Quarterly Reports and 2008 Market Recap

Dear Valued Client:

The transition from Royal Alliance to LPL Financial has been accomplished with as little disruption as we could have hoped.  We are already experiencing some of the efficiencies that allow us to better serve you.  We are excited about some of the forthcoming changes that will be made possible with this switch.  Some of the changes and opportunities planned this year include:

• Enhanced quarterly performance statements
• Electronic newsletter format
• Survey for you to evaluate our services

As part of the transfer, we are reviewing all of our client accounts to ensure that everything has transferred appropriately, checking for residual balances that have accrued in the Royal Alliance accounts, and checking data generated by our electronic downloads.  It is important that all of the information we report to you is accurate, and as such, your December 31, 2008 quarterly report will be delayed until February 17, 2009.  We apologize for any inconvenience and appreciate your patience as we reconcile all data.  We encourage you to contact us and establish electronic access to your accounts if current balances at LPL Financial are needed.

The year 2008 was tumultuous, to say the least.  The S&P 500 closed the year at -37.00%, the MSCI EAFE ND at -43.38% and the Russell 2000 at -33.79%.  The LB Aggregate Bond index closed 2008 at 5.24% and inflation, as measured by the Consumer Price Index, rose by 0.65%.

Intervention by policy makers has historically marked the turning point for bear markets and limited the duration of recessions.  While the current financial crisis is more severe than most, the scope of the policy response is unprecedented.  And while key policy actions are taking time to implement, we believe the trillions of dollars being marshaled to stabilize the global financial markets are likely to prove successful.  Indeed, signs of progress evident in late 2008 include a sharp fall in interbank lending rates, stabilizing credit spreads, and the return of the commercial paper market.  However, many potentially negative unintended consequences stemming from these unprecedented policy actions create a lot of uncertainty as we enter 2009.  These consequences include the impact of sweeping regulatory changes, political oversight, more conservative consumer financing, the ongoing deleveraging of financial institutions, and the potential for rising inflation as growth resumes.

Although no one can tell with absolute certainty the future and timing of the economy, we do know that clearly understanding a client’s cash flow needs is a critical part of developing and maintaining the asset allocation model.  By having adequate balances in cash equivalents and fixed income, we can assist you through these volatile times.

Please contact us with any questions or concerns you may have.  We welcome your comments.

The Waller Financial Team