Wealth Management Trends:2016 Findings from Tiburon Advisors
Universal Points fromTiburon CEO Summit XXX
Keynote Presentation
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
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 XXXA 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
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
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
ConsumersConsumers: 318.9 million
Persons per household: 2.6Consumer 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 assetsPotential 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 FolksGrowing 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!
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
FinancialAssets
RetirementPlan
Assets
PersonalAssets
SmallBusiness
Valuations
TotalAssets
Liabilities Net Worth
$38.6
InvestableAssets
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 7Source: 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 AttendeesBy 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
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 8
Baby Boomers will Liquidate Some Portion of the $59.4 Trillion in Retirement Plans, Personal Assets, & Small Businesses
Source: 3/10/16 Federal Reserve Flow of Funds Report; 9/21/15 FSI News Brief (Federal Reserve Flow of Funds); 9/19/15 Wall Street Journal (Federal Reserve Flow of Funds); 9/18/15 Federal Reserve Flow of Funds Report; 3/12/15 Federal Reserve Flow of Funds Report; 3/3/15 New York Times; 2/10/15 BenefitsPro (Cogent Reports); 12/11/14 Federal Reserve Flow of Funds Report; Tiburon Research & Analysis
Consumer HouseholdsAssets
($ Trillions)
$98.0
$59.6$21.0
$27.7$10.7
FinancialAssets
RetirementPlan
Assets
PersonalAssets
SmallBusiness
Valuations
TotalAssets
$38.6
InvestableAssets
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 > $3.0 Trillion Assets Under Management & Administration
12. Multiple Huge Impacts of the Coming Fiduciary Standard
Outline
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 1010
Source: 4/7/15 TD Ameritrade Presentation (Bradley); 4/7/15 LPL Financial Presentation (Casady); 4/5/15 Fidelity Investments Email (Birke); 4/4/15 TD Ameritrade Email (Bradley); 4/4/15 Fidelity Investments Email (Canter); 3/17/15 Fidelity Investments Web Site; 3/9/15 LPL Email (Kloman); 2/25/15 RIA Biz; 10/13/14 Wall Street Journal (Fidelity Investments); 7/21/14 Barron’s (Scorpio Partnership); Tiburon Research & Analysis
Both the Retail and Financial Advisor Support Models at Both Fidelity Investments & The Charles Schwab Corporation are Now Amongst the Leading Financial Advisor Channel Firms
Leading Financial Advisor Channel Firms By Assets Under Administration
($ 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
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
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 ManagementSustainable 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
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
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 $118.0 Billion in 2012
Online Advice FirmsAssets Under Management
($ 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
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 1515
Online Advice FirmsMarket Definition
Online Advice Firms can Specifically be Defined to Include Defined Contribution Plan Focused Firms & B2C Focused Firms
Source: Tiburon Research & Analysis
Robo AdvisorsDiscount Brokerage
Firms & Mutual Fund Companies
Online Advice Firms
Market Definition
Defined Contribution Plan
Focused FirmsB2C Focused Firms
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 16
Defined Contribution Plan Focused Firms
86%
Robo Advisors3%
Discount Brokerage Firms & Mutual Fund
Companies11%
16
Online Advice FirmsAssets 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
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
$114.5
Wealthfront
Betterment
Stadion Money Management
The Charles Schwab Corporation
TD Ameritrade (Amerivest)
Fidelity Investments (PAS-W)
Guided Choice
The Vanguard Group (Personal Advisor Services)
Morningstar (Retirement)
Financial Engines
The Leading Online Advice Firms are the Defined Contribution Plan Focused Firms & the Large Discount Brokerage Firms & Mutual Fund Companies
Source: 4/6/16 Morningstar Presentation (Phillips); 3/30/16 Financial Times; 10/14/15 Hellman & Friedman Presentation (Thorpe); 10/13/15 Financial Engines Presentation (Jones); 10/5/15 Fidelity Investments Email (Langlois) (Cerulli Associates); 10/2/15 TD Ameritrade Email (DeFreitas); 10/1/15 Fidelity Investments Email (Langlois); 10/1/15 Morningstar Email (Phillips); 8/5/15 MarketWatch Web Site; Tiburon Research & Analysis
Online Advice FirmsBy Assets Under Management
($ Billions)
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 $205 Million
Online Advice FirmsVenture Capital Raised
($ 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
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
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
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
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 2222
No83%
Yes17%
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 StrategyBy Propensity to Target Multicultural Prospects
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
InvestorsBy 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
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 2424
InheritancesBy 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
Women70%
Other Destination30%
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 2525
Women ConsumersBy 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%
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 2626
ConsumersBy Propensity to Believe that they
Spend a Lot of Time Researching AlternativesBefore 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
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
GenerationsBy 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
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
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 ($1.5 billion sales over past ten years) (50% into retirement accounts)
Rise of fixed or indexed annuities Force out same individual brokers Will lead to consolidations in broker/dealer market (especially of
smaller firms) (Met Life sold; AIG sold) Interesting one to watch… rollovers to fee-based financial advisors Also… Further challenges large DC plan economics ACLI threatens lawsuit
Securities & Exchange Commission SEC would diverge (Mary Jo White) Not likely under Mary Jo White
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 30
Tiburon CEO Summit Attendees Believe in the Need for a Fiduciary Standard
Tiburon CEO Summit AttendeesBy Belief in Need for Fiduciary Standard
74% 76%
26% 24%
Tiburon CEO Summit XXIX Tiburon CEO Summit XXX
Yes
No
Source: 3/26/16 Tiburon CEO Summit XXX Content Survey Data; 10/2/15 Tiburon CEO Summit XXIX Content Survey Data; Tiburon Research & Analysis
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 31
Full-Service Wealth ManagersIndividual Retirement Accounts (IRA) Account Size
Assets Under Administration($ 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
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 32
Assets Under AdministrationShare 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 AmericaCorporation
LPL FinancialHoldings
Raymond JamesFinancial
Stifel Financial SIFMA Wells FargoCorporation
Source: 10/30/15 Financial Services Observer (SIFMA); Tiburon Research & Analysis
Average: 30%
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 ImpactPotential 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
16.04.05 – Hearsay Social Chip Roame Group Presentation © Tiburon Strategic Advisors, LLC™ 343434Source: 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
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