therefore, I was very interested when our
firm introduced active management as a tool.
Some of my clients, including family
members, were fully committed to active
management. My wife was thrilled with the
results she saw during the credit crisis and
recession. While she was not in the green
for that period, she was not down much
and overall in better shape to benefit from
the eventual move back to a bull market for
stocks and bonds. Of course, this may not be
the case for all investors.
How do you explain active manage-
ment to clients?
It all depends on their goals, risk profiles,
and a more holistic look at where they want
to be in the future. And it also depends on
how we might construct their overall finan-
cial strategy between insurance products,
annuities, and other forms of investments.
But even with several annuity options, active
management can be incorporated as part of
the product advantageously to help with
underlying asset growth, and, subsequently,
with potentially higher income streams in
continue on pg. 10
Steve Miller
Grew up in Ohio on the family farm
Married for 29 years and father of two
B.S. in Biology from Kent State University
Masters in Real Estate from Georgia State University
Enjoys boating, water skiing, and running
9July 24, 2014 | proactiveadvisormagazine.com

10. M U LT I - M A R K E T
+
MULTI-STRATEGY
+
MULTI-MANAGER
One p rtfolio
D Y N A M I C A L LY R I S K - M A N A G E D
L E A R N M O R E
Past performance does not guarantee future results.
The opportunity for profits
carries with it the possibility of losses.
800-347-3539 | flexibleplan.com
A complete list of all of our recommendations over the last 12 months and Brochure Form ADV Part 2A are available upon request.
I do emphasize preservation of capital and
using third-party managers to capture
reasonable future returns over time. To me,
that is the essence of developing a mutually
beneficial relationship with clients—sound
money management enhances and deepens
that relationship.
I use active management for clients of
all sizes, down to relatively small portfolios.
Risk management is not just reserved for the
most affluent any more, nor should it be. I
explain to all clients, if the ship appears to
be going down, do you want to be sitting
on the deck in a new chair or heading for a
new ship?
Hopefully we will not see anything like
2008 any time soon, but we are prepared. And
active management is not just for distressed
markets, which is sometimes misunderstood.
Active managers are skilled in all types of
market environments and attempt to protect
against market loss and take advantage of
market gains.
Thank you, Steve. Any final thoughts
on your overall investment philosophy?
Between my own clients and those man-
aged within my organization, we play an
important role in the overall financial health
of quite a few people and their families. We
take that responsibility very seriously.
I approach financial and investment
planning from a risk first perspective. It is all
about managing volatility and risk-managed
returns. I do not try and “sell” on the idea
of promising a certain level of unrealistically
high returns to new or prospective clients.
continued from pg. 9
Steve Miller is a Registered Representative and an Investment Advisor Representative with Transamerica Financial Advisors, Inc.
Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA), Transamerica
Financial Group Division—Member FINRA, SIPC, and Registered Investment Advisor. Non-securities products and services
are not offered through TFA.
Photography:ChrisHamilton
10 proactiveadvisormagazine.com | July 24, 2014

11. There can be no assurance that any investment product will achieve its investment objective(s). There are risks associated with investing, including the entire loss of principal invested. Investing involves market
risk. The investment return and principal value of any investment product will fluctuate with changes in market conditions. Guggenheim Investments represents the investment management businesses of Gug-
genheim Partners, LLC. Securities offered through Guggenheim Funds Distributors, LLC. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim Partners, LLC. x0515 #12526
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“BUY-AND-HOPE”
OR RISK MANAGEMENT?
No one bets regularly and wins every
time. The image that comes to mind when
I think of betting, and what I portray to
clients, is a roulette wheel with both red
and black markers. Very few would bet
by putting all their chips exclusively on
black or exclusively on red all of the time.
They would most likely divvy them up or
vary their pattern in recognition that no
one color would come up forever. Passive,
long-only investing to me is akin to putting
all our chips on just red or just black during
all market conditions.
Markets move in dual directions. They
go up and they go down. And, based
on the real-time data, we can orient our
positions to potentially gain accordingly
or at least establish hedges targeted at
reducing drawdowns. Passive investing is
tantamount to betting the house on red,
ignoring the black, and hoping that the
wins from hitting red will more than offset
the losses from black. Notwithstanding the
fact that there are periods when going all
red prevails, there are just as many times
where it is detrimental.
Clearly there will be periods where
long-only, full risk-on investing will un-
deniably beat a more disciplined active
management approach. But ignoring both
the potential for drawdowns, as well as the
confidence that comes from strategies that
hedge risks, seems rather irresponsible.
The rationale behind active manage-
ment is more than linguistics or what is
in vogue. It needs to be expressed in plain
English so that our clients appreciate its
appropriateness in both navigating all
market conditions and our associated
value-add.
continued from pg. 5
Clients appreciate how active management
navigates all market conditions
Gregory Gann is a Registered Representative with, and securities are offered through, LPL Financial. Member FINRA/SIPC. The
opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations
for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not
be invested into directly. Asset allocation does not ensure a profit or protect against a loss. There is no guarantee that a diversified
portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
11July 24, 2014 | proactiveadvisormagazine.com

12. The opinions and forecasts expressed herein are those of the author and may not actually come to pass. Any opinions and viewpoints regarding the future of the markets should not be
construed as recommendations of any specific security nor specific investment advice. The analysis and information in this edition and on our website is for informational purposes only.
No part of the material presented in this edition or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed
nor any portfolio constitutes a solicitation to purchase or sell securities or any investment program.
Editor
David Wismer
Marketing Coordinator
Elizabeth Whitley
Contributing Writers
Greg Gann
David Wismer
Graphic Designer
Roger Ackerman
Contributing Photographer
Chris Hamilton Photography, Atlanta, GA
July 24, 2014
Volume 3 | Issue 4
Proactive Advisor Magazine is
dedicated to promoting and educating
on active investment management.
Distribution reaches a wide audience
of financial professionals who advise
clients on investments and portfolio
management. Each issue features
an experienced investment advisor
who offers insights on active money
management, client service, and
investment approaches. Additionally,
Proactive Advisor Magazine offers
an up-close look at a topic with
current relevance to the field of
active management.
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Copyright 2014 © Dynamic Performance
Publishing, Inc. All rights reserved.
Reproduction of printed form, whole or in
part, without permission is prohibited.
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