1. Founders management advisory and insights for financial services institutions
Advisory
2Q 2012
Founders Quarterly U.S. Private Client Asset &
Wealth Management II

2. Issue Overview
Overview of 2Q 2012 Issue of Founders Quarterly: U.S.
Private Client Asset & Wealth Management II
Summary: continuing down the path For U.S. private wealth managers, we explore the importance of
to modernity particular functional roles in positively influencing financial
advisors’ productivity and effectiveness, including advisor pricing
In this issue of Founders Quarterly we continue our focus on (or rather underpricing, according to industry leaders). We attempt
understanding the way forward for the U.S. private client asset and to gauge what financial advisors value and rate the importance of
wealth management marketplace. These first steps are vital in sources of new clients for them. Additionally, we measure the
comprehending the key dynamics impacting the postmodern era. The importance of potential corporate initiatives where building robust
journey to modernity will not only be full of challenges, but also very alternatives capabilities leads the pack. This issue of Founders
exciting. We believe that asset managers and private wealth managers Quarterly examines the importance of proprietary affiliations (asset
must take many of these steps today to be positioned to thrive moving management, investment bank, etc.) to private wealth managers
forward. (rather lack of importance). Lastly, we attempt to better understand
financial advisor and end-client/investor satisfaction levels with
We first examine the performance and effectiveness of asset and their firms.
wealth managers on several key items impacting their firms. While
leaders in the industry perceive they are performing satisfactorily on While there are several key agenda items for firms to tackle as they
many items, there are several key areas in which they are transition to the postmodern era, the importance of excelling at
underperforming. Notably, both cohorts (i.e., asset managers and client service and relationship management stand out. Without
wealth managers) believe they are significantly underperforming with question, client service has a major impact, perhaps the greatest, on
regard to marketing/strategic marketing. raising new assets—not to mention retaining assets. And we believe
that client service and relationship management is really sales in
For U.S. asset managers, we delve into the primary influencers on disguise—in a good way. That said, the industry has a long road to
asset gathering and sales, including revenue sharing’s impact on total travel to transition from a sales-first mindset to a client service-
assets. We then examine client asset concentration, where there is centric approach. While this may or may not be a subtle transition,
more at risk than many leaders in the industry perceive. We also firms that successfully deliver world-class client service will gather
analyze the importance of various components of salesforce the vast share of assets.
compensation, sales deployment methodology, and attempts to gain
efficiencies via financial advisor segmentation.
Founders Quarterly 2Q 2012 U.S. Private Client Asset & Wealth Mgmt. II Founders Advisory Ideas & Insights 2

3. Table of Contents
Contents
I. Summary: continuing down the path to III. Private wealth management: finding the right
modernity levers to pull in the postmodern era Founders Quarterly is our
II. Asset Management: transitioning to a client A. Measuring effectiveness and performance vehicle for delivering Ideas
service-centric approach and Insights on a regular
B. Financial advisor pricing basis. We explore and provide
A. Measuring distribution effectiveness and
performance 1. Influencing financial advisor advice for relevant global
productivity asset and wealth management
B. Key influencers of new sales
issues and problems supported
C. Gauging what financial advisors value by our deep industry
1. Source of new assets
D. Prioritizing new initiatives knowledge, applicable senior-
C. Distinguishing service levels for top tier
level industry experience, and
clients E. Importance of proprietary affiliations in-depth knowledge
1. Tier I partners’ influence on development and problem-
F. Source of new assets
total assets solving process. Each
G. Financial advisor satisfaction with their quarterly issue draws upon
D. Top 10 client/intermediary asset
firm our ongoing dialogues with
concentration
senior executives from around
1. End-client/investors’ satisfaction the world and our multiple
1. Aspirational client/intermediary
with their firm provider ongoing invite-only
asset concentration
IV. Appendix proprietary surveys. We
E. Influencing salesforce behavior via
distribute an issue each
compensation A. Methodology & reading Guide
calendar quarter in electronic
F. Salesforce deployment methodology format.
19 proprietary exhibits
G. Financial advisor segmentation
This Founders Advisory material is intended exclusively for distribution within the purchasing firm. Distribution to or use by any other firm,
subsidiary, affiliate, external field force, or client is prohibited (as is reproduction in whole or part in any media, including electronic or company
communications), except by permission. Analysis relies on data sources deemed to be reliable. Although believed to be accurate, this
information is not guaranteed and may be incomplete. Founders Advisory. All rights reserved.
Founders Quarterly 2Q 2012 U.S. Private Client Asset & Wealth Mgmt. II Founders Advisory Ideas & Insights 3

4. Methodology
Methodology Reading Guide
The sole purpose of Founders’ Ideas & Insights is to give advice and This reading guide is meant to highlight the design elements found in
recommendations so that you can position your firm to thrive. In other each Founders Quarterly. The quarterly is designed to be very precise
words, we emphasize the “so what do we do now?” versus “nice to (i.e., not longwinded or blow hardly) and written under the belief
have data” end of the research spectrum. We challenge many of the (rather wishful thinking) that it will be read from cover-to-cover. That
old norms of the industry and provide advice on how your firm can said, Founders Quarterly is for senior executives at financial services
flourish in the postmodern era. institutions worldwide, so we have intentionally designed the quarterly
so that more than one reading style can easily attain valuable ideas and
This advice is not only creative and catalyzing, but also pragmatic. We insights from each issue.
apply a structured problem-solving process that is fact-based and
actively engages senior executives by leveraging our deep industry Flip read: By reading just the headlines (see sample page that
relationships. So, our process is not ivory tower-based (perhaps a follows) on each page clients will be able to absorb several/most of
little…) but entails active dialogues and debates with executives and the key action and/or agenda items within each issue.
leaders who are in the trenches every day. Data read: Each exhibit is designed (see next page) so that clients can
easily understand the context of the data and at least one key insight.
We use original and proprietary data and information. We explore Page read: While the entire document flows together, each page is
trends and issues, and design proprietary invite-only surveys based self-contained and can be understood in isolation.
upon collaboration with the industry. This issue of Founders Summary read: Each issue of Founders Quarterly has a one page
Quarterly contains proprietary data from two separate invite-only introduction/executive summary that highlights key themes in the
surveys. More than 30 heads of U.S. retail intermediary asset issue.
management distribution completed an invite-only survey. This cohort
represents more than $15 trillion in worldwide AUM and roughly $3.5 All Founders’ Ideas & Insights offerings are optimized for tablet
trillion in retail intermediary assets. The U.S. private wealth reading (although we have only tested on the iPad) and delivered in
management survey cohort consists of roughly 20 senior executives at electronic format only.
firms representing 100,000 financial advisors and/or client advisors
and approximately $8 trillion in assets under advisement/supervision.
Founders’ Ideas & Insights endeavors to deliver advice and
recommendations that link together the entire global asset and wealth
management value chain. Our research (including multiple proprietary
surveys) spans multiple segments such as global retail and
institutional asset management distribution and wealth management
delivery (including professional buyers) on a global scale.
Founders Quarterly 2Q 2012 U.S. Private Client Asset & Wealth Mgmt. II Founders Advisory Ideas & Insights 4

5. Sample Page
Asset managers need to transition from solely looking at addressable
markets via the lens of channels to adopting a more client-centric approach
Salesforce deployment methodology Managers continue to mostly deploy by channel, though most
Salesforce deployment by channel remains the predominant strategy have tailored traditional channel definitions to suit their tactic
for retail intermediary asset managers. Territory or geographical EX 9: What best describes your primary salesforce deployment?
deployment is second with 28% of firms utilizing this approach. While (select only one) U.S. retail intermediary asset mgmt., = 100%
most firms have firm-level client tiers (see exhibit 4 on page 8), only
8% of firms deploy their salesforce in this fashion.
Traditional channel definitions have little meaning today. Said Channel 40
differently, most asset managers have adjusted strict channel
classifications (wirehouse, regionals, IBDs, etc.) to fit into their own
methodology, which is somewhat linked to their client tiers. For
Asset Managers
example, firms may have a wirehouse channel (i.e., BAML, MSSB,
28
UBS, WFA) that also includes a regional and an IBD. Territory
Asset managers also create custom channels to boost focus on a subset
of intermediaries. For instance, firms attempting to penetrate new
intermediaries many times will carve out a customized channel for this
Financial advisor-level 16
segments
endeavor. This is typically just a short-term approach that at some
point gets weaved into the overarching client segmentation strategy. In
the same vein, while not channels per se, firms have specialist groups
that focus on gathering defined contribution (DC) assets from retail- Product 8
centric intermediaries.
This is all to say that asset managers would be wise to be less
dependent on channels and focus more on clients. While subtle and Firm-level client tiers 8
partly semantics, simply utilizing new terminology will help firms
transition to a client service-centric mindset. Additionally, addressable
markets will continue to converge (e.g., traditional retail and
institutional delineations) forcing firms to become more client-centric
when deploying their distribution strategy. Source: Founders Advisory
Founders Quarterly 2Q 2012 U.S. Private Client Asset & Wealth Mgmt. II Founders Advisory Ideas & Insights 5

6. Sample Page
Private wealth managers need to allocate more resources and develop
creative techniques to helping FAs acquire net new clients
Source of new assets Old school and new school are in a close race for the crown of
least important source of new clients for FAs
U.S. private wealth management is a client service driven business.
By far and away, the most valuable source of new clients for financial EX 17: Rate the importance of the following sources of new clients
advisors (FAs) is existing clients. Corporate level brand awareness (client acquisition) for financial advisors, U.S. private wealth
ranks a distant second, while social media and cold-calling are not management, Average score (1=not very important, 5=very important)
considered vital sources for acquiring new clients. (It’s likely too
early to get a fair read on social media as firms are just starting to Not very Very
learn how to use this tool.) important important
1 2 3 4 5
U.S. private wealth management firms struggle to create much value
from marketing endeavors. Strategic marketing scores poorly as a Referrals from existing 4.57
source of new clients for FAs (see exhibit 11 on page 14 also). While clients
we don’t have an antidote for this underperformance at this time, it is
clear that firms need to rethink their approach. Brand awareness
3.00
(firm/corporate level)
Raising net new assets is a significant challenge to growth for private
wealth managers (see exhibit 5 on page 10 of the 1Q issue). And far Referrals from affiliated/
proprietary business units 2.93
too often minimal resources are allocated solely to helping existing
FAs acquire new clients. The norm is to focus almost exclusively on
recruiting new FAs to the firm as the source for net new assets at the Marketing/strategic marketing
2.86
corporate level. (firm/corporate level)
We believe that helping FAs design and build effective client Social media 2.36
acquisition programs can be a key ingredient to FA retention. And
while senior executives claim that retaining FAs is a priority, more
resources and firm focus is typically allocated to recruiting new FAs Old-fashioned cold-calling 2.21
than serving existing FAs in this manner.
Source: Founders Advisory
Founders Quarterly 2Q 2012 U.S. Private Client Asset & Wealth Mgmt. II Founders Advisory Ideas & Insights 6

7. How to Subscribe
Founders management advisory and insights for financial services institutions
Advisory
How to subscribe to Founders Quarterly Paul A. Fullerton
Managing Principal
Founders
617.794.6788
Quarterly
paul_fullerton@foundersadvisory.com
P.O. Box 130020 Boston MA 02113
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This Founders Advisory material is intended exclusively for distribution within the purchasing firm. Distribution to or use by any other firm,
subsidiary, affiliate, external field force, or client is prohibited (as is reproduction in whole or part in any media, including electronic or company
communications), except by permission. Analysis relies on data sources deemed to be reliable. Although believed to be accurate, this
information is not guaranteed and may be incomplete. Founders Advisory. All rights reserved.
Founders Quarterly 1Q 2012 U.S. Private Client Asset & Wealth Mgmt. Founders Advisory Ideas & Insights 7

8. Founders management advisory and insights for financial services institutions
Advisory
2012
Founders Advisory Firm Overview

9. Founders Advisory specializes in the global asset
and wealth management marketplaces
About Methodology
Founders Advisory is a management •Advice and insights that are focused,
consulting advisory firm and actionable, creative, pragmatic, and
provides custom ideas and insights to catalyzing
institutions in the worldwide
financial services industry. We serve •Applicable industry experience and
firms focused on asset and wealth know-how
management such as asset managers,
wealth managers, brokerage firms, •Client-driven approach
pension consultants, platform
providers, insurance firms, •Ongoing senior executive dialogue
technology firms, and capital
investors (including venture capital •Senior management focus
and private equity firms).
Firm Overview Founders Advisory management advisory and insights for financial services institutions 9

10. Founders Advisory expertise links together the entire value chain and
utilizes a combination of qualitative and quantitative techniques
Asset management
•Addressable markets analysis
•Retail & institutional sales, client service,
and relationship management
•Organizational structure
•Product development
Financial technology Professional buyers
(FINTECH) •State of the industry
•Platform providers •Organizational structure
•Outsourcing •Ideas & Insights
•Advisory Partners •Buying behaviors
•Portfolio accounting & •Servicing models
management •Management Consulting
•Startups
Wealth managers/distributors
•Fee-based advice delivery
•Integrated wealth management
•Platform support & developments
•Financial advisors/client advisors
Firm Overview Founders Advisory management advisory and insights for financial services institutions 10

11. Our services are based on ongoing client partnerships
Services Description
•Advice and recommendations to position your firm to thrive
Ideas & Insights •Advice that is not only creative & catalyzing, but also pragmatic
•Original and proprietary data and information
•Delivered via:
•Founders Quarterly
Subscription- •Founders Reports
based •Founders Notes
•Ongoing custom advice and problem-solving for key senior
management agenda items/issues
Advisory Partners
•Flexible and fluid partnership
•Dynamic senior management advising and counseling
(i.e., strategic planning, sounding board)
•Project engagements
Management Consulting •Custom analysis and knowledge development
•Workshops for senior management
•Presentations and roundtable facilitation
Firm Overview Founders Advisory management advisory and insights for financial services institutions 11

12. Ideas & Insights leverages deep industry relationships and works closely with
senior executives via ongoing dialogues and proprietary invite-only surveys
Ideas & Insights Offerings Description
•This is our complimentary quarterly publication exclusively for
survey participants
Founders •We provide insights from our ongoing knowledge development
Notes including multiple global surveys and ongoing walkabouts within
the industry
•This is our vehicle for delivering Ideas & Insights on a regular
basis
Founders •We explore and provide advice for relevant global asset and
Quarterly wealth management issues and problems
•Annual cost US$5,000 per institution
•These reports are based on a particular component of the value
Founders chain and/or segment of the industry
•All reports are linked to multiple surveys and targeted
Reports interviews with senior executives
•2012 reports cost US$5,000 per institution
Firm Overview Founders Advisory management advisory and insights for financial services institutions 12