Thank you for showing interest in my company.  I have decided to provide a question and answer session to give a little background about my self and my company.

First of all I would like you to know that I have literally invested the last 12 years of my life in the defined risk strategy (“the Strategy”).  Knowing this process would take a long time to perfect and learn, I have been careful not to grow my business to fast, which may have limited my ability to provide the best possible investment advisory services to my clients.  You will get the same benefit my existing clients enjoy and you will enjoy the peace of mind gained from my knowledge and experience.

Since 2005, I debated whether or not to grow my business.  During 2008, I made the decision to expand.  To that end, I have added to the Swan Consulting team.  I have added two people that I know to be qualified and each brings the highest amount of integrity.  As I stated, I have spent more than a decade on refining "the Strategy" and my name and reputation mean a lot to me.  I am not willing to jeopardize either one.

My bottom line belief is, if a potential client takes the requisite time to complete his/her due diligence and understands the basics of the Strategy, they will not be disappointed in the results that my company will deliver (both from a performance as well as customer service perspective).  In fact, I have not lost a client since I became a registered investment advisor.

Sincerely,

Randy W. Swan, CPA

I have been an avid investor and saver since the age of 10.  Back then it was my earnings from my lawn care business.  It may sound silly, but the preservation of that money was just as important as my savings are today.  At 14, I started investing in stocks, mutual funds, and gold and silver coins.  After graduating college, I devoted a lot of time researching and trying different trading services.  I experimented with various forms of fundamental and technical analysis and I investigated popular asset allocation models.  From a risk or reward perspective, none of them ever met my expectations.  At age 20, I experienced the crash of 1987.  I also endured the impact of the 1st Gulf war before I was 24.  Needless to say, neither provided positive returns on my portfolio.  However, they were good experiences because they forced me to find a better solution, "the Strategy."

I started to learn about options in 1992 when I was 25.  At that time, options were relatively new to the markets.  I was intrigued by the risk management aspects options offered and soon realized their potential.  At the time, I was a CPA, working as a senior tax manager in the financial services group for KPMG, in Houston, TX.  During my tenure there, my clients included actuaries and risk managers for insurance companies and other groups that looked to reduce most of the exposures with insurance and reinsurance.  I was fascinated by the methods exercised to reduce risk and assorted exposures.  This is when ‘the light’ went on.

It was then with my love of investing and risk management that I saw the potential of my professional dream; the combination of investments with risk management techniques that we all employ in our everyday lives.  We all insure our health, our car, and house.  Why not your investments?  Was it even possible?

My research concluded that it was not only possible but it was the only long-term investment approach that made sense.

I believed in the potential so much that in 1996 I decided to quit my job and move.  With my wife and 1st daughter, we moved to Durango, Colorado.  That is where I started to develop and implement "the Strategy."  This relocation removed me from most outside influences and allowed me to dedicate myself to proving my theory correct.  Theory being, there is a better way to invest.

The answer must be provided in two parts.

Part I.  Most investment advisors do not have the experience, knowledge, or expertise to do what I do.  I believe my background as a CPA gives me a unique perspective that few other advisors can offer.  They have been content to rely on outdated investment management ideas.  Ideas like asset allocation and diversification.  Who could blame them?  It is well accepted, easily understood and everyone else (their competition) was doing it too.  Besides, until recently, those methodologies worked well.  Finally, the investment advisory industry leaders have not shown a desire to explain to their clients about other ways to manage risk even if they could.  Simply said, it is not easy to invent a better mousetrap.

Part II.  Although I am not aware of any other firms that offer a defined risk strategy, there are a few investment products out there that approach or implement some of the techniques used in "the Strategy." I have studied, researched, and even made small investments in some of these products.  Not one offers the comprehensive benefit of "the Strategy."   Some offer defined risk but often it leads to minimal upside potential.  Others, like the buy-write funds, offer upside potential but their risk management techniques miss the mark.

This past summer, with the first addition to the Swan Consulting team, Drew Kehoe and I went to the Chicago Board Options Exchange (CBOE), for a 2 day training session.  During the tour of the trading floor, one of the senior market makers made a comment that ‘options are not being used by investment advisors.’  That comment made me grin ear to ear.  I still have objections to traditional advisors.  I cannot understand how ‘professionals,’ the ‘professionals’ that hard working people are entrusting with their wealth, their retirement, their future fail to take advantage of something so beneficial?  I think you should expect more.  I do.

My personality and my previous career as a CPA made me very risk averse and conservative.  What I tell people is that “you want to eliminate the risk that you do not want, and keep the risk that allows you to make a reasonable profit.” We accomplish that goal by purchasing investment products from market makers on the option exchanges whereby we decide in advance what price we can sell the stock indexes at some point in the future.  In other words, for a price, we transfer the risk that we do not want.  This does not guarantee that we will not lose money but it gives us a reasonable assurance that catastrophic losses do not occur.  Then, we hedge, our hedge.  We implement additional risk management and hedging techniques to pay for the cost of insurance and provide for additional profit.

Yes, FDIC insured deposits offer less risk.  I would take issue with money market accounts since they are not insured and they represent debt with no guarantee of payback.  The problem with these types of investments is they provide no real return.  Only the defined risk strategy can offer superior risk-adjusted returns.  Bonds may or may not be insured but your return of capital is far from certain.

The Strategy has been implemented since mid 1997 in both bull and bear markets outperforming the S&P 500 by 219%.  The Strategy has performed favorably with the buy and hold investor during the two previous bull markets with returns approximating 95% of the index.   Remember, there is an income component to "the Strategy" that allows for income potential in all types of markets and should outperform a fixed income portfolio over an extended flat market.

I do not recommend trying to time the market since I believe it is difficult if not impossible.  That being said,  if over the three month period you knew the market was going to drop substantially then it might be marginally better to wait.

We use Interactive Brokers.  They have some of the lowest transaction fees in the industry.  Brokerage fees are minimal.  In my experience, Interactive Brokers is also one of the best at execution.    The tax implications are minimal for several reasons.  First, we do not usually sell the shares unless we are trying to generate a loss.  Secondly, a lot of the hedging transactions offset each other.  Thirdly, the dividends plus 60% of the capital gains are taxed at 15% whereas the remaining 40% are short-term gains taxed at ordinary income rates.

No, I do not have any independent confirmation of returns.  I do not think it is fair to make my clients pay for this.  I offer referrals to prospective clients to ascertain whether or not my claims are valid.