CERULLI QUANTITATIVE UPDATE SUBSCRIPTION INTERMEDIARY MARKETS 2010 September 2010

Transcription

1 CERULLI QUANTITATIVE UPDATE SUBSCRIPTION INTERMEDIARY MARKETS 2010 September 2010 This annual publication provides comprehensive data on financial product distribution, including advisor market sizing, retirement plans, 529 plans, insurance, managed account programs, mutual funds, annuities, alternative investments, and advisor preferences regarding these vehicles. In addition, it examines many of the metrics and challenges around product providers retail wholesaling teams. This report allows firms to: Benchmark salesforces to peers Focus sales efforts on key distribution partners Position products to help advisors move back into the market Find alternate ways to address RIAs Refine their sales strategy given changes in the distribution landscape Create products that address main advisor concerns: flexibility, choice, and pricing This report contains 227 exhibits and includes the following chapters: 1. Channel Strategy 2. Advisor Sizing 3. Broker/Dealerl Sizing 4. Registered Investment Advisors (RIAs) Sizing 5. Advisor Portfolio Construction 6. Advisor Product Usage 7. Product Sizing 8. Mutual Funds 9. Annuities 10. Alternative Investments and ETFs 11. Managed Accounts 12. Retirement Products 13. External Salesforces 14. Wholesaling Challenges 15. Sales Support Table of contents, user examples, and sample exhibits are included in this attachment. INSIDE LOOK: Exclusive data: Current and projected advisor headcount and assets under management by channel Top broker/dealers by headcount and assets under management RIA firms, assets, and advisors by affiliation model Market sizing of mutual funds, annuities, managed accounts, retirement and alternative products External salesforce headcounts, organizational structures, compensation Hybrid/e-wholesaling compensation and staffing Key findings: Despite the much hyped advisor trend toward independence, asset managers can not ignore traditional employee-advisor channels as they manage the majority of client assets. Asset managers have cut back on distribution partners due to increased costs of doing business and broker/dealer consolidation. ETFs are not universely accepted by advisors less than half use them currently. Mutual funds, on the other hand, still dominate advisors product mix. The advisor landscape is highly concentrated 65% work for one of the top-25 firms. 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 40.5% Wirehouse Source: Cerulli Associates Marketshare of Advisors and Assets by Channel, % 15.9% 11.5% 14.9% Regional B/D 29.6% IBD Advisor marketshare 10.9% 5.9% 7.7% 4.2% 6.6% 4.8% 3.6% RIA Dually registered AUM marketshare Bank B/D 29.0% Insurance B/D Report purchase includes: 5 hardcopies Online access Exhibits in Excel format Key findings in PDF format Analyst support For pricing, please contact: Marketing & Business Development CAmarketing@cerulli.com Subscription Details: Quantitative Updates are subscription-based and include online access to a database of prior annual releases of this report, related Thematic Reports. See page 3 for more details. Cerulli Associates Boston Singapore London September 2010

2 CERULLI QUANTITATIVE UPDATE SUBSCRIPTION INTERMEDIARY MARKETS 2010 USER EXAMPLES: The following are examples of how this report can be applied to business planning and strategic decision-making: Scenario 1: A mid-size asset manager is trying to reduce costs by assessing its current distribution strategy. They are interesting in comparing their salesforce structure to other managers. Cerulli Quantitative Update: Intermediary Markets 2010 answers the following questions: What is the average salesforce headcount for mid-size asset managers? Where have other managers cut personnel in the past year? What are wholesaler compensation trends? Scenario 2: A boutique asset manager is trying to understand the trend of advisor shift toward independence. They think they have a unique offering that RIAs would be interested in but they aren t sure how to address this channel. Cerulli Quantitative Update: Intermediary Markets 2010 answers the following questions: How many RIA firms, advisors, and assets are there in U.S.? What types of products are RIAs using? Who are the top RIA custodians and how do asset managers access these platforms? Scenario 3: An insurance firm is revamping their marketing strategy and hoping to get new advisors interested in their products. Cerulli Quantitative Update: Intermediary Markets 2010 answers the following questions: MORE INFORMATION: To learn how to apply this report to your firm s unique needs, please contact: What types of advisors are planning to increase their use of annuities? How do advisors select an annuity provider? How are advisors using annuities in retirement income planning? Marketing & Business Development CAmarketing@cerulli.com

3 EXHIBIT 2.07 Asset Marketshare by Channel, Sources: Cerulli Associates, Investment Company Institute, Insured Retirement Institute, VARDS, Strategic Insight/SIMFUND, Securities Industry and Financial Markets Association, Investment News, Financial Planning, Bank Insurance Market Research Group, National Regulatory Services, Standard and Poor's Money Market Directories, The Institute of Management and Administration, Judy Diamond, Department of Labor, CFO, Pensions & Investments, Cerulli Associates, in partnership with Advisor Perspectives, the College for Financial Planning, Financial Planning Association, Financial Services Institute, Investment Management Consultants Association, and Morningstar 100% 80% 60% 40% 20% 0% 3.2% 3.1% 3.6% 4.8% 6.9% 6.6% 13.2% 15.2% 15.3% 15.3% 15.7% 48.2% 45.1% 13.9% 15.9% With 40.5% marketshare, wirehouses control the largest marketshare of advisor-sold assets. However, wirehouses having been quickly losing marketshare over the past three years as recently as 2007, wirehouses controlled close to half of advisor-sold assets (48.2%). Key Implication: Wirehouses have lost significant marketshare of advisor-sold asset over the past three years. The precipitous loss of marketshare in 2008 can be attributed to the financial crisis in which wirehouses were central players. Clients became concerned about the trustworthiness of the large brokerage houses and some advisors and clients fled to distance themselves from the troubled firms. The lost marketshare in 2009 is largely due to wirehouses intentionally trimming lower tier advisors in the wake of the crisis. In an effort to cut overhead costs, wirehouse firms raised production levels, essentially laying-off the bottom end of their advisor force which hurt their overall asset marketshare, but the remaining advisors are high-quality advisors with large books of business. It remains to be seen whether wirehouse firms can use their remaining advisor force to reverse the trend and reclaim marketshare. Likely, growing their assets base will require that wirehouse firms begin hiring and training advisors once again. CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010 CHAPTER % 17.2% 40.5% Wirehouse IBD RIA Regional B/D Bank B/D Insurance B/D EXHIBIT 4.01 Retail-Focused RIA Market Segmentation, 2009 ($ billions) Sources: National Regulatory Services, Cerulli Associates, Cerulli Associates-Financial Planning Association Advisor Surveys, Cerulli Associates-Investment Management Consultants Association Advisor Surveys Retail-Focused RIAs 15,639 firms $1,691.6 Retail 1 Mixed2 Retail 14,352 firms 1,287 firms Institutional $1,418.1 $ Retail Independent Retail Hybrid Mixed Independent3 Mixed Hybrid4 Asset Management 10,098 firms 4,254 firms 847 firms 440 firms $928.7 $489.4 $199.6 $73.8 Money Managers Money Managers Money Managers Money Managers 656 firms 330 firms 91 firms 26 firms $54.2 $41.0 $29.1 $11.2 Investment Planners Investment Planners 440 firms 168 firms 4,410 firms 1,492 firms $110.9 $32.8 $367.8 $113.2 Financial Planners Financial Planners Financial Planners Financial Planners 3,665 firms 1,757 firms 215 firms 178 firms $257.4 $159.1 $22.9 $5.6 Wealth Managers Wealth Managers Wealth Managers Wealth Managers 1,367 firms 675 firms 101 firms 68 firms $249.3 $176.2 $36.8 $ Retail RIA firms are those that primarily focus on retail clients including high-net-worth clients 2 Mixed RIA firms are those firms that serve both retail, high-net-worth and institutional clients 3 Independent RIA firms are those firms that only maintain an independent RIA registration 4 Hybrid RIA firms are those that are affiliated with a broker/dealer as well as maintaining a RIA registration separate of their broker/dealer There are 15,639 retail-focused, independent RIA firms. Collectively, these firms managed $1.7 trillion at year-end Analyst Note: Hybrid RIA firms are those RIAs that are registered with the SEC but also maintain a broker/dealer registration with FINRA. This model is alternatively referred to throughout this report as dually registered. Independent RIA firms are those firms that are only registered with the SEC and do not maintain a broker/dealer registration. Retail firms are those with primarily (>75%) retail clients (including the high net worth). Mixed firms serve a mix of retail and institutional clients but must have at least 25% retail clients to be included in this sizing. Key Implication: There are multiple elements to Cerulli s definition of retail-focused RIAs. First, the RIA needs to be operating as a financial advisor. Cerulli defines this as someone who is in the business of managing all of their client s money. While a retail client might have multiple advisors, a retail advisor is at least positioned to be the sole solution for a retail client. Second, Cerulli s RIA definition excludes the fee-based business of broker/dealers. To qualify for this sizing, a RIA firm must have their Form ADV filed with either the SEC or the state, separate from any larger corporate entity. Finally, as a name suggests, these firms should be retail focused, meaning at least 25% of their clients are individuals, including the high net worth. CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010 CHAPTER 4 71 Focus Advice EXHIBIT 8.01 Long-Term Mutual Fund Assets and Number of Funds, Q 2010 ($ billions) Sources: Strategic Insight/SIMFUND, Cerulli Associates $9,000 6,357 6,333 6,427 6,565 6,629 7,000 6,210 6,004 6,114 6,153 6,253 6,358 6,371 $8,000 $7,780 6,000 $7,021 $7,000 $6,774 $6,703 $6,000 5,000 $6,000 $5,400 $5,038 $5,000 $4,518 $4,680 4,000 $4,410 $4,074 $4,000 $3,614 3,000 $3,000 $2,000 $1,000 $ s long-term mutual fund asset growth proved unsustainable in 2010, as market declines drove overall assets levels down $71 billion through 2Q Reversing the decline in funds seen in 2009, 19 new funds entered the market through 2Q Asset managers trying to capture assets held in cash equivalents have opened new funds targeting the opportunity. Analyst Note: Long-term mutual fund assets include all long-term mutual fund share classes, and exclude funds of funds, ETFs, money market mutual funds, 529s plans, and closed-end mutual funds. Key Implication: Retail investors focus on principal protection has stalled the growth of long-term funds. Managers can take two approaches to capitalize on this opportunity--attempt to placate investors with conservative funds, such as blue chip equity and fixed income, or lure the aggressive segment back into the market with competitive returns compared to short-term investments. 120 CHAPTER Q 2010 Long-term mutual fund assets Number of funds 2,000 1,000 CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS EXHIBIT Hybrid Wholesaler Compensation, 2010 Source: Cerulli Associates $150,000 and up 15% $100,000 - $150,000 62% $50,000 - $75,000 8% $75,000 -$100,000 15% The majority of hybrid wholesalers (62%) earn between $100,000 and $150,000. Only 8% are reported to earn less than $75,000. Though numbers clearly vary widely across firms, the average salary of a hybrid comes in at approximately $125,000 compared to about $330,000 annually for a traditional field wholesaler. On this basis, firms should count on annual compensation of hybrids to be about 35-40% of that of a field wholesaler. Key Implication: Despite the lower cost nature of hybrid wholesaling, some firms remain reluctant to embrace the model. In many cases firms seem reluctant to embrace the role on a subjective, rather than objective, basis. In these cases the reluctance often comes from sales managers, usually former wholesalers, who reference their own experience in the field as the epitome of how things should be. In these cases sales managers believe that the depth of trust they were able to build with the advisors in their former territories just cannot be duplicated by a home office-based hybrids. Essentially, they feel hybrids create acquaintances rather than relationships. CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010 CHAPTER CERULLI QUANTITATIVE UPDATE SUBSCRIPTION INTERMEDIARY MARKETS 2010 Report purchase includes: 5 hardcopies Online access Exhibits in Excel format Key findings in PDF format Analyst access Subscription-based Quantitative Updates are now subscription-based. Your purchase includes online access to a database of prior report releases and related Thematic Reports. A subscription to Cerulli Quantitative Update: Intermediary Markets 2010 remains active through 9/30/2011 and includes online access to the 13 related reports below at no cost. See the green Purchase tab on for more information on these reports. 1. Cerulli Quantitative Update: Intermediary Markets Cerulli Special Report: Market Update: RIA Channel Sizing and Assessment 3. Cerulli Quantitative Update: Intermediary Markets Registered Investment Advisors Cerulli Quantitative Update: Intermediary Markets State of Wholesaling: Next-Generation Coverage Models Cerulli Quantitative Update: Intermediary Markets Cerulli Quantitative Update: Intermediary Markets Retail Registered Investment Advisors in Transition Cerulli Quantitative Update: Intermediary Markets Cerulli Quantitative Update: Intermediary Markets Transitioning from Commissions to Fee-Based Pricing The State of Retail Registered Investment Advisor Market 2003 Please contact me about this report. Fax completed form to Name: Title: Phone: Firm: Division or Business Unit Name: Please contact Marketing & Business Development to learn more about pricing CAmarketing@cerulli.com CERULLI ASSOCIATES One Exeter Plaza Boston, MA Tel: Maxwell Road Singapore Tel: Betterton Street London WC2H 9BP Tel: Special Feature: To view a thumbnail view of the contents of this report, please visit our website at Go to Reports and click on view next to the report title. p.37 p.71 p.120 p.261

4 table of contents - Overview INTRODUCTION & METHODOLOGY KEY THEMES & PROGNOSIS SECTION I: THE ADVISOR MARKETPLACE CHAPTER 1: CHANNEL STRATEGY CHAPTER 2: ADVISOR SIZING CHAPTER 3: BROKER/DEALER SIZING CHAPTER 4: RIA SIZING CHAPTER 5: ADVISOR PORTFOLIO CONSTRUCTION CHAPTER 6: ADVISOR PRODUCT USAGE SECTION II: ADVISOR PRODUCTS CHAPTER 7: PRODUCT SIZING CHAPTER 8: MUTUAL FUNDS CHAPTER 9: ANNUITIES CHAPTER 10: ALTERNATIVE INVESTMENTS AND ETFS CHAPTER 11: MANAGED ACCOUNTS CHAPTER 12: RETIREMENT PRODUCTS SECTION III: WHOLESALING CHAPTER 13: EXTERNAL SALESFORCES CHAPTER 14: WHOLESALING CHALLENGES CHAPTER 15: SALES SUPPORT COMPANY INDEX CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010 TABLE OF CONTENTS 5

5 table of contents - Detailed SECTION I: THE ADVISOR MARKETPLACE CHAPTER 1: CHANNEL STRATEGY Exhibit Retail Channel Rankings: Gross Sales, Service Costs, and Profitability, Exhibit Retail Third-Party Channel Rankings: Gross Sales, Service Costs, and Profitability, Exhibit National Sales Manager: Salesforce Resource Allocation by Channel, E Exhibit National Sales Manager: Most Commonly Targeted Distribution Opportunities, CHAPTER 2: ADVISOR SIZING Exhibit Intermediary Matrix, Exhibit Number and Percentage of Advisors by Channel, Exhibit Historical Change in Total Advisors by Channel, Exhibit Marketshare of Employee and Independent Advisors, Exhibit Average Branch Concentration by Channel, Exhibit Assets by Channel, Exhibit Asset Marketshare by Channel, Exhibit Marketshare of Advisors and Assets by Channel, Exhibit Average Advisor AUM and Productivity Index (PX) by Channel, Exhibit Asset Marketshare by Employee and Independent Advisors, Exhibit Assets by Product by Channel, Exhibit Projected Advisor Headcount by Channel, E Exhibit Projected Advisor Headcount Marketshare by Channel, E Exhibit Projected Advisor Marketshare by Employee and Independent Advisors, E Exhibit Projected Asset Marketshare by Channel, E Exhibit Projected Asset Marketshare by Employee and Independent Advisors, E Exhibit Projected Experienced Advisor Moves, CHAPTER 3: BROKER/DEALER SIZING Exhibit Top-25 Broker/Dealers by Advisor Headcount, Exhibit Top-20 Broker/Dealers by Assets under Management, Exhibit Headcount of Top-25 Broker/Dealers as a Percentage of Industry Headcount, Exhibit Broker/Dealer Networks, Exhibit Broker/Dealer Sub-Segments, Exhibit Top-15 Bank Broker/Dealer Programs by Advisor Headcount, Exhibit Selected Bank Third-Party Marketers by Advisor Headcount, TABLE OF CONTENTS CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010

6 Exhibit Selected Bank Broker/Dealer Program Platform Reps, Exhibit Bank Broker/Dealer Assets by Product, Exhibit Top-30 Independent Broker/Dealers by Advisor Headcount, Exhibit Advisors by Independent Broker/Dealer Segment, Exhibit Independent Broker/Dealer Assets by Product, Exhibit Top-15 Insurance Broker/Dealers by Advisor Headcount, Exhibit Advisors by Insurance Segment, Exhibit Insurance Broker/Dealer Assets by Product, Exhibit Selected Private Client Groups by Advisor Headcount, Exhibit Top-15 Regional Broker/Dealers by Advisor Headcount, Exhibit Advisors by Regional Segment, Exhibit Regional Broker/Dealer Assets by Product, Exhibit Wirehouse Broker/Dealers by Advisor Headcount, Q Exhibit Wirehouse Assets by Product, CHAPTER 4: RIA SIZING Exhibit Retail-Focused RIA Market Segmentation, Exhibit Retail-Focused RIA Practice Type Definitions, Exhibit Retail-Focused RIA Assets by Segment, Exhibit Retail-Focused RIA Firms by Segment, Exhibit Share of Retail-Focused RIA Firms and Assets by Segment and AUM, Exhibit Retail-Focused RIA Firm and Asset Marketshare Change by AUM Segment, Exhibit Retail-Focused RIA Firms, Assets, and Advisors by Affiliation Model, Exhibit Top-50 Retail-Focused RIA Firms by AUM, Exhibit RIA Assets by Product, Exhibit RIA Custodians: Total Number of Clients, Exhibit RIA Custodians: Total Client Assets, Exhibit Service Agent Comparison: Average RIA Client Assets by Service Agent, Exhibit Transaction Fee vs. No-Transaction-Fee Mutual Funds Offered, Exhibit Service Agent Services Offered, CHAPTER 5: ADVISOR PORTFOLIO CONSTRUCTION Exhibit Advisor Allocation to Investment Products, Q Exhibit Percent of Advisors Using Investment Products by Channel, 2Q Exhibit Advisors' Expected Change in Product Allocation, 2Q Exhibit Projected Advisor Product Mix, 2Q Q 2011E Exhibit Advisor Means of Determining Asset Allocation, 2Q CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010 TABLE OF CONTENTS 7

7 Exhibit Frequency with Which Advisors Use Various Portfolio Construction Methods, 2Q Exhibit Frequency with Which Advisors Outsource Portfolio Construction, 2Q Exhibit Advisor Allocation to Active and Passive Products by Channel, 2Q Exhibit Advisor Beliefs on Active and Passive Management, 2Q Exhibit Reasons Advisors Choose an Asset Manager by Channel, 2Q Exhibit Number of Asset Managers Used by Advisors, 2Q Q Exhibit Means Used by Advisor Teams to Make Product Decisions, 2Q CHAPTER 6: ADVISOR PRODUCT USAGE Exhibit Percentage of Advisor Assets Held in Managed Accounts, 2Q Q Exhibit Advisor Opinion of Managed Account Features, 2Q Exhibit Determinants of Advisor Use of Managed Account Program Types, 2Q Exhibit Advisors' Preferred Methods to Learn About New Managed Account Programs, 2Q Exhibit Advisor Satisfaction with Their Broker/Dealer's Managed Account Platform, 2Q Exhibit Advisor Opinion of Insurance Wrappers on Managed Account Programs, 2Q Exhibit Advisor Perception of Unified Managed Accounts, 2Q Exhibit Factors in Advisor Selection of a Defined Contribution Provider,2Q Q Exhibit Advisor Opinion of Retirement Income Funds, 2Q Exhibit Factors in Advisor Selection of a Variable Annuity Provider, 2Q Exhibit ETF Attributes Important to Advisors, 2Q Exhibit Inhibitors to Advisors' Use of ETFs, 2Q Exhibit Advisor Opinion of Active ETFs, 2Q SECTION II: ADVISOR PRODUCTS CHAPTER 7: PRODUCT SIZING Exhibit Advisor-Sold Products, Exhibit Marketshare of Advisor-Sold Products, Exhibit Greatest Challenge for Asset Managers, Exhibit Drivers of Future Asset Manager Growth, Exhibit Greatest Challenges for Variable Annuity Issuers, Exhibit Drivers of Future Variable Annuity Issuer Growth, CHAPTER 8: MUTUAL FUNDS Exhibit Long-Term Mutual Fund Assets and Number of Funds, Q TABLE OF CONTENTS CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010

8 Exhibit Long-Term Mutual Fund Net Flows, Q Exhibit Mutual Fund Assets by Fund Type, Q Exhibit Mutual Fund Net Flows by Fund Type, Q Exhibit Largest Mutual Fund Asset Managers, 2Q Exhibit Largest Mutual Fund Asset Managers by Net New Flows, 2Q Exhibit Largest Mutual Funds by Assets Under Management, 2Q Exhibit Largest Long-Term Mutual Fund Asset Managers, 2Q Exhibit Largest Long-Term Mutual Funds by Assets Under Management, 2Q Exhibit Largest Short-Term Mutual Fund Asset Managers, 2Q Exhibit Largest Short-Term Mutual Funds by Assets Under Management, 2Q Exhibit Total Closed-End Mutual Fund AUM and Growth, Q Exhibit Closed-End Mutual Fund Net New Flows, Q 2009 YTD Exhibit Total Number of Closed-End Mutual Funds, Q Exhibit Largest Closed-End Mutual Fund Asset Managers, 2Q Exhibit Largest Closed-End Mutual Funds, 2Q Exhibit Broker-Sold Fund Companies' Marketshare by Segment, 2Q 2009 and 2Q Exhibit Top-Tier Broker-Sold Fund Companies, 2Q Exhibit Mid-Tier Broker-Sold Fund Companies, 2Q Exhibit Third-Tier Broker-Sold Fund Companies, 2Q Exhibit Persistence of Flows and Assets for Top-10 Broker-Sold Fund Companies, Q Exhibit Mutual Fund Assets by Share Class, Q Exhibit Mutual Fund Net Flows by Share Class, Q 2009 YTD Exhibit Number of Proprietary Fund Families and Long-Term Mutual Funds by Channel, 2Q Exhibit Proprietary Long-Term Fund Assets by Channel, 2Q Exhibit Proprietary Long-Term Fund Net Flows by Channel, 2Q Exhibit Assets: Nonproprietary Funds vs. Proprietary Funds, 2Q Exhibit Net Flows: Nonproprietary Long-Term Funds vs. Proprietary Long-Term Funds, 2Q Exhibit Savings Plan Assets, Q CHAPTER 9: ANNUITIES Exhibit Annuity Industry Sales Mix by Product Type, Q 2010E Exhibit Qualified Annuity Sales and Assets by Percentage, (including TIAA-CREF), E Exhibit Fixed Annuity Assets, E Exhibit Fixed Annuity Sales, Q 2010E Exhibit Top-Selling Fixed Annuity Issuers by New Sales, Q Exhibit Fixed Annuity Sales by Distribution Channel by Percentage, Q CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010 TABLE OF CONTENTS 9

9 Exhibit Immediate Annuity Sales as a Percentage of Total Annuity Sales, E Exhibit Fixed-Indexed Annuity Sales as Percentage of Total Fixed Annuity Sales, Q 2010E Exhibit Fixed-Indexed Annuity Sales by Distribution Channel, Q Exhibit Variable Annuity Industry Assets and Growth, E Exhibit Variable Annuity Total Sales, Q Exhibit Variable Annuity Total Sales by Distribution Channel, Q Exhibit Variable Annuity Net Sales, Q Exhibit Variable Annuity Net Sales as Percentage of Gross Sales, Exhibit Top Variable Annuity Issuers by Total Assets, Q Exhibit Top Selling Variable Annuity Issuers by New Sales, Q Exhibit Percentage of Variable Annuity Contracts That Impose Investment Restrictions by Rider, 1Q Exhibit Key Variable Annuity Fund Management Metrics, Exhibit Largest 25 Variable Insurance Asset Managers, Exhibit Variable Insurance Embedded-Advice Fund Assets and Net Sales as Percentage of Variable Insurance Industry Total, Exhibit Percentage of Variable Annuity Target-Risk Fund Sales Attributable to Living Benefit Requirements, Exhibit Life Insurance Sales Mix by Product Type, Exhibit Top-10 Variable Life and Variable Universal Life Insurance Providers by New Premiums, Exhibit Top Long-Term Care Insurance Providers Used by Agents, CHAPTER 10: ALTERNATIVE INVESTMENTS AND ETFS Exhibit Alternative Mutual Fund Assets, Q Exhibit Alternative Mutual Fund Net Flows, Q Exhibit ETF Assets and Growth, Q Exhibit Top ETF Asset Managers, 2Q Exhibit Top-25 ETFs, 2Q Exhibit Global Single-Manager Hedge Fund Assets by Domicile, Exhibit Largest Hedge Fund Firms by Hedge Fund AUM, Exhibit Global Fund-of-Hedge-Fund Assets, Exhibit Number and Market Capitalization of Public REITs, Exhibit Managed Futures Funds Assets, Q Exhibit Venture Capital Investments: Number and Total Amount, Q CHAPTER 11: MANAGED ACCOUNTS Exhibit Managed Account Definitions, Exhibit Total Managed Account Assets, Q TABLE OF CONTENTS CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010

10 Exhibit Summary of Managed Account Segment Assets by Sponsor, 2Q Exhibit Program Type Comparison: Managed Account Marketshare, 2Q 2009 vs. 2Q Exhibit Channel Comparison: Managed Account Marketshare, 2Q 2009 vs. 2Q Exhibit Largest Separate Account Consultant Program Asset Management Groups, 2Q CHAPTER 12: RETIREMENT PRODUCTS Exhibit Total Retirement Market Assets, E Exhibit (k) Assets, E Exhibit (k) Contributions and Distributions, E Exhibit (k) Assets by Asset Segment, 2009E Exhibit Most Used 401(k) Plan Providers by Segment, Exhibit (b) Plan Assets, E Exhibit Most Frequently Used 403(b) Plan Providers by Number of Plans, Exhibit Total 457 Plan Assets, E Exhibit Leading 457 Plan Managers by Assets, Exhibit IRA Assets by Traditional and Other Assets, E Exhibit Annual New IRA Rollover Contributions, E Exhibit Target-Date and Risk-Based Fund Assets, Q Exhibit Target-Date and Risk-Based Fund Net Flows, Q 2010 YTD SECTION II: WHOLESALING CHAPTER 13: EXTERNAL SALESFORCES Exhibit Large Asset Managers: Salesforce Headcount by Functional Role, Exhibit Medium Asset Managers: Salesforce Headcount by Functional Role, Exhibit Small Asset Managers: Salesforce Headcount by Functional Role, Exhibit Variable Annuity and Insurance Providers: Salesforce Headcount by Functional Role, Exhibit Actual and Expected Changes in Salesforce Headcount by Functional Role, Exhibit Productivity of External Wholesalers, Exhibit Salesforce Channelization, Exhibit Generalist Wholesalers' Product Line Responsibility, Exhibit Specialist Wholesalers' Product Line Responsibility, Exhibit Breakdown of Current Wholesaler Compensation, Exhibit Comparison of Current and Ideal Wholesaler Compensation, Exhibit Obstacles to Moving Away from a Gross Sales Focus, Exhibit Wholesalers' Annual Expense Budget, Exhibit Wholesaler Efforts Made to Reduce Travel Expenses, CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010 TABLE OF CONTENTS 11

11 CHAPTER 14: WHOLESALING CHALLENGES Exhibit Wholesalers Greatest Challenges, Exhibit Primary Value Wholesalers Provided to Advisors, by Product Sold, Exhibit Wholesalers vs. Advisors: Reasons Advisors Choose Asset Managers, Exhibit Wholesalers vs. Advisors: Reasons Advisors Choose Variable Annuity Providers, Exhibit Wholesaler and Advisor Licenses and Designations, Exhibit Wholesaler-Advisor Comparison: Years as Wholesaler vs. Years as Advisor, Exhibit Wholesalers Rating of Importance of Skills vs. Their Own Skill Level, Exhibit Wholesaler Time Allocation, Exhibit Wholesaler Opinions on the Annual Business Planning Process, Exhibit Activity Metrics Tracked for Wholesalers, Exhibit Number of Wholesaler Contacts, by Tier, Product Line, and Advisor Type, Exhibit Source of Wholesaler Appointments Booked by Product Line and Tier, Exhibit Source of Wholesaler Appointments Booked by Product Line and Tier, Exhibit Information Collected During Advisor Profiling Process, Exhibit Wholesaler Time Spent on Initial Prospect Advisor Interview, Exhibit National Sales Managers Ranking of Training Method Effectiveness, Exhibit Wholesaler Interest in Additional Training Topics by Age, Exhibit Wholesaler Experience by Productivity, Exhibit Sales Management vs. Salesforce Comparison: Reasons Why a Wholesaler Would Leave a Firm, Exhibit Sources of New Wholesaler Hires, Exhibit Expected Experienced Wholesaler Productivity in First Year with New Firm, CHAPTER 15: SALES SUPPORT Exhibit Ratio of Wholesalers to Divisional Sales Managers, Exhibit Divisional Sales Manager Time Allocation, Exhibit Ratio of External to Internal Wholesalers, Exhibit Percentage of Mutual Fund and Separate Account Sales Influenced by the Professional Buyer at Broker/Dealers, Exhibit Greatest Challenges for Key/National Account Managers, Exhibit Key Account Manager Time Allocation, Exhibit Breakdown of Key Account Manager Compensation, Exhibit Wholesalers' Most Desired Information from Key Accounts Team, Exhibit Wholesaler Interest in B/D Technology Platforms, Exhibit Group Responsible for Supporting B/D Professional Buying Teams, TABLE OF CONTENTS CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010

12 Exhibit Compensation Breakdown for Professionals Supporting B/D Professional Buying Teams, Exhibit Professional Buyer Support: Allocation of Time by Responsibility, Exhibit Most Important Attributes in Developing Professional Buyer Relationships, Exhibit Implementation of Hybrid/E-Wholesaler Role, Exhibit Primary Strategy of Hybrid Wholesalers, Exhibit Productivity of Hybrid Wholesalers, Exhibit Hybrid Wholesaler Compensation, Exhibit Makeup of Hybrid Wholesaler Compensation, Exhibit Hybrid/E-Wholesaler Time Allocation, Exhibit Wholesalers: Key Elements of an Effective Sales Idea, Exhibit Advisors' Desired Changes to Client-Approved Marketing Materials, Exhibit Wholesalers: Usage of Firm CRM System, COMPANY INDEX CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010 TABLE OF CONTENTS 13

13 Introduction & Methodology Cerulli Quantitative Update: Intermediary Markets 2010 is the seventh report in an annual series, which is the outcome of ongoing research and analysis of the intermediary marketplace by Cerulli Associates. The report focuses on financial products and product distribution, including market sizing, advisor product usage and preferences, and product provider salesforces. Cerulli Quantitative Update: Intermediary Markets 2010 leverages CA s continuous research and analysis of the marketplace, including proprietary surveys of advisors and asset managers conducted through CA s proprietary survey engine. A number of these surveys were conducted in partnerships with industry trade organizations, such as the Investment Management Consultants Association, the College for Financial Planning, Morningstar and the Financial Planning Association. The proprietary data in this report is supplemented with government sources (FDIC, Federal Reserve, Department of Labor, National Regulatory Services, etc.), as well as third-party sources (Strategic Insight/SIMFUND, Morningstar Direct, Insured Retirement Institute, etc.). Cerulli Quantitative Update: Intermediary Markets 2010 is designed to serve as a stand-alone publication, but also as a complement to other publications, specifically the Cerulli Quantitative Update: Advisor Metrics 2010, which focuses on advisor trends and consumer information. Each exhibit includes charts and commentary, including the important tactical ramifications for asset managers and broker/dealers. The report is designed as a business planning tool. Market sizing Methodology: Cerulli s annual sizing of the advisor marketplace provides assets under management and advisor headcounts by channel for retail advisors. Cerulli defines retail advisors as those advisors in the business of offering financial advice to retail clients and who seek to manage an entire asset allocation strategy for their clients. Cerulli s definition of retail advisors excludes registered personnel such as wholesalers and home-office staff who are not addressable for asset managers and broker/dealers, but who are commonly included in other attempts at sizing the advisor marketplace. The SEC and FINRA regulatory filings serve as a starting point from which Cerulli analysts individually remove broker/dealer and RIA firms not engaged in financial advising for retail clients. Using third-party industry sources, firm filings, regulatory filings, and interviews with executives, Cerulli analysts assign advisor headcounts to each firm. Firm headcounts are then aggregated into overall channel advisor headcounts. In general, CA s opinions and perspective are shaped by a robust methodology that includes: Industry understanding: All Cerulli analysts come to the firm with a background shaped by relevant experience at leading financial services firms, which contributes to the internal pool of industry knowledge. Quantitative analysis: CA maintains an online, password-protected survey engine as part of a voluntary, information-sharing relationship whereby participants complete confidential surveys in exchange for an aggregate summary of key findings. All information is presented in aggregate form, and proprietary survey information in not directly attributed to participants. Qualitative research: Cerulli analysts annually conduct background research interviews with industry executives and advisors in a confidential manner, which allow for candid commentary regarding the state of the advisor markets and potential future trends. 14 METHODOLOGY CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010

14 SAMPLE SECTION from CERULLI QUANTITATIVE UPDATE: INTERMEDIARY MARKETS 2010

15 EXHIBIT 2.08 Marketshare of Advisors and Assets by Channel, 2009 Sources: Cerulli Associates, Investment Company Institute, Insured Retirement Institute, VARDS, Strategic Insight/SIMFUND, Securities Industry and Financial Markets Association, Investment News, Financial Planning, Bank Insurance Market Research Group, National Regulatory Services, Standard and Poor's Money Market Directories, The Institute of Management and Administration, Judy Diamond, Department of Labor, CFO, Pensions & Investments, Cerulli Associates, in partnership with Advisor Perspectives, the College for Financial Planning, Financial Planning Association, Financial Services Institute, Investment Management Consultants Association, and Morningstar 45% 40% 40.5% 35% 30% 25% 29.6% 29.0% 20% 15% 10% 5% 15.0% 15.9% 11.5% 14.9% 10.9% 5.9% 7.7% 6.6% 4.2% 4.8% 3.6% 0% Wirehouse Regional B/D IBD RIA Dually registered Bank B/D Insurance B/D AUM marketshare Advisor marketshare Wirehouses control 40.5% of advisor-sold assets, but only employ 15% of the industry s advisors. In contrast, insurance firms employ 29% of the industry s advisors and only control 3.6% of assets. Key Implication: Comparing the percentage of assets in a channel to the percentage of advisors working in a channel reveals the characteristics of each channel. For example, wirehouse firms control a disproportionate percentage of the industry s assets relative to the number of advisors they employ. Wirehouses advisors tend to target high-net-worth clients and as a result have of the largest books of business in the industry. RIAs also target high-net-worth clients and, as such, control 10% of the industry s assets with only 6% of the industry advisors. Channels that tend to target lower net worth clients show the opposite relationship, with advisors maintaining smaller books of business on average. For example, the IBD channel has close to double the marketshare of advisors compared to marketshare of assets, highlighting the fact that IBD advisors tend to work with middle-market clients. The insurance channel shows the greatest disparity between assets and advisors. In this channel, many advisors focus on selling insurance products and selling asset management products is a secondary pursuit, and many advisors do not accumulate significant assets under management. 38 CHAPTER 2 CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010

16 EXHIBIT National Sales Managers Ranking of Training Method Effectiveness, 2010 Source: Cerulli Associates Rank Method 1 Incentive compensation 2 (tie) Peer to peer 2 (tie) Wholesaler travel with sales management 4 Dedicated training staff 5 (tie) Full salesforce meetings 5 (tie) Divisional or regional meetings 7 Third-party trainer 8 Website or online Sales managers surveyed in 2010 ranked incentive compensation as the most effective training method. Peer to peer and joint travel with sales management tied for the second most effective method for wholesaler training. Key Implication: Finding the right balance for wholesaler training is a challenging subject. Just within this chapter, Cerulli has both advocated for wholesalers as content experts, but also that wholesalers must maximize their time in front of advisors. If wholesalers are taken out of the field for training, then that is time they are not working with advisors. As a result, time out of the field should be used for a mix of skill-based and content training. Sales skills should be reinforced through peer-to-peer training and sales management travel. However, wholesalers must take it upon themselves to maintain their content expertise in their downtime. Product manufacturers must supply wholesalers with on-demand content, such as white papers and webcasts, to allow them to stay current as time allows. 238 CHAPTER 14 CERULLI QUANTITATIVE UPDATE INTERMEDIARY MARKETS 2010