Five massive foundational shifts are impacting financial service providers of all types, and they are impacting those that serve affluent clients in especially unique ways. Many of the strategies, skills and behaviors that enabled success in the past are now at best ineffective, and completely irrelevant in some cases. Advisors and firms serving affluent clients must adapt to these new realities to be successful in the future.

1. The Future of Wealth Management
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2. The evolution of wealth
management
The First Era of Wealth Management (1853-1980)
New firms arose to serve the wealthy,
focused on protecting and transferring
wealth of established families.
The Second Era of Wealth Management (1981-2007)
Deregulation, falling interest rates and
the beginning of a raging bull market
ushered in a new era, focused on
creating and growing wealth.
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3. The New Era of Wealth
Management (2008 -?)
Low Growth/ Regulatory Competitive Generational Technology
Low Yield
Environment Environment Environment Shifts Shifts
New Rules for a New Era
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4. Persistent low growth / low yield environment
is challenging revenue growth…
“Slower growth means lower
returns on capital. If real GDP
grows at 1.5 percent, then a
diversified portfolio of stocks
and bonds would probably
grow at 1.5 percent, as well.”
- PIMCO’s Bill Gross 7/11/12
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5. …ROEs are below pre-crisis levels, at
risk of not covering cost of capital.
20
15
10
5
2012
2011
0 2010
ROE 2009
2008
2007
2006
Source: Accenture Banking 2012: Revenue Growth and Innovation
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6. Regulatory Environment
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7. Welcome to re-regulation. And we
are just getting started…
33%
Not Yet
Proposed
Proposed Finalized
34% 33%
Dodd-Frank Rules
Source: Davis Polk 10/1/12
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8. Competitive Environment
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9. Customers are at risk…
17% Recently
Changed
50% Ripe for
Change
33% Stable
Source:: Sway Research- “Hearts and Wallets”
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10. …and firms all expect to take market
share from one another.
“Where will your growth come from in next 12 months?
79% Acquistion
49% Expansion
40% Focus on Affluent Clients
19%
Lower costs
6%
Unsure
5%
Other
3%
Source: WealthManagement.com No growth expected
survey of 648 wealth managers
from all channels (Oct 2012)
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10

11. Generational Shifts
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12. Transfer of Wealth: 2017-2052
Baby Boomers $41 Trillion*
Gen X Wealth of Gen X +
Gen Y expected
to exceed
Boomers by 2018
Gen Y *90% of heirs intend to leave current firm
*Up to 98% of heirs switch
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advisors 12

13. Keys for Success Differ by
Generation
Boomers Gen X Gen Y
Trust large Value conscious
institutions Self-Service
Mass luxury Peer advice
Safety/Stability
Transparency Socially
Brand names responsible
Prestige factors Tech literate
Tech fluent
New Rules for a New Era
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14. Technology Shifts
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15. This is what passes for client
experiencein most of our industry…
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16. Today’s clients want high-tech and high-
touch. Why should they have to choose?
Analytics
Advisors
Mobile
Social
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17. Clients want an ecosystem, not silos.
Branches
Wealth
Web
Management
Customers
Commercial
Mobile
Bank
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18. Skate to Where the Puck is Going
“With so few wealth managers
concentrating on Gen X and Y, and
the fact that nonfinancial services
firms are only beginning to move
into the wealth space, a disruptive
opportunity may exist for an
innovative wealth manager.”
-Delloitte Consulting
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19. Client-Centric/Advice-Driven
plan
What do you want to do?
Financial Planning | Estate Planning
share grow
How will you share your wealth? What risks are you willing to take?
Charitable Gifting | Family Distributions Savings| Investments | Leverage
protect
How can you protect what you’ve built?
Advice | Insurance | Trusts
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20. Driving efficiency through a
differentiation of tasks and roles:
What can banks learn from
healthcare?
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21. Smarter Differentiation of
Roles, Tasks and Tools, for one
thing…
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22. Execution Diagnosis
Low Touch Intimacy/EQ High Touch Nursing Psychotherapy
Pharmacy Brain Surgery
Standardized Process Specialized
Adapted from True Professionalism by David H. Maister
© 1997 David H. Maister , used by permission 22

23. Are your brain surgeons handing
out aspirin?
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24. High Touch
• Standard Credit • Goal Setting
• Product Advice • Financial Planning
• Estate Settlement • Complex Estates
• Discretionary Trust • Succession Matters
• Complex Issues • Nonfinancial Issues
• Moral Support
Intimacy/EQ
• Account Opening • Custom Credit
• Transactions • Asset Allocation
• Balance Reporting • Basic Trust Admin
• Basic Service Issues • Complex Assets
• Funds Transfers • Basic Estate Plans
Low Touch
Standardized Process Specialized
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25. Or worse,
Are your pharmacists performing
brain surgery?
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26. HNW Client Insights
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27. How HNW Clients are Feeling
“How would you describe the state of mind of your clients in 2012?”
Source: WISE Gateway 2012 Executive
Survey.
Source: WISE Gateway 2012 Executive
Survey.
27

28. Clients Still Need Help!
Top Six Priorities of HNW Clients, 2010
1. Capital Preservation
2. Effective Portfolio Management
3. Specialized Advice
4. Transparency of Statements and Fees
5. Global Asset Allocations of Portfolios
6. Independent Investment Advice
Source: Merrill Lynch Cap Gemini, 2011.
Source: Merrill Lynch Cap Gemini, 2011.
28

29. Differing Loyalty Drivers
Drivers of Loyalty to Advisors Drivers of Loyalty to Firms
1. Trust 1. Quality of
Advice
2. Responsiveness
/ Pro-activity 2. Service
3. Quality of 3. Value for
Advice Money
Related and overlapping, but clients
expect firms to drive advice and service
Source: VIP Forum
Research.
29

30. The Challenge of Competition
77% of Affluent Primarily Use Banks for Banking
12% of Affluent Primarily Use Brokerages for Banking
81% of Affluent Primarily Use Brokerages for Investments
1% of Affluent Primarily Use Banks for Investments
Source: McKinsey and Co.
30

31. Revenue Mix Varies by Segment
Share of Revenue Wallet in Wealth Management for Various
Segments, 2010
Wealth Credit Deposit Investment
Segment Products Products Products
$5M + 16% 31% 53%
$1M -- $5M 29% 29% 42%
$250k -- $1M 39% 26% 35%
Expected
Change in +8% +8% -1%
Profitability
Source: McKinsey and Co.
31

32. Advice is the differentiator
“ What product or service is most “What product or service is most
effective at attracting NEW clients in effective at engaging EXISTING
2012?” clients in 2012?”
Brokerage
Delivery &
Model, 12% Insurance, Investment
8% Capabilities, 2
6%
Loan
Products, 2
0% Financial
Financial Planning &
Planning & Advice, 47%
Advice, 32
%
Specific
Products
Investment Offered, 27%
Products, 2
8%
Source: WISE Gateway 2012 Executive
Survey.
32

33. Wealth Managers’ Survey
Operating
“Most important
Margin
metrics for
making decisions
and evaluating Expense/ Change in
operating Revenue
Revenues
Ratio
performance?” Top 5
Metrics
Client Average
Source: WISE Gateway Retention Revenue
Rate per RM
Metrics Survey 2011
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34. Questions?
www.clientific.net
@Cllientific
www.wisegateway.com
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