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Wealth Management Trends 2016: Findings from Tiburon Advisors

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Presented by Charles "Chip" Roame, managing partner at Tiburon Strategic Advisors at Hearsay Innovation Summit 2016

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Wealth Management Trends 2016: Findings from Tiburon Advisors

  1. 1. Wealth Management Trends: 2016 Findings from Tiburon Advisors Universal Points from Tiburon CEO Summit XXX Keynote Presentation
  2. 2. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 22  Tiburon – 18+ years; 400+ corporate clients; & 1,800+ projects  Tiburon CEO Summits – 30 events over 15 years; ~250 attendees each time (all clients and all EVPs+)  Content barometer • FI Level issues - Wealth management #1 or #2 (payments) • FA level issues - Sales & marketing #1 or #2 (succession planning)  Hearsay Social (Vanguard CEO Bill McNabb ~2013)  Today… Universal points from the stage  Key product & channel issues at lunch (Break-Away Brokers; Independent Advisors; Online Brokerage; Indexing; Hedge Funds; SRI & II) Context Setting Context Setting
  3. 3. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 33 Tiburon CEO Summit XXX – A Dozen Tiburon Industry Views that May Impact Your Firm’s Strategy Tiburon CEO Summit XXX A Dozen Tiburon Industry Views that May Impact Your Firm’s Strategy Source: Tiburon Research & Analysis 1. Continuing Low Interest Rates Depressing Industry Profitability by 5%-15% 2. The Most Important Statistics: Consumer Wealth ≈ $80 Trillion & Expected Liquidation ≈ $30 Trillion 3. Break-Away Brokers Trend Stagnate at ≈ 100 4. Independent Advisors > $3.5 Trillion Assets Under Management & Administration 5. Discount & Online Brokerage Firms > $5.0 Trillion Assets Under Management & Administration 6. Robo Advisors > $250 Billion Assets Under Management 7. Indexing > $4.5 Trillion Assets Under Management 8. Hedge Funds & Liquid Alternative > $3.0 Trillion Assets Under Management (But Continue to Stumble) 9. Socially Responsible Investing & Impact Investing > $6.0 Trillion Assets Under Management 10. Non-Whites, Women, & Millennials Each > 50% of the Population 11. TAMPs > $3.0 Trillion Assets Under Management & Administration 12. Multiple Huge Impacts of the Coming Fiduciary Standard
  4. 4. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 44 1. Continuing Low Interest Rates Depressing Industry Profitability by 5%-15% 2. The Most Important Statistics: Consumer Wealth ≈ $60 Trillion & Expected Liquidation ≈ $30 Trillion 3. Break-Away Brokers Trend Stagnate at ≈ 100 4. Independent Advisors > $3.5 Trillion Assets Under Management & Administration 5. Discount & Online Brokerage Firms > $5.0 Trillion Assets Under Management & Administration 6. Robo Advisors > $250 Billion Assets Under Management 7. Indexing > $4.5 Trillion Assets Under Management 8. Hedge Funds & Liquid Alternative Mutual Funds > $3.0 Trillion Assets Under Management (But Continue to Stumble) 9. Socially Responsible Investing & Impact Investing > $6.0 Trillion Assets Under Management 10. Non-Whites, Women, & Millennials Each > 50% of the Population 11. TAMPs > $3.0 Trillion Assets Under Management & Administration 12. Multiple Huge Impacts of the Coming Fiduciary Standard Outline
  5. 5. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 555 Source: 4/5/16 Tolleson Wealth Management Presentation; 3/31/16 The Wall Street Journal; 3/30/16 Insurance News Net; 3/15/16 CNBC; 3/10/16 Federal Reserve Flow of Funds Report; 10/13/15 Financial Engines Presentation (Jones); 10/13/15 United Capital Financial Partners Presentation (Brown); 9/21/15 FSI News Brief (Federal Reserve Flow of Funds); 9/19/15 Wall Street Journal (Federal Reserve Flow of Funds); Tiburon Research & Analysis The Most Important Statistics: Consumer Wealth ≈ $60 Trillion & Expected Liquidation ≈ $30 Trillion The Most Important Statistics: Consumer Wealth ≈ $60 Trillion & Expected Liquidation ≈ $30 Trillion Consumers Consumers: 318.9 million Persons per household: 2.6 Consumer households: 122.7 million Investable Assets & Financial Assets $38.6 trillion investable assets, $21.0 trillion retirement plan assets, & $59.6 trillion financial assets $98.0 trillion household assets Potential to reach $100 trillion in 2016 depending on stock & real estate markets (and Tiburon tweak to remove non-profits) $14.5 trillion debt $83.5 trillion net worth Rich Folks Growing numbers of wealthy households  1,826 billionaires  132,000 with $25 million  1.2 million with $5 million  10.1 million millionaires Fun… and useless… facts  Average consumer household: $315,000 investable assets, $486,000 financial assets, $799,000 total assets, & $681,000 net worth  Seriously!
  6. 6. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 66 Consumer Households Have $38.6 Trillion Investable Assets, $59.6 Trillion Financial Assets, $98.0 Trillion Total Assets, and $83.5 Trillion Net Worth… Consumer Households Net Worth ($ Trillions) Source: 3/10/16 Federal Reserve Flow of Funds Report; 9/21/15 FSI News Brief (Federal Reserve Flow of Funds); 9/19/15 Wall Street Journal (Federal Reserve Flow of Funds); 9/18/15 Federal Reserve Flow of Funds Report; 3/12/15 Federal Reserve Flow of Funds Report; 12/11/14 Federal Reserve Flow of Funds Report; 3/31/14 Federal Reserve Flow of Funds Report; 3/25/14 Federal Reserve Flow of Funds Report; Tiburon Research & Analysis $98.0 $59.6 $83.5 $14.5 $21.0 $27.7 $10.7 Financial Assets Retirement Plan Assets Personal Assets Small Business Valuations Total Assets Liabilities Net Worth $38.6 Investable Assets
  7. 7. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 7 Source: 3/15/16 Tiburon CEO Summit XXX Content Survey Data; 9/2/15 Tiburon CEO Summit XXIX Content Survey Data; Tiburon Research & Analysis Tiburon CEO Summit Attendees Continue to Estimate that ~50%-75% of Financial Advisor Clients are Baby Boomers, with ~75% the More Common Answer Tiburon CEO Summit Attendees By Estimated Share of Financial Advisor Clients Who are Baby Boomers 7 7% 40% 53% 0% 0% 3% 23% 74% Tiburon CEO Summit XXIX Tiburon CEO Summit XXX ~50% of Financial Advisor Clients ~25% of Financial Advisor Clients ~75% of Financial Advisor Clients ~100% of Financial Advisor Clients
  8. 8. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 8 Baby Boomers will Liquidate Some Portion of the $59.4 Trillion in Retirement Plans, Personal Assets, & Small Businesses Source: 3/10/16 Federal Reserve Flow of Funds Report; 9/21/15 FSI News Brief (Federal Reserve Flow of Funds); 9/19/15 Wall Street Journal (Federal Reserve Flow of Funds); 9/18/15 Federal Reserve Flow of Funds Report; 3/12/15 Federal Reserve Flow of Funds Report; 3/3/15 New York Times; 2/10/15 BenefitsPro (Cogent Reports); 12/11/14 Federal Reserve Flow of Funds Report; Tiburon Research & Analysis Consumer Households Assets ($ Trillions) $98.0 $59.6$21.0 $27.7 $10.7 Financial Assets Retirement Plan Assets Personal Assets Small Business Valuations Total Assets $38.6 Investable Assets
  9. 9. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 99 1. Continuing Low Interest Rates Depressing Industry Profitability by 5%-15% 2. The Most Important Statistics: Consumer Wealth ≈ $60 Trillion & Expected Liquidation ≈ $30 Trillion 3. Break-Away Brokers Trend Stagnate at ≈ 100 4. Independent Advisors > $3.5 Trillion Assets Under Management & Administration 5. Discount & Online Brokerage Firms > $5.0 Trillion Assets Under Management & Administration 6. Robo Advisors > $250 Billion Assets Under Management 7. Indexing > $4.5 Trillion Assets Under Management 8. Hedge Funds & Liquid Alternative Mutual Funds > $3.0 Trillion Assets Under Management (But Continue to Stumble) 9. Socially Responsible Investing & Impact Investing > $6.0 Trillion Assets Under Management 10. Non-Whites, Women, & Millennials Each > 50% of the Population 11. TAMPs > $3.0 Trillion Assets Under Management & Administration 12. Multiple Huge Impacts of the Coming Fiduciary Standard Outline
  10. 10. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 1010 Source: 4/7/15 TD Ameritrade Presentation (Bradley); 4/7/15 LPL Financial Presentation (Casady); 4/5/15 Fidelity Investments Email (Birke); 4/4/15 TD Ameritrade Email (Bradley); 4/4/15 Fidelity Investments Email (Canter); 3/17/15 Fidelity Investments Web Site; 3/9/15 LPL Email (Kloman); 2/25/15 RIA Biz; 10/13/14 Wall Street Journal (Fidelity Investments); 7/21/14 Barron’s (Scorpio Partnership); Tiburon Research & Analysis Both the Retail and Financial Advisor Support Models at Both Fidelity Investments & The Charles Schwab Corporation are Now Amongst the Leading Financial Advisor Channel Firms Leading Financial Advisor Channel Firms By Assets Under Administration ($ Billions) $591 $771 $1,000 $1,107 $1,353 $1,447 $1,522 $1,600 $1,900 $1,900 Edward Jones & Company Ameriprise Financial UBS Wealth Management Americas Schwab Advisor Services Schwab Investor Services Fidelity Custody & Clearing Fidelity Investments Retail Wells Fargo Advisors Bank of America Merrill Lynch Morgan Stanley
  11. 11. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 1111 1. Continuing Low Interest Rates Depressing Industry Profitability by 5%-15% 2. The Most Important Statistics: Consumer Wealth ≈ $60 Trillion & Expected Liquidation ≈ $30 Trillion 3. Break-Away Brokers Trend Stagnate at ≈ 100 4. Independent Advisors > $3.5 Trillion Assets Under Management & Administration 5. Discount & Online Brokerage Firms > $5.0 Trillion Assets Under Management & Administration 6. Robo Advisors > $250 Billion Assets Under Management 7. Indexing > $4.5 Trillion Assets Under Management 8. Hedge Funds & Liquid Alternative Mutual Funds > $3.0 Trillion Assets Under Management (But Continue to Stumble) 9. Socially Responsible Investing & Impact Investing > $6.0 Trillion Assets Under Management 10. Non-Whites, Women, & Millennials Each > 50% of the Population 11. TAMPs > $3.0 Trillion Assets Under Management & Administration 12. Multiple Huge Impacts of the Coming Fiduciary Standard Outline
  12. 12. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 12 Robo Advisors  45 online advice firms  $217.4 billion assets under management, up from $118.0 billion in 2012  Narrowly defined robo advisors have gathered just $7.2 billion  Raised $540 million venture capital (three > $100 million) (Betterment > $200 million)  Huge predictions  SigFig: $1.0 trillion in 2021  Citi: $5.0 trillion in 2024  Deloitte: $6.0 trillion by 2025 Predictions  Robo advisors each generate $10 million or less revenues  Challengers  Financial Engines • Grew $10.5 billion assets under management in 1H/15 (greater than all robo advisors’ assets under management) • Acquired The Mutual Fund Store & adding video service  The Vanguard Group’s Personal Advisor Services business • Lowered minimum from $100,000 to $50,000 • Quickly gathered $31.0 billion assets under management (still in pilot phase; no paid advertising)  The Charles Schwab Corporation • No separate fee for investment advice • Allocates 6% to 30% of assets to cash • Quickly gathered $6.5 billion assets under management  TD Ameritrade • Amerivest (Tom Bradley: that is our robo; $25,000 minimum; $100,000 average; $11.0 billion AUM; now actively selling)  Fidelity Investments • Announced available to public in beta test (Fidelity Go) • 35-39 basis points Robo Advisors > $250 Billion Assets Under Management Robo Advisors > $250 Billion Assets Under Management Sustainable Impacts  Creates price pressure on all channels  Commoditization of basic asset allocation & investment management (25 bps)  Ric Edelman says kiss the 1.00% goodbye  Raises importance of financial education & financial planning  Also shines light on user experience & digital tools  Requires omni channel delivery  Digitization will force everybody to change  Combination of fintech & human intervention will win in the delivery of financial advice to consumers  Only 3% of financial advisors offer online advice services to clients, and only 11% plan to offer online advice services to clients in the next twelve months  Role of human advisors is still critical & valued  Holy grail is ability to cost efficiently serve mass market (face-to-face via video; financial advice for episodic events)  Financial advisors will need to deliver real value beyond investments  Financial advisors will converge & coexist  Models expanding  Targeting baby boomers: Personal Capital Corporation; The Vanguard Group  Developing financial advisor models: Betterment; The Charles Schwab Corporation  Developing 401K plan models: Betterment; Personal Capital Corporation  Outcomes: 5-10 will survive; 10-15 will sell; 15-20 will die Source: 4/6/16 HD Vest Financial Services Presentation (Ochs); 4/6/16 Sageview Capital Presentation (Stuart); 4/6/16 FolioDynamix Presentation (Mrak); 4/5/16 Adhesion Wealth Advisor Solutions Presentation (Stier); 4/5/16 Ellevest Presentation (Knoll); 4/5/16 Guided Choice Presentation (Grabot); 4/5/16 Sage Financial Group Presentation (Cohn); 4/5/16 Ritholtz Wealth Management Presentation (Brown); Tiburon Research & Analysis 12
  13. 13. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 1313 Online Advice Firms Include Betterment, FutureAdvisor, Personal Capital Corporation, & Wealthfront Online Advice Firms 13 Source: 11/21/15 Wall Street Journal; 11/3/15 The Charles Schwab Corporation Email (Bettinger); 11/2/15 Investment News; 10/14/15 Hellman & Friedman Presentation (Thorpe); 10/13/15 Marstone Presentation (Hartigan); 10/5/15 Fidelity Investments Email (Langlois) (Cerulli Associates); 10/4/15 Fidelity Investments Email (Langlois); 10/2/15 TD Ameritrade Email (DeFreitas); Tiburon Research & Analysis  Acorns  Advisor Software  GoalGetter & Goalgami  Aegon  Transamerica Robo Advisor (NextCapital)  Asset Builder  Betterment Holdings  Betterment  Betterment Institutional  BlackRock  FutureAdvisor  BOM Financial Group  Harris My CFO  Brinker Capital  Retirement Advice Business  CircleBlack  Decimal Software  Edelman Financial Services  Edelman Online  Ellevate  Envestnet  Upside Holdings  Financial Engines  FMR (Fidelity Investments)  Fidelity Go  Strategic Advisor-W  Guided Choice  Savant Capital Management  Savant Portfolios Management  Searcy Financial Services  Allos Investment Advisors  SheCapital  SigFig  Stadion Money Management  Standard  Mainspring Management  TD Bank Financial Group  TD Ameritrade (Amerivest)  The Bank of New York Mellon Corporation  Pershing Robo Advisor (Marstone)  The Charles Schwab Corporation  Intelligent Portfolios  Institutional Intelligent Portfolios  The Vanguard Group  Personal Advisor Services  Trizic  Wealth Access  Wealthfront  WiseBanyan  Worthfm  Hedgeable  Interactive Brokers Group  Covestor  Jemstep  Liftoff  Mariner Holdings  First Point Financial  Market Riders  Marstone  Morningstar  Retirement Advice  NextCapital  Northwestern Mutual Life  LearnVest  Personal Capital Corporation  ProManage  RebalanceIRA  Russell Investments  Russell Adaptive Retirement Accounts (NextCapital)  Riskalyze  Autpilot
  14. 14. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 1414 All Online Advice Firms Have Gathered $217.4 Billion Assets Under Management, Up from $118.0 Billion in 2012 Online Advice Firms Assets Under Management ($ Billions) Source: 10/14/15 Hellman & Friedman Presentation (Thorpe); 10/5/15 Fidelity Investments Email (Langlois) (Cerulli Associates); 10/2/15 TD Ameritrade Email (DeFreitas); 10/1/15 Fidelity Investments Email (Langlois); 10/1/15 Morningstar Email (Phillips); 8/5/15 MarketWatch Web Site; 7/15 Morningstar Fact Sheet; 6/5/15 RIA Biz; 4/7/15 Betterment Presentation (Stein); 4/7/15 FTV Capital Presentation (Bernstein); Tiburon Research & Analysis $118.0 $154.6 $186.5 $217.4 2012 2013 2014 2015
  15. 15. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 1515 Online Advice Firms Market Definition Online Advice Firms can Specifically be Defined to Include Defined Contribution Plan Focused Firms & B2C Focused Firms Source: Tiburon Research & Analysis Robo Advisors Discount Brokerage Firms & Mutual Fund Companies Online Advice Firms Market Definition Defined Contribution Plan Focused Firms B2C Focused Firms
  16. 16. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 16 Defined Contribution Plan Focused Firms 86% Robo Advisors 3% Discount Brokerage Firms & Mutual Fund Companies 11% 16 Online Advice Firms Assets Under Management By Market Segment Online Advice Firms’ Assets Under Management are Dominated by the Defined Contribution Focused Firms Source: 3/31/16 MyVest Corporation Email (Honikman); 10/14/15 Hellman & Friedman Presentation (Thorpe); 10/5/15 Fidelity Investments Email (Langlois) (Cerulli Associates); 10/1/15 Fidelity Investments Email (Langlois); 10/1/15 Morningstar Email (Phillips); 8/5/15 MarketWatch Web Site; 6/5/15 RIA Biz; 2/27/15 Main Street Web Site; Tiburon Research & Analysis
  17. 17. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 1717 $3.0 $3.9 $3.8 $6.5 $11.0 $12.3 $12.4 $31.0 $38.7 $114.5 Wealthfront Betterment Stadion Money Management The Charles Schwab Corporation TD Ameritrade (Amerivest) Fidelity Investments (PAS-W) Guided Choice The Vanguard Group (Personal Advisor Services) Morningstar (Retirement) Financial Engines The Leading Online Advice Firms are the Defined Contribution Plan Focused Firms & the Large Discount Brokerage Firms & Mutual Fund Companies Source: 4/6/16 Morningstar Presentation (Phillips); 3/30/16 Financial Times; 10/14/15 Hellman & Friedman Presentation (Thorpe); 10/13/15 Financial Engines Presentation (Jones); 10/5/15 Fidelity Investments Email (Langlois) (Cerulli Associates); 10/2/15 TD Ameritrade Email (DeFreitas); 10/1/15 Fidelity Investments Email (Langlois); 10/1/15 Morningstar Email (Phillips); 8/5/15 MarketWatch Web Site; Tiburon Research & Analysis Online Advice Firms By Assets Under Management ($ Billions)
  18. 18. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 1818 Betterment Has Raised the Most Venture Capital Amongst the Online Advice Firms with $205 Million Online Advice Firms Venture Capital Raised ($ Millions) Source: 3/30/16 Brinker Capital Email (Coyne); 3/30/16 The Wall Street Journal; 10/1/15 CrunchBase Web Site; 9/30/15 CrunchBase Web Site; 9/2/15 RIA Biz; 3/30/15 Investment News (CrunchBase); 3/26/15 Envestnet Edge (Aite Group); 2/12/15 RIA Biz; 2/6/15 Silicon Valley Business Journal; 10/8/14 Venrock Presentation (Ascher); 10/8/14 Foundation Capital Presentation (Moldow); 9/15/14 Think Advisor; Tiburon Research & Analysis $15 $15 $22 $24 $24 $32 $69 $104 $130 $205 SigFig Jemstep FutureAdvisor Covestor Autopilot Acorns LearnVest Personal Capital Corporation Wealthfront Betterment
  19. 19. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 1919 1. Continuing Low Interest Rates Depressing Industry Profitability by 5%-15% 2. The Most Important Statistics: Consumer Wealth ≈ $60 Trillion & Expected Liquidation ≈ $30 Trillion 3. Break-Away Brokers Trend Stagnate at ≈ 100 4. Independent Advisors > $3.5 Trillion Assets Under Management & Administration 5. Discount & Online Brokerage Firms > $5.0 Trillion Assets Under Management & Administration 6. Robo Advisors > $250 Billion Assets Under Management 7. Indexing > $4.5 Trillion Assets Under Management 8. Hedge Funds & Liquid Alternative Mutual Funds > $3.0 Trillion Assets Under Management (But Continue to Stumble) 9. Socially Responsible Investing & Impact Investing > $6.0 Trillion Assets Under Management 10. Non-Whites, Women, & Millennials Each > 50% of the Population 11. TAMPs > $3.0 Trillion Assets Under Management & Administration 12. Multiple Huge Impacts of the Coming Fiduciary Standard Outline
  20. 20. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 202020 Non-Whites, Women, & Millennials Each > 50% of the Population Non-Whites, Women, & Millennials Each > 50% of the Population Non-Whites  The United States of America’s ethnic composition will see an increasing decline of white majority Women  Women are more likely to rely on financial advisors  Women value the opinions of financial advisors more than men when they are picking mutual funds  Men tend to have bigger retirement accounts due to higher salaries  The average 401K balance for men is $121,000 compared to women at $78,000  Women are 10% more likely to enroll in workplace plans  Women save at higher rates (up to 12%)  Just 56% of women own mutual funds & stocks in their accounts versus 73% of men  Women will receive 70% of inheritances and this will continue to be true for the next 40 years  92% of women become the primary decision maker at some point in their lives  Nearly all women are single by age 65  Women are underserved by financial advisors Millennials  Generational transformation from baby boomers to millennials (but not so fast!)  Baby boomer & Gen X will control the vast majority of assets for several decades  Millennials are a huge population but it will take time for them to control assets  Three-quarters of each generation look for brokers that offer a variety of tools  Roughly half in each generation prefer their accounts be a balance of human & robo management  Over half in each generation report evaluating their portfolio at least weekly  Almost half of millennials use an investing & trading app on their smartphone once a week or more  Over three-quarters of millennials strongly or somewhat agree that the ability to monitor their investments on the go is critical  Over two-thirds of millennials strongly or somewhat agree that it is important that their brokerage’s app has robust capability that rival the web site experience  Over two-thirds of millennials strongly or somewhat agree that they plan to use their mobile device to manage their portfolios more frequently in the next year  Less than half of millennials strongly or somewhat agree that they are interested in using wearable technologies, like smart watches, to monitor portfolios  Millennials make up one-quarter of the population  Millennials question the financial services industry because they became adults during the time of the financial crisis, bank failures, & the foreclosure boom  Almost half of Millennials consider themselves to be conservative investors  More than one-quarter of Millennials would get a second opinion before taking a financial advisor’s advice  Millennials are four times more likely than older generations to consult with other sources before taking the advice of a financial advisor  Millennials are looking to their peers for money guidance over financial advisors  Almost half of Millennials believe that they spend a lot of time researching alternatives before making major purchase decisions Source: 4/6/16 HD Vest Financial Services Presentation (Ochs); 4/6/16 Sageview Capital Presentation (Stuart); 4/5/16 Ellevest Presentation (Knoll): 1/11/16 E*Trade Financial StreetWise Report; 4/7/15 Advisor Software Presentation (Rudd); 4/7/15 Pax World Investments (Keefe); 4/5/15 EverBank Financial Email (Trotter); 3/11/15 The Ark (The Vanguard Group; New York Times); Tiburon Research & Analysis
  21. 21. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 21 The US Population is Expected to Grow More than 20% Over the Next 30 Years, with Non-Hispanic Whites Becoming a Minority United States of America Residents By Ethnicity Source: 3/29/16 EverBank Financial Email (Trotter); 11/24/15 The Wall Street Journal (US Census Bureau); 4/18/14 The Wall Street Journal (Pew Research); Tiburon Research & Analysis 85% 64% 43% 10% 12% 13% 4% 16% 31% 1% 8% 13% 1960 2010 2060 Whites Hispanics Blacks Asians & Other 21
  22. 22. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 2222 No 83% Yes 17% Source: 3/14 Retirement Advisor; Tiburon Research & Analysis Less than One-Fifth of Financial Advisors Use Marketing & Sales Strategies that Target Multicultural Prospects Marketing & Sales Strategy By Propensity to Target Multicultural Prospects
  23. 23. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 23 Women are More Likely to Rely on Financial Advisors Source: 2/14 Worth.Com (Merrill Lynch; Prudential); Tiburon Research & Analysis Investors By Financial Advisor Reliance By Gender Do Own Research & Buy Directly 54% 41% 33% 44% 12% 15% Men Women Rely on Financial Advisor Input But Make Own Decisions Base Decisions Mostly on Financial Advisor Recommendations 23
  24. 24. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 2424 Inheritances By Destination Women will Receive 70% of Inheritances and this will Continue to for the Next 40 Years Source: 10/14 Retirement Advisor; Tiburon Research & Analysis Women 70% Other Destination 30%
  25. 25. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 2525 Women Consumers By Propensity to Fire their Financial Advisor within One Year of Being Widowed or Divorced Almost Three-Quarters of Women Fire their Financial Advisor within One Year of Being Widowed or Divorced Source: 1/19/14 Investment News (Pershing); Tiburon Research & Analysis Fired Financial Advisor 70% Did Not Fire Financial Advisor 30%
  26. 26. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 2626 Consumers By Propensity to Believe that they Spend a Lot of Time Researching Alternatives Before Making Major Purchase Decisions Almost Half of Millennials Believe that they Spend a Lot of Time Researching Alternatives Before Making Major Purchase Decisions 33% 37% 44% Baby Boomers Generation X Millenials Source: 10/2/13 HighTower Email (Weissbluth); 9/13 HighTower Email (Weissbluth); Tiburon Research & Analysis
  27. 27. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 27 Over Three-Quarters of Millennials Strongly or Somewhat Agree that the Ability to Monitor their Investments on the Go is Critical Generations By Agreement that Ability to Monitor Investments On the Go is Critical 27 76% 66% 51% Millennials Gen X Baby Boomers Source: 1/11/16 E*Trade Financial StreetWise Report; Tiburon Research & Analysis
  28. 28. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 2828 1. Continuing Low Interest Rates Depressing Industry Profitability by 5%-15% 2. The Most Important Statistics: Consumer Wealth ≈ $60 Trillion & Expected Liquidation ≈ $30 Trillion 3. Break-Away Brokers Trend Stagnate at ≈ 100 4. Independent Advisors > $3.5 Trillion Assets Under Management & Administration 5. Discount & Online Brokerage Firms > $5.0 Trillion Assets Under Management & Administration 6. Robo Advisors > $250 Billion Assets Under Management 7. Indexing > $4.5 Trillion Assets Under Management 8. Hedge Funds & Liquid Alternative Mutual Funds > $3.0 Trillion Assets Under Management (But Continue to Stumble) 9. Socially Responsible Investing & Impact Investing > $6.0 Trillion Assets Under Management 10. Non-Whites, Women, & Millennials Each > 50% of the Population 11. TAMPs > $3.0 Trillion Assets Under Management & Administration 12. Multiple Huge Impacts of the Coming Fiduciary Standard Outline
  29. 29. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 292929 Source: 4/6/16 HD Vest Financial Services (Ochs); 4/5/16 FTJ FundChoice Presentation (Cook); 4/5/16 Guided Choice Presentation (Grabot); 4/5/16 Lincoln Investment Email (Forst); 4/5/16 Loring Ward Group Presentation (Potts); 4/5/16 M Financial Group Presentation (Jonske); 4/5/16 PIEtech Presentation (Curtis); 4/5/16 Sawtooth Presentation (Pries); 4/5/16 Tolleson Wealth Management Presentation (Joyner); Tiburon Research & Analysis The Fiduciary Standard The Fiduciary Standard Fiduciary Standard  One of biggest changes since 1940 Act  Goal to lessen commissions & fees that cost savers billions of dollars each year  UK mixed results  Drawn substantial opposition from the industry  Will massively change the industry for the better  More financial planning  Cheaper annuities  More robo advice (“savor of the robos!”) (other to follow Betterment in seeking financing)  Technology adoption  Three bills introduced to stop (February 2016)  LPL Financial responded with lower fees & lower account minimums Department of Labor  Began in 2010  7,000 comment letters  Due out tomorrow  Eight months to comply  Require deeper look at clients & paper trail  Financial planning to increase in use  May jettison seven million & $250 billion low balance IRA accounts (orphan accounts) (to robo advisors?)  Rewrite of product sales deals  $2.4 billion revenues under threat (e.g continued distribution fees)  Variable annuities ($1.5 billion sales over past ten years) (50% into retirement accounts)  Rise of fixed or indexed annuities  Force out same individual brokers  Will lead to consolidations in broker/dealer market (especially of smaller firms) (Met Life sold; AIG sold)  Interesting one to watch… rollovers to fee-based financial advisors  Also… Further challenges large DC plan economics  ACLI threatens lawsuit Securities & Exchange Commission  SEC would diverge (Mary Jo White)  Not likely under Mary Jo White
  30. 30. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 30 Tiburon CEO Summit Attendees Believe in the Need for a Fiduciary Standard Tiburon CEO Summit Attendees By Belief in Need for Fiduciary Standard 74% 76% 26% 24% Tiburon CEO Summit XXIX Tiburon CEO Summit XXX Yes No Source: 3/26/16 Tiburon CEO Summit XXX Content Survey Data; 10/2/15 Tiburon CEO Summit XXIX Content Survey Data; Tiburon Research & Analysis
  31. 31. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 31 Full-Service Wealth Managers Individual Retirement Accounts (IRA) Account Size Assets Under Administration ($ Billions) Hundreds of Billions of Dollars in Individual Retirement Accounts May be Orphaned Depending on New Department of Labor Fiduciary Standard Regulations $115 $275 $580 <$25,000 <$50,000 <$100,000 Source: 10/30/15 Financial Services Observer (Morningstar); Tiburon Research & Analysis
  32. 32. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 32 Assets Under Administration Share that are Individual Retirement Accounts (IRA) Individual Retirement Account Assets Under Administration Account for Almost One- Third of Industry Assets, Even More at Some Firms Such as LPL Financial Holdings 17% 52% 40% 26% 34% 21% Bank of America Corporation LPL Financial Holdings Raymond James Financial Stifel Financial SIFMA Wells Fargo Corporation Source: 10/30/15 Financial Services Observer (SIFMA); Tiburon Research & Analysis Average: 30%
  33. 33. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 33 -0.3% -0.5% -1.3% -1.4% -2.2% -2.3% -2.4% -4.6% -5.5% -7.2% Ameriprise Financial Has the Most Potential Earnings Per Share Dilution From the Department of Labor Fiduciary Rule at -7.2% Department of Labor Fiduciary Rule Impact Potential Earnings Per Share Dilution By Company Source: 3/23/16 Financial Times (Morgan Stanley); Tiburon Research & Analysis Ameriprise Financial Aegon (Transamerica) Prudential PLC (Jackson National) Provident Financial Lincoln National Corporation Voya Financial Prudential Financial Axa Met Life Allianz
  34. 34. 16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 343434 Source: Tiburon Research & Analysis Tiburon Strategic Advisors • Focus on corporate-level strategy - Serve senior executives only at financial services companies - Key services: market seminars, market research, & strategy consulting - Served over 400 corporate clients and completed over 1,800 projects since 1998 - Host semi-annual CEO Summits, offer free weekly research releases, and offer free business benchmarking tools for all types of advisors • Chip Roame background - McKinsey & Company - The Charles Schwab Corporation - Tiburon since 1998 Comments

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