35%
Percentage of Fortune 500 companies that are “family firms” (controlled and/or managed by a family).

$400 Billion
The largest family business is …
Wal-Mart, with almost $400 billion in sales and 2.1 million employees worldwide.

Family businesses in the United States account for 78% of all new job creation, 60% of the nation’s employment and 50% of the gross domestic product. (Yeah, it does.)

ON THE HOME FRONT
A smattering of local
family businesses

Alpine Gas Fireplace
Bank of American Fork
Bee Safe Systems
Bennett Communications (that would be us)
Bluefin Office Group
Checknet
Clyde Companies
Corporate Alliance
Cowboy Leaders
Dastrup Insurance
Dexter & Dexter
Dippidee
Forrest Motors
Garden Path
Geneva Pipe
JCW’s
Johnson Tire
Lehi Roller Mills
McGee’s Stamp & Trophy
Nu Skin
Ream’s
Shirley J
Sound Concepts
Wing Enterprises
Zions Bank

AT HOME AND ABROAD
Famous family businesses around the world

American Eagle Outfitters
BMW
Dillard’s
Enterprise Rent-A-Car
Estee Lauder Cos.
Fidelity Investments
Ford Motor Co.
Gap
Hallmark Cards
Hasbro
Huntsman Corp.
Hyundai Motor
Ikea
Levi Strauss
LL Bean
L’Oreal
Marriott International
Mary Kay
McGraw-Hill
Motorola
New York Times
Nordstrom
News Corp.
Samsung
S.C Johnson & Co.
Tyson Foods
Viacom
Wal-Mart
Washington Post
Winn-Dixie

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They’re upset … but they don’t do anything about it. They seem to believe the situation will somehow fix itself. What they don’t realize is if you do what you’ve always done, you’ll get what you’ve always got. Insanity is repeating the same poor actions over and over — and expecting a different outcome.

There is a much better way to invest, but it requires you to take action and be proactive. It all starts with selecting a quality financial adviser. Interview a prospective financial adviser just like you would a prospective employee. While hiring the wrong employee can cause unnecessary grief, hiring the wrong financial adviser can wreak havoc with your entire future.

Often, because people don’t know how to evaluate an adviser, they simply invest with the first person that impresses them. This is a mistake. The best salespeople are not necessarily the best advisers.
We provide educational resources on our Web site, www.paragonwealth.com, that outline seven steps to selecting a financial adviser. Three of them are non-negotiable. First, the adviser must be a fiduciary. Second, he or she should have 10 years of investment experience. And third, the adviser needs to show you a 10-year investment track record.

These may seem like stiff requirements, but they will significantly increase your odds of success.

Why is it important to find a fiduciary adviser? Fiduciary advisers have a legal obligation to put your interests ahead of their own. They are held to a much higher standard. Most people do not realize that all financial advisers are not fiduciaries. Surprisingly, it’s been estimated that only about 15 percent of advisers are fiduciaries. Generally speaking, most sales reps who receive a commission for selling financial products such as annuities, insurance and mutual funds are not fiduciaries. On the other hand, Registered Investment Advisers and their reps usually are fiduciaries.

Why should they have 10 years of experience? Because markets are difficult to navigate and are constantly changing. Ideally, your adviser should have experience investing in both good and bad markets. Experience is critical.

Why should you require them to show you their 10-year track record? If they don’t, then how do you know what they’ve done for prior clients? Talk is cheap. Legitimate advisers can show what they’ve done for clients over the years. Showing you the track record of a mutual fund, a hypothetical model, or anything else they have recently started selling does not count. They need to show you their own track record, which would be a composite of the results of their previous clients’ investments. Any adviser who refuses to show you their track record should be crossed off your list.

Make sure your adviser meets these three requirements. If you are not happy with your investment performance or your current adviser, do something about it. Poor investments will not fix themselves. To improve your situation, you must be proactive.

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PICTURE MAKES PERFECT
We conducted six photo shoots with local photographer Bryant Livingston (www.blphoto.com). Here are just two of the highlights:

Trust Fall
KS Marketing’s Kory Boyd and Randall Hild were good sports with the heaps of boxes we made them climb through. They were even willing to gleefully throw their hands up and fall backward into the pile — just to nail our photo shoot. There’s a reason you’re No. 1, KS Marketing.

Lights Out
The power was unexpectedly turned off the morning of our Little Adventures shoot in Lehi, but Livingston came prepared with battery-operated equipment. Thankfully, founders Heather Granata and Jenny Farnsworth were game to smile in the dark and wait for the flash.

Q&A
The Q got its A on and surveyed the execs in charge. Here are our favorite responses.

Q: When you have to pull an all-nighter, what’s the food of choice?
A: “Peach rings … gotta have your fruit group.”
— Kyle Hall, Complete Merchant Solutions

A: “Smelling salts … then ice cream.”
— James Norton, Infuse Medical

A: “Monster energy drinks and pizza.”
— Chris Finken, OrangeSoda

A: “Dr Pepper and Bajio Grill.”
— Jim Higgins, Smile Reminder

Q: Who’s your favorite local entrepreneur?
A: “Alan Ashton.”
— Chris Boyle, Access Technology Solutions

A: “Alan Hall. He was one of my early mentors. I love what he is doing with Grow Utah Ventures.”
— Rich Christiansen, CastleWave

A: “Scott Abbott (because he’s being CCd on this).”
— Chad R. Jones, Five Star Painting

Q: If you could be anyone else, who would you be?
A: “Me, myself and I.”
— Answer of 90 percent of our respondents

A: “Bobby Flay.”
— Christian Faulconer, Franchise Foundry

A: “Santa Claus.”
— Jon Moss, RBM Building Services

A: “Oprah Winfrey.”
— Heather Granata, Little Adventures

A: “Jerry Seinfield — I love performing and my life could have gone in a completely different direction if acting/comedy had taken over.”
— Oliver Bigler, Marketecture, Inc.

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Any guesses? (And don’t cheat with the subhead of this article.)

Answer: The fine art of micromanaging. (You cheated, didn’t you?)

Micromanaging, by definition, is close supervision where a manager is extremely attentive to and is closely watching the actions and decisions of those being supervised.

“It can be good or bad, depending upon the training and the expectations that have been created between a manager and a person being supervised,” says David Cherrington, a professor of organizational behavior at BYU.

Every organized unit has to decide how to deal with it, and depending on how micromanagement is conducted, it can be a wonderful experience or a destructive one. Read on to see where you can falter and where you can fly.

The negative
When employees are micromanaged, they can feel they’re being treated unfairly and that their employer is not bestowing them adequate trust.

Translation: An extremely unpleasant work environment.

“Micromanaging can be used in a rather negative way, suggesting that supervisors are being heavy-handed and showing a lack of confidence and trust in the subordinate,” Cherrington says.

Cherrington has seen the negative effects of micromanagement begin in the classroom. When students work on a group project or on a research team, a group leader might micromanage the team and re-interview a person and re-analyze the same data. Not only can this lead to a lack of cohesiveness, it can also be a downright waste of time.

“Do you have confidence in one another, and {are you willing} to be OK saying, ‘We’ll just add it all together?’” Cherrington says. “Or do you have a lack of trust and confidence?”

Christian Faulconer, of Orem-based Franchise Foundry, is strongly against micromanaging in the workplace.

“Micromanaging de-motivates your employees, results in less creative thinking and limits scalability,” Faulconer says. “Micromanaged employees feel less autonomy and therefore less responsibility for the end product. They are less likely to deliver a creative solution to a problem and more likely to do something very ordinary.”

Faulconer finds a large difference between micromanaging and ensuring quality, but they are often confused for one another. He believes ensuring quality is the proper approach.

“Ensuring quality means training your team to do things the right way, developing processes to ensure consistency and checks to verify quality,” he says. “A good quality program is scalable and leaves the employees feeling responsible for their work and responsible for improvement.”

The positive
Although micromanaging can be negative, it can also be a beneficial tool.

“There are times when some decisions have to be carefully monitored because they have to be coordinated with other areas of the company,” Cherrington says.

Micromanaging can be successful when someone needs to take control and ensure everything runs smoothly and that proper channels of communication are in place.

“Not only when you have a greater division of labor do you need more micromanaging, but also when someone is not adequately trained,” Cherrington says. “A new trainee could be very desirous of micromanaging. If you’ve created the proper expectation, then it’s not a problem.”

Dustin Tibbitts, executive director of New Haven in Spanish Fork, says a mentor educated him about micromanaging.

“He said, ‘Never be afraid to micromanage something you feel strongly about. It’s one of the most powerful ways to communicate the task’s importance to the success of the company,’” Tibbitts says.

Tibbitts has developed “strategic micromanaging.” Tibbitts pushes his employees while keeping an open line of communication. He doesn’t hesitate to step in when he sees an employee who needs help, and he assists the employee with setting goals and following up to ensure progress.

In the end, it’s all about balance.

“There are some people whose attitudes are if you want it done right, you’ve got to do it yourself,” Cherrington says. “The reality is there are some jobs where there’s one right way to do it, but there are a lot of jobs where there are lots of ways to
do it.”

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This stress-free picture describes what an ideal investment program would be like — a low-stress, methodical strategy that allows you to reach your long-term goals.

Is it possible to have this type of experience?

Over the past 10 years, many investors’ experiences have been more like riding a roller coaster in the dark with no brakes, which is the complete opposite of low stress.

While it is impossible to have a completely stress-free experience, it is possible to reduce stress significantly by building a portfolio that is aligned with your specific risk tolerance. Your risk tolerance determines how aggressive or conservative you are invested. Your particular mix might be 20 percent conservative and 80 percent growth, 50/50, 70/30 or some other combination. It is different for each person. It depends on your individual goals and objectives and what you can handle.

Every investor has an amount of risk he or she is comfortable with. If your risk level is set too high, you will most likely have a hard time every time your account value declines. If your risk level is set too low, your returns may be inadequate, and you will never reach your goals. Basically, when it is not set right, you will worry every time the market drops and become euphoric every time it goes up.

Why is this so important? Because many investors do not consider how much risk they are signing up for when they initially invest. It might be invested in a way that you will lose everything when something goes wrong. For long-term success, it is critical you have a clear idea of exactly how much risk you are exposed to. Otherwise, your chances of success are slim.

Paragon cannot guarantee the accuracy of information from other sources. Opinions are as of the dates indicated only. This report is not a solicitation for any security. Past performance is not a guarantee of future results. Investment performance reflects time and size-weighted geometric composite returns of actual client accounts. Investment returns are net of all fees and costs. The S&P Index is a diversified, size weighted index of 500 stocks.

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In an effort to stem the overwhelming tide of fear, we created a presentation called “Is The World Ending?” In short, we didn’t believe it was the end. We believed the entire situation had evolved into unwarranted panic and fear, and we advised clients to become fully invested.

As we expected, the March lows were the market bottom. Since then, the economy has moved back from the precipice. In mid-July, we wrote several articles stating we believed the recession actually ended around June 30. Since the March lows, the U.S. market has gained 50 percent, retracing a good portion of the losses since last fall. Many of the international markets have come back even stronger, with the emerging markets leading the way.

Buy and Hold?
So, after all of this market drama, what is the best way to invest? Wall Street, mutual funds, stock brokers and financial planners all pitch “buy and hold” as the best way. Buy and hold is the most “promoted” investment strategy there is. John Bogle, founder of Vanguard Funds, is the poster child of the buy-and-hold strategy. He endorses it with evangelical zeal. Buy and hold is an investment strategy where you simply buy an investment and then hold it indefinitely. In theory, as the markets move up and down, your investment moves up and down, but over time you are rewarded.

Active management is a strategy where you are constantly adjusting your portfolio to what the market is doing. Unlike day trading, most active strategies are trying to capture intermediate term (three to 18 months) moves.

There has always been a debate whether buy and hold or active management is better. Since this is such an emotional debate, let’s look at the numbers.

In mid-October, the Dow Industrials moved above 10,000. Everyone cheered. The last time it hit 10,000 was about a year ago, on its way down. Looking longer term, the Dow Industrials first hit 10,000 back on March 18, 1999. That was more than 10 years ago. During that 10-year period of time, faithful buy-and-hold investor’s returns have been almost non-existent. When you factor in inflation, the returns are actually negative.

The Dow paints a relatively positive picture. Let’s say you invested in the NASDAQ (which represents 6,000 stocks) more than nine years ago on March 10, 2000. Buying and holding the NASDAQ from March 10, 2000 through Oct. 16, 2009 would have given you a loss of 57 percent. Out of curiosity, just how much longer do the buy and holders recommend you keep holding the NASDAQ?

Active Management
At Paragon, we are proponents of active management. And the numbers back us up. Both of our actively managed portfolios are doing extremely well year-to-date. Stocks trounced bonds, small cap and mid cap stocks outperformed large caps, and emerging markets outperformed all asset classes. Fortunately, that is where our models positioned us, and it is why our portfolios once again outperformed their benchmarks. Our conservative portfolio, Managed Income, is up 11.93 percent year-to-date, through Sept. 30 — more than doubling the 5.72 percent for its benchmark, the Barclays Bond Index.

Our growth portfolio, Top Flight, is up 27.7 percent year-to-date, through Sept. 30 — versus 19.3 percent for its benchmark, the S&P 500. Since January 2007, Top Flight is down only one percent versus its benchmark, the S&P 500, which is down 21 percent during the same period. Since its inception in January 1998, Top Flight has gained 337 percent versus only 33 percent for the S&P 500 index.

Active management does work.

Paragon cannot guarantee the accuracy of information from other sources. Opinions are as of the dates indicated only. This report is not a solicitation for any security. Past performance is not a guarantee of future results. Investment performance reflects time and size-weighted geometric composite returns of actual client accounts. Investment returns are net of all fees and costs. The S&P Index is a diversified, size weighted index of 500 stocks.

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