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The Financial Planning Association

The Financial Planning Association

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The Financial Planning Association

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  1. The Financial Planning Association

  2. Opening Assumptions Future market growth will be slower than in the past. This greatly affects how you build your business going forward.

  3. Building Your Business in the ’90s… Your Market Share AUM

  4. Asset Retention = Growth Asset Growth Building Your Business in the ’90s… AUM

  5. You Need to Take AssetsAway From Competitors Building Your Business Today… AUM

  6. The Battle for the Affluent Market

  7. Independent Advisors A Battle on Two Fronts Fending Off Name-Brand Brokerage Firms Regaining Investor Trust

  8. A Battle on Two Fronts Fending Off Name-Brand Brokerage Firms A battle you won in the past

  9. Two Key Factors Differentiation Flight to Quality

  10. Commission-based Services Fee-based Services Proprietary Product; Revenue Sharing Open Architecture Financial Planning Sales Culture Wealth Management Differentiated! The 1990s Independent Advisors

  11. Enron Auditor Raises Specter of Crime Adelphia Founder, Sons Charged Lawmakers Say Files Show Flagrant WorldCom Fraud Rite Aid Trial Spotlights Public View of Corporate Scandals Former Chief of ImClone Systems Charged U.S. Opens Criminal Probe of Freddie Mac Ex-Tyco Chief Indicted Grasso Quits NYSE Amid Pay Furor

  12. Wall St. and Its Analysts Get Warning From S.E.C. Morgan Stanley Probed on Sales of Mutual Funds Strong Capital Faces Calls for Audit Alliance Suspends 2 Fund Executives in Trading Inquiry Criminal Charges May Be Filed In Bank of America Fund Case Janus Review Uncovers Improper Trades J.P. Morgan to Settle Case Over IPO Allocations U.S. Appoints a Monitor for Merrill Lynch Probe Forces Resignations at Prudential Securities

  13. 47% 11% Independent AdvisorAffluent Market Share Flight to Quality 1990 2004

  14. The “Brand” Game Dean Witter EF Hutton Shearson First Union Prudential

  15. June 25, 2005 Citigroup and Legg Mason Release Details of Asset Swap In a widely anticipated deal that highlights the financial and regulatory pressures facing Wall Street, Citigroup and Legg Mason yesterday announced the details of a $3.7 billion asset swap that would catapult Legg Mason to the ranks of the nation’s largest money managers.

  16. THE WALL STREET JOURNAL February 15, 2006 BlackRock and Merrill Lynch Investment Management to Combine, Forming One of the World’s Largest Independent Investment Management Firms Combined Firm to Have $1 Trillion in Assets Under Management Will Operate Under BlackRock Name; Merrill Lynch to Have a 50% Stake

  17. Wall Street Firms Off-loading their commoditized proprietary products… but keeping their “sexy’ products, such as hedge funds and private equity.

  18. Commission-based Services Fee-based Services Proprietary Product; Revenue Sharing Open Architecture Financial Planning Sales Culture Wealth Management Differentiated! The 1990s Independent Advisors

  19. Fee-based Services Open Architecture Open Architecture Financial Planning Financial Planning Wealth Management Wealth Management Not Differentiated! Today Independent Advisors Fee-based Services

  20. Open Architecture Financial Planning Wealth Management An Edge Independent Advisors Fee-based Services Hedge Funds Private Equity Mortgages Credit Cards

  21. Huge Brand Disparity

  22. Affluent Investors’ Primary Advisors 24% 2004 Full-Service Broker 31% 2005 18% 2004 Investment Adviser 17% 2005 17% 2004 Financial Planner 14% 2005 9% 2004 Investment Manager 10% 2005 9% 2004 Accountant 9% 2005 3% 2004 Discount/Online Broker 7% 2005 2% 2004 Trust Officer 2% 2005 3% 2004 Private Banker 1% ’05 Source: The Spectrem Group Affluent Study 2005; cited in Investment News, 01/30/06.

  23. “Several factors contributed to the increase, including…the chameleon-like ability of the wirehouses to make their business models look more like those of financial planners…” George Walpert, president, The Spectrem Group Source: Quoted in Investment News, 01/30/06.

  24. A Formidable Adversary Camouflaged in Your Business Model Sexier Products Huge Brand Recognition

  25. The Second Front Regaining Investor Trust

  26. Wall Street Analysts Exposed Spitzer Takes on the Mutual Funds Tyco… Enron… WorldCom CEO Scandals Accountancy Malfeasance

  27. April 17, 2006 Affluent assets flow away from advisors

  28. 39% 48.6% Dissatisfaction with asset management Lack of Trust April 17, 2006 Affluent assets flow away from advisors Source: TNS Financial Services of Greenwich, Conn., Annual Survey; cited in Investment News, April 17,2006.

  29. Diminishing Satisfaction Affluent Investor Attitudes Quality of service 59% Satisfaction Quality of advice 45% Satisfaction Advisor’sknowledge 53% Satisfaction Investment Performance 32% Satisfaction Source: The Spectrem Perspective: The Affluent Investor

  30. Affluent Investors’ Primary Advisors 24% 2004 Full-Service Broker 31% 2005 18% 2004 Investment Adviser 17% 2005 17% 2004 Financial Planner 14% 2005 9% 2004 Investment Manager 10% 2005 9% 2004 Accountant 9% 2005 3% 2004 Discount/Online Broker 7% 2005 2% 2004 Trust Officer 2% 2005 3% 2004 Private Banker 1% ’05 Source: The Spectrem Group Affluent Study 2005; cited in Investment News, 01/30/06.

  31. Independent Advisors

  32. New SEC Required Disclosure… Your account is a brokerage account and not an advisory account. Our interests may not always be the same as yours. Please ask us questions to make sure you understand your rights and our obligations to you, including the extent of our obligations to disclose conflicts of interest and to act in your best interest. We are paidboth by you, and sometimes,by people who compensate us based on what you buy.

  33. Advice Will Bifurcate… Distributors Advisors

  34. “[The Merrill rule] is a good sales tool [for advisors. The new rule] advances the distinctions between brokers and advisors, between fiduciary and suitability.” William Donaldson Former SEC Chairman

  35. How will you make the distinction?

  36. Sell-Side Platform Distributors Advisors

  37. Sell-Side Platform Proprietary Products Either-Or Portfolios Lack of Transparency Biased Research Conflicts Middleman Fees Complexity

  38. Sell-Side Platform Client-Side Platform Distributors Advisors

  39. Client-Side Platform No Product Bias Holistic Portfolios Transparency Independent Research No Conflicts No Middleman Fees Clear Expectations

  40. You change the game again… just like you did in the 1990s.

  41. No Product Bias Holistic Portfolios Transparency Independent Research No Conflicts No Middleman Fees Clear Expectations Differentiated Again! Independent Advisors They can’t! You can do this! And, they won’t!

  42. Business Solutions for Independent Advisors

  43. Portfolios V B G L M S Efficient Frontier Portfolio Optimization A s s e t A l l o c a t i o n Benchmarks Style Purity

  44. Portfolios Theoretical Precision Has Overwhelmed Good Judgment and Common Sense Efficient Frontier Portfolio Optimization A s s e t A l l o c a t i o n V B G L Benchmarks M S Style Purity

  45. Client-Side Platform No Product Bias Holistic Portfolios Transparency Independent Research No Conflicts No Middleman Fees Clear Expectations What does the Portfolio look like?

  46. Client-Side Platform No Product Bias Holistic Portfolios Transparency Independent Research No Conflicts No Middleman Fees Clear Expectations What does the Portfolio look like?