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The Future of Advice: Best Practices of the Leading Financial Advisors. Tiburon Research October 31, 2013. Outline. Evolution of Financial Advisor Industry Market History Market Definition Market Growth Leading Financial Advisors State of the Financial Advisor Industry Target Marketing

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The Future of Advice: Best Practices of the Leading Financial Advisors


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    1. The Future of Advice:Best Practices of the Leading Financial Advisors Tiburon Research October 31, 2013

    2. Outline • Evolution of Financial Advisor Industry • Market History • Market Definition • Market Growth • Leading Financial Advisors • State of the Financial Advisor Industry • Target Marketing • Sales & Marketing Strategies • Investment Management Strategies • Client Service Strategies • Staffing & Compensation Strategies • Firm Cultures • Technology & Outsourcing • Industry Networking • Mergers & Acquisitions • Future Predictions for the Financial Advisor Industry • Continued Growth in the Financial Advisor Industry • Five Best Practices Define Leading Financial Advisor Firms

    3. The Financial Advisor Industry Emerged in XXXX and Has Subsequently Evolved through its Early, Middle, & Recent Phases Financial Advisor Industry History Financial Advisor Industry Emerged Financial Advisor Industry Today Early Phase Middle Phase Recent Phase Approximate Dates: XXXX 1981 - 2000 2001 - 2009 2011 - 2013 2013 Key Steps: • XXXX: Financial Advisor Industry emerged • XXXX: -- • XXXX: -- • XXXX: -- Source: Tiburon Research & Analysis

    4. Financial Advisor Industry Emerged in XXXX Comments • -- Source: Tiburon Research & Analysis

    5. Outline • Evolution of Financial Advisor Industry • Market History • Market Definition • Market Growth • Leading Financial Advisors • State of the Financial Advisor Industry • Target Marketing • Sales & Marketing Strategies • Investment Management Strategies • Client Service Strategies • Staffing & Compensation Strategies • Firm Cultures • Technology & Outsourcing • Industry Networking • Mergers & Acquisitions • Future Predictions for the Financial Advisor Industry • Continued Growth in the Financial Advisor Industry • Five Best Practices Define Leading Financial Advisor Firms

    6. Financial Advisor Industry can be Defined Many Ways Comments • -- Source: Tiburon Research & Analysis

    7. The Financial Advisor Industry can Specifically be Defined to Include Target Marketing, Sales & Marketing Strategies, Investment Management Strategies, Client Service Strategies, Staffing & Compensation Strategies , Firm Cultures, Technology & Outsourcing , Industry Networking, & Mergers & Acquisitions Financial Advisor Industry Market Definition Financial Advisor Industry Market Definition Target Marketing Sales & Marketing Strategies Investment Management Strategies Client Service Strategies Staffing & Compensation Strategies Firm Cultures Technology & Outsourcing Industry Networking Mergers & Acquisitions Source: 5/14/09 1st Global Presentation (Batman); 2/2/09 Investment News (Advisor Benchmarking.Com); Tiburon Research & Analysis

    8. Outline • Evolution of Financial Advisor Industry • Market History • Market Definition • Market Growth • Leading Financial Advisors • State of the Financial Advisor Industry • Target Marketing • Sales & Marketing Strategies • Investment Management Strategies • Client Service Strategies • Staffing & Compensation Strategies • Firm Cultures • Technology & Outsourcing • Industry Networking • Mergers & Acquisitions • Future Predictions for the Financial Advisor Industry • Continued Growth in the Financial Advisor Industry • Five Best Practices Define Leading Financial Advisor Firms

    9. Market Growth in the Financial Advisor Industry can be Measured in a Variety of Ways Comments • -- Source: Tiburon Research & Analysis

    10. Financial Advisor Industry Market Growth can Specifically be Measured by Clients, Spending, Revenues, & Net Profits Financial Advisor Industry Market Growth Measures Financial Advisor Industry Market Growth Measures Clients Spending Revenues Net Profits Source: Tiburon Research & Analysis

    11. The Number of Financial Advisor Industry Clients are Increasing Needs data Financial Advisor Industry Clients (Millions) Source: Tiburon Research & Analysis

    12. Financial Advisor Industry Spending Has Increased Needs data Financial Advisor Industry Spending ($ Billions) Source: Tiburon Research & Analysis

    13. Financial Advisor Industry Generate Over Trillions in Revenue Needs data Financial Advisor Industry Revenues ($ Billions) Source: Tiburon Research & Analysis

    14. Financial Advisor Industry Earn Trillions Needs data Financial Advisor Industry Net Profits ($ Billions) Source: Tiburon Research & Analysis

    15. Outline • Evolution of Financial Advisor Industry • Market History • Market Definition • Market Growth • Leading Financial Advisors • State of the Financial Advisor Industry • Target Marketing • Sales & Marketing Strategies • Investment Management Strategies • Client Service Strategies • Staffing & Compensation Strategies • Firm Cultures • Technology & Outsourcing • Industry Networking • Mergers & Acquisitions • Future Predictions for the Financial Advisor Industry • Continued Growth in the Financial Advisor Industry • Five Best Practices Define Leading Financial Advisor Firms

    16. Leading Financial Advisor Companies can Specifically be Measured by their Number of Clients, Spending, Revenues, & Net Profits Leading Financial Advisor Companies Measures Leading Financial Advisor Companies Measures Clients Spending Revenues Net Profits Source: Tiburon Research & Analysis

    17. There are a Number of Leading Financial Advisor Companies in Terms of Clients Needs data Leading Financial Advisor Companies Clients Source: Tiburon Research & Analysis

    18. There are a Number of Leading Financial Advisor Companies in Terms of Spending Needs data Leading Financial Advisor Companies Spending ($ Millions) Source: Tiburon Research & Analysis

    19. There are a Number of Leading Financial Advisor Companies in Terms of Revenues Needs data Leading Financial Advisor Companies Revenues ($ Millions) Source: Tiburon Research & Analysis

    20. There are a Number of Leading Financial Advisor Companies in Terms of Net Profits Needs data Leading Financial Advisor Companies Net Profits ($ Millions) Source: Tiburon Research & Analysis

    21. Outline • Evolution of Financial Advisor Industry • Market History • Market Definition • Market Growth • Leading Financial Advisors • State of the Financial Advisor Industry • Target Marketing • Sales & Marketing Strategies • Investment Management Strategies • Client Service Strategies • Staffing & Compensation Strategies • Firm Cultures • Technology & Outsourcing • Industry Networking • Mergers & Acquisitions • Future Predictions for the Financial Advisor Industry • Continued Growth in the Financial Advisor Industry • Five Best Practices Define Leading Financial Advisor Firms

    22. Target Marketing Target Marketing Target Marketing • -- • -- Source: Tiburon Research & Analysis 22

    23. Niche Marketing Niche Marketing Niche Marketing • -- • -- Source: Tiburon Research & Analysis 23

    24. Niche Marketing is So Obviously a Smart Idea… Fee-Only Financial Advisor Clients By Occupational Segment Source: 3/1/04 First Trust Advisor Conversation (Sloane); 2/27/04 First Trust Advisor Conversation (Tomlinson); 2/26/04 First Trust Advisor Conversation (Kaiser); 2/26/04 First Trust Advisor Conversation (Tripp); 2/25/04 First Trust Advisor Conversation (Brodeski); 2/2404 First Trust Advisor Conversation (Caldwell); 2/24/04 First Trust Advisor Conversation (Cowles); Tiburon Research & Analysis 24

    25. There are Three Distinct Benefits of Segment Marketing, Including Increased Referrals, Higher Close Rates, & Lower Costs to Serve Segment Marketing Benefits Increased Flow of Referrals Decreased Competition & Better Close Rate Lower Cost to Serve Clients • Target marketing will lead to improved prospecting results due to an increase in real and perceived value • One’s reputation spreads much faster in niche markets than in broad markets • Having a niche will positively affect public relations • Able to better use time and money • Competition decreases as advisors establish themselves as experts in a particular niche • Segment marketers win every time • Isn’t serving the incremental client who looks alike easier? Source: 3/03 Financial Planning; 2/03 On Wall Street; 2/03 Financial Planning; 1/03 On Wall Street; 10/02 Financial Advisor; Tiburon Research & Analysis 25

    26. Other Successful Financial Advisors Follow the Niche (or Segment) Marketing Strategy, Often Overlaid with Some Mass Marketing Techniques Leading Independent Advisors Niche Marketing Ron Blue & Company CMS Companies Hanson McClain Cleary Gull • Based in Sacramento, CA • 2,500 clients • $1.3 billion assets under management • Co-CEOs: Scott Hanson & Pat McClain • -- • -- • Founded in late 1960s • 100 employees Source: 6/28/11 Russell Investments Brochure; Tiburon Research & Analysis 26

    27. Hanson McClain Has Three Core Businesses, Including its Hanson McClain Retirement Planning, Hanson McClain Retirement Network, & Hanson McClain Strategic Advisors Hanson McClain Businesses Hanson McClain Retirement Planning Hanson McClain Retirement Network Hanson McClain Strategic Advisors Hanson McClain Businesses Source: 9/23/11 Hanson McClain Retirement Network Email (Hanson);5/06 Investment Advisor; Tiburon Research & Analysis 27

    28. Hanson McClain’s Hanson McClain Retirement Planning Has 2,500 Clients, Relatively Flat in Recent Years Hanson McClain Retirement Planning Clients Source: 5/06 Investment Advisor; 1/22/04 Hanson McClain Conversation (Neeley); 1/21/04 Hanson McClain Email (Neeley); Tiburon Research & Analysis 28

    29. Hanson McClain’s Hanson McClain Retirement Planning Has $1.3 Billion Assets Under Administration, Up More than 1,300% Since 1996 and 60% Since 2004 Hanson McClain Retirement Planning Assets Under Administration ($ Millions) Source: 9/10/07 Investment News Web Site; 12/06 Research; 5/06 Investment Advisor; 9/04 Registered Rep; 8/04 Investment Advisor; 1/21/04 Hanson McClain Email (Neeley); 1/8/04 Hanson McClain Web Site; 9/03 Registered Rep; 9/02 Registered Rep; Tiburon Research & Analysis 29

    30. Hanson McClain’s Hanson McClain Retirement Network Has $4.0 Billion Assets Under Administration, Up 60% Since 2003 Hanson McClain Retirement Network Assets Under Administration ($ Billions) Source: 9/10/07 Investment News Web Site; 1/25/04 Hanson McClain Conference Brochure; 1/21/04 Hanson McClain Email (Neeley); 1/7/04 Hanson McClain Conversation (Neeley); 10/4/02 Sacramento Business Journal; Tiburon Research & Analysis 30

    31. Hanson McClain’s Hanson McClain Retirement Planning Clients are Slightly More than Half Pacific Bell Retirees Hanson McClain Retirement Planning Clients By Type Source: 12/06 Research Magazine; 5/06 Investment Advisor; 8/04 Investment Advisor; 1/22/04 Hanson McClain Conversation (Neeley); 1/21/04 Hanson McClain Email (Neeley); 1/8/04 Hanson McClain Web Site; 1/7/04 Hanson McClain Conversation (Neeley); Tiburon Research & Analysis 31

    32. Hanson McClain’s New Business Comes Three-Quarters from Client Referrals, Most of Which are a Result of the Firm's Charity Work Hanson McClain Clients By Marketing Method Source: 1/22/04 Hanson McClain Conversation (Neeley); 1/21/04 Hanson McClain Email (Neeley); 1/8/04 Hanson McClain Web Site; 1/7/04 Hanson McClain Conversation (Neeley); 9/03 Registered Representative; Tiburon Research & Analysis 32

    33. Hanson McClain’s Hanson McClain Retirement Planning Believes that it Has Captured Nearly Three-Quarters of the Pacific Bell Retiree Market Pacific Bell Retirees By Financial Advisor Utilized Source: Tiburon Research & Analysis 33

    34. Segments Can be Nearly Anything… Milwaukee-Based Cleary Gull Targets Airline Pilots Comments • Introduction uses pilot terminology such as engineer, safety, stay on course, etc. • Custom seminars for pilots of leading airlines • Services listed for pilots including AA Super Saver 401k Asset Allocation and UAL DAP Asset Allocation • Specialized questionnaires for pilots from American, United, Delta, and others • Several ex-pilots on staff for pilot relationships Source: 11/17/03 Cleary Gull Web Site; Tiburon Research & Analysis 34

    35. …Philadelphia-Based CMS Companies Serves Only Entrepreneurs with Philanthropic Interests… Comments • Founded in the late 1960s • Based in Philadelphia, PA • 100 employees • Several hundred clients • Exclusively serves successful entrepreneurs interested in philanthropy • Creates 4-5 private equity and real estate funds annually • Range from $30-$150 million • Firm and its clients have invested over $3 billion in private equity and real estate • Also offers advice on life insurance, estate planning, and asset allocation • CEO: Mark Solomon • President: Paul Silberberg • Chief Investment Officer: Bill Landman Source: 12/03 Inc Magazine; Tiburon Research & Analysis 35

    36. … And Ron Blue Approaches Christian Clients From a Unique Perspective Ron Blue Client Approach All Clients Christian Clients • Goal setting • Net worth calculations • Income tax projections • Estate & will review • Cash flow projections • Spend less than you earn • Avoid the use of debt • Investment overview • Education analysis • Charitable giving strategies • Retirement analysis • Insurance analysis • God owns it all ~ we are Stewards • Quote biblical principals for each aspect of the financial planning process • Ask “how much is enough?” • Emphasize eternal perspective • Emphasize charitable giving • “Wealth” transference including financial, social and spiritual capital Source: 2/6/02 Ron Blue Email (Guffin); Tiburon Research & Analysis 36

    37. First Allied Holdings’ Wealth Management’s Fourth Business is Greenbook Financial Services which Offers Financial Planning for Healthcare Professionals Comments • Based in San Diego, CA • 65 employees • 60 reps • 1,100 qualified plans • $251 million assets under administration • CEO: Robert Holcomb • Web site: www.gbfs.com Source: 12/15/10 RIA Biz;1/17/06 Greenbook Meeting (Holcomb); 1/12/06 Greenbook Web Site; 1/12/06 Greenbook Email (Holcomb); 1/4/06 Greenbook Email (Holcomb); Tiburon Research & Analysis 37

    38. Silicon Valley Bank Serves Half of All Venture Backed Companies in the United States Venture Backed Companies By Propensity to be Served by Silicon Valley Bank Source: 4/10/12 Joyce Financial Management Email (Joyce);2/22/06 Woordside Meeting (White); 2/6/06 Woodside Asset Management Web Site; 2/2/06 Silicon Valley Bank Web Site; Tiburon Research & Analysis

    39. Silicon Valley Bank’s Commercial Banking Business’ Clients are Two-Thirds Technology Companies Silicon Valley Bank Commercial Banking Clients By Type Source: 2/6/06 Woodside Asset Management Web Site; 2/2/06 Silicon Valley Bank Web Site; Tiburon Research & Analysis

    40. Outline • Evolution of Financial Advisor Industry • Market History • Market Definition • Market Growth • Leading Financial Advisors • State of the Financial Advisor Industry • Target Marketing • Sales & Marketing Strategies • Investment Management Strategies • Client Service Strategies • Staffing & Compensation Strategies • Firm Cultures • Technology & Outsourcing • Industry Networking • Mergers & Acquisitions • Future Predictions for the Financial Advisor Industry • Continued Growth in the Financial Advisor Industry • Five Best Practices Define Leading Financial Advisor Firms

    41. Sales & Marketing Strategies Three models (two of which lead to raging success): mass marketing (Edelman; The Mutual Fund Store; Fisher Investments); niche marketing (Hanson McClain; Ron Blue & Company; Cleary Gull; CMS Companies); & everyone else… Sales & Marketing Strategies • -- • -- Source: 9/20/11 Impact Communications Email (Swift); 9/11/11 Turning Point Email (Vigeveno); 8/26/11 Joyce Financial Management Conversation (Joyce); Tiburon Research & Analysis 41

    42. There are Three Fundamental Sales & Marketing Strategies Sales & Marketing Strategies Mass Marketing Niche Marketing Everyone Else • Financial Institutions • Advertising (Talk to Chuck) • Stadium & sporting event sponsorships • Financial Advisors • Client referrals (generally reactive) • Professional referrals • Community networking • Seminars • Self promotion (articles, books, radio, & television) • Advertising (direct mail, print, web, radio, television) • Public relations • Sales people • Measurement (offices, financial advisors, leads, closure rate, touches, client retention) • Identify niche(s) • Follow more narrow & customized mass marketing approach Source: 6/28/11 Russell Investments Brochure; Tiburon Research & Analysis 42

    43. Mass Marketing Mass Marketing • Sales People • Magazine columns • Radio program • TV shows • Books • Social media (compliance & efficiency concerns) (Kirk Michie) • New media (audio & video; podcasts & digital assets) Source: 9/20/11 Impact Communications Email (Swift); 9/11/11 Turning Point Email (Vigeveno); 8/26/11 Joyce Financial Management Conversation (Joyce); Tiburon Research & Analysis 43

    44. Three of the Top Independent Advisors are Following the Mass Marketing Strategy Leading Independent Advisors Mass Marketing Edelman Financial Services Fisher Investments The Mutual Fund Store • Founded in 1973 • Founded by Ken Fisher • Based in Woodside, CA • 5 offices • 900 employees • 18,000 clients • 37,648 accounts • $35 billion assets under management • $5.0 billion gross new assets • $300 million revenues • CEO: Ken Fisher • Founded in 1973 • Founded by Ric Edelman • 13 states • 30 offices • 300 employees • 18,500 clients • $8.5 billion assets under management • CEO: Ric Edelman • Founded in 1996 • Founded by Adam Bold • Based in Overland Park, KS • 34 states • 73 offices • 104 investment advisors • 32,000 clients • 67,950 accounts • $6.5 billion assets under management • Chairman: Adam Bold • CEO: John Bunch Source: 10/14/12 Edelman Financial Services Email (Edelman); 4/10/12 Impact Communications Email (Swift); 8/18/11 RIA Biz; 6/8/11 The Mutual Fund Store Web Site; 5/31/11 The Mutual Fund Store Web Site; 5/31/11 The Charles Schwab Corporation Email (Salesky); 5/30/11 Investment News; 5/30/11 Kansas City Star;11/28/09 Traders Daily; 5/17/09 Investment News; 5/12/09 Investment News; 3/08 Investment Advisor; Tiburon Research & Analysis 44

    45. Three of the Top Independent Advisors are Following the Mass Marketing Strategy Leading Independent Advisors Mass Marketing Edelman Financial Services Fisher Investments The Mutual Fund Store • Founded in 1973 • Founded by Ken Fisher • Based in Woodside, CA • 5 offices • 900 employees • 18,000 clients • 37,648 accounts • $35 billion assets under management • $5.0 million gross new assets • $300 million revenues • CEO: Ken Fisher • Founded in 1973 • 6 states • 22 offices • 240 employees • 14,200 clients • $6.5 billion assets under management • CEO: Ric Edelman • Founded in 1996 • Founded by Adam Bold • Based in Overland Park, KS • 34 states • 73 offices • 104 investment advisors • 32,000 clients • 67,950 accounts • $6.5 billion assets under management • Chairman: Adam Bold • CEO: John Bunch Source: 4/10/12 Impact Communications Email (Swift); 8/18/11 RIA Biz; 6/8/11 The Mutual Fund Store Web Site; 5/31/11 The Mutual Fund Store Web Site; 5/31/11 The Charles Schwab Corporation Email (Salesky); 5/30/11 Investment News; 5/30/11 Kansas City Star;11/28/09 Traders Daily; 5/17/09 Investment News; 5/12/09 Investment News; 3/08 Investment Advisor; 2/20/08 Investment Advisor; Tiburon Research & Analysis 45

    46. The Edelman Financial Group Has Offices in 21 States, Consistent with 2007, But Down from its Peak of 25 in 2011 The Edelman Financial Group States Source: 9/13/12 The Edelman Financial Group Press Release; 5/18/11 Answers.Com Web Site; 5/10/11 Sanders Morris Harris Group Press Release; 11/29/10 Sanders Morris Harris Group Press Release; 12/5/08 Sanders Morris Harris Group Press Release; 11/13/08 Sanders Morris Harris Group Press Release; 11/10/08 Sanders Morris Harris Group Press Release; Tiburon Research & Analysis

    47. The Mutual Fund Store Has 73 Offices The Mutual Fund Store Offices Source: 8/29/11 Ask.Com Web Site; 5/31/11 The Mutual Fund Store Web Site; 5/30/11 Kansas City Star; Tiburon Research & Analysis 47

    48. The Edelman Financial Group Has 500 Employees, Up 60% Since 2003 But Down from its Peak of 610 in 2007 The Edelman Financial Group Employees Source: 9/14/12 Houston Business Journal; 5/18/11 Answers.Com Web Site; 5/18/11 Funding Universe Web Site; 5/10/11 SMH Group Press Release; 11/29/10 SMH Group Press Release; 12/5/08 SMH Group Press Release; 11/13/08 SMH Group Press Release; 11/10/08 SMH Group Press Release; 11/7/08 SMH Group Press Release; 9/8/08 SMH Group Press Release; 6/12/08 SMH Group Press Release; Tiburon Research & Analysis

    49. The Edelman Financial Group’s Edelman Financial Services Has 240 Employees, Up 200% Since 2004 Added 64 employees in 2010? Edelman Financial Services Employees Expected to add 60 employees in 2011 to reach 300 at 12/11 15 technology people Source: 6/15/11 Financial Advisor; 4/14/11 Edelman Financial Services Presentation (Edelman); 1/18/11 RIA Biz; 10/21/10 RIA Biz; 8/31/09 RIA Biz; 12/04 Research; Tiburon Research & Analysis 49

    50. The Mutual Fund Store Has 104 Investment Advisors The Mutual Fund Store Investment Advisors Source: 8/29/11 Complaints Board Web Site; 6/8/11 The Mutual Fund Store Web Site; 5/31/11 The Mutual Fund Store Web Site; 5/31/11 The Charles Schwab Corporation Email (Salesky); 5/30/11 Investment News; Tiburon Research & Analysis 50