From the President

2015 ended the year with a move down in the major markets.  This seems to have been driven by falling oil prices, which usually signal a slowdown in global demand for manufactured goods.  As oil fell from over $100 to around $30 per barrel, stocks broadly fell in unison.  By the first quarter of 2016, charts showing the S&P 500 index and WTI oil prices were nearly identical.  While definitely a correction in the market, defined as a broad decline of more than 10%, the country averted a recession and stocks recovered just after reaching a decline of 20%.  Failing to stay below that level, a bear market was avoided.  Interest rates saw their first hike in many years, but only to .25%

The first quarter of 2016 saw lots of movement, but very little progress to the upside or downside.  The quarter ended just shy of where it began.  Individual sectors had advances and declines as money rotated from winning stocks to companies with more upside potential, but the broad measures were little changed.  With the volatility of the first quarter, many firms priced in fewer rate hikes than were predicted late last year, and bonds rallied a bit from this expectation of low rates holding for a while longer.

With the declines in the markets, our revenues were slightly lower for the year, reflecting a reduction in the amount of asset-based fees the firm collected.  The stable markets also contributed to a slowdown in the recruiting efforts of the firm, as representatives were content to remain with their current firms.  High volatility and steep declines in the markets are generally better for recruiting, and 2015 had neither.

Although not very favorable as far as returns in the last year, the markets were reasonably steady and news continues to be upbeat.  This has again contributed to a low incidence of customer complaints and litigations for the firm, with only one small arbitration case added for the year. 

In 2016, management placed a greater emphasis on recruiting for our broker-dealer division, and has begun new initiatives to increase our broker count and ultimately our revenue.  The Department of Justice has added a new dimension to our growth plans by implementing a series of rules that will dramatically change the industry, especially with respect to smaller investors.  While noble in intentions, the new rules create additional costs for firms and the potential for broader litigation in the industry, along with a new fee structure that could significantly impact broker-dealer firms in the near term, but have little effect long-term.  Most of the provisions of these new regulations are effective in April of 2017, with a few waiting until January of 2018.  Of course, the changes will begin almost immediately, so the firm should see some revenue differences before the end of 2016.

The firm was able to again provide a dividend to shareholders in 2015, matching our distribution from 2014.  Growth of this dividend is a focus of management and we are working to provide a predictable, long-term income stream for shareholders.  We are also reviewing other initiatives to increase the value of our company and provide liquidity for our shares in the public markets.

As always, growth, profitability, and shareholder value continue to be our primary missions.  We continue to operate a profitable and professional organization with a well-trained and experienced staff.

John Carlson 
Chief Executive Officer

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