Cerulli Interactive Report Dashboards. The Cerulli Report U.S. RIA MARKETPLACE 2018 SUBSCRIPTION DETAILS. Designing a Framework for Independence

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1 The Cerulli Report U.S. RIA MARKETPLACE 2018 Designing a Framework for Independence Overview & Methodology In its eighth iteration, this report provides an in-depth analysis of the retail-focused registered investment advisor (RIA) marketplace. The report includes Cerulli s 10+ year market sizing of the independent RIA and hybrid RIA channels, addressing factors that have led to the channels high growth. It offers insights about the needs, challenges, and opportunities facing RIAs in today s environment. The report also covers key topics for RIA sales distribution, including product use, portfolio construction, and allocation changes. Data included in this report comes from Cerulli s continuous surveys of financial advisors, wholesalers, and distribution executives at asset managers through our proprietary survey engine. Cerulli conducted approximately 2,000 advisor surveys in Research interviews were conducted with industry executives, RIAs, RIA custodians, and RIA service providers whereby participants engage in open dialogue about the current state and outlook for the advisor markets. Benefits y Understand the differences between two groups of hybrid RIAs: longterm hybrids and transitional hybrids y Explore new market sizing of hybrid RIA assets and firms at risk of dropping their broker/dealer affiliation y Identify coverage strategies for sub-segments of the RIA channel, including hybrid RIAs, consolidators, and large (billion-dollar-plus) firms y Review quantitative and qualitative insight into advisor movement patterns and growth trends impacting the hybrid RIA channel Questions Answered y How is the hybrid RIA model evolving? y How is advisor movement impacting the hybrid RIA channel? y Which RIA segments are winning marketshare? y Who are the primary influences on RIAs investment decisionmaking processes? y How are distribution teams covering the largest RIA firms? y How is consolidation affecting the RIA marketplace? SUBSCRIPTION DETAILS $19,000 PURCHASE INCLUDES y Digital copy and hardcopy in color y Online access to eight related reports y Unlimited online firm-wide access y Exhibits in Excel y Key findings y Analyst support y Interactive Report Dashboards y Executive Summary Video RESEARCH INCLUDED WITH SUBSCRIPTION For more information, contact us: ``info@cerulli.com ANNUAL 216 PAGES 168 EXHIBITS y Five years of The Cerulli Report U.S. RIA Marketplace y Boutique Advisor Firms and RIAs: Balancing Scale and Independence for Top-Tier Advisors y State of the RIA Marketplace 2012: Sizing, Product Trends, and Distribution Opportunities y Registered Investment Advisor Market 2011 Cerulli Interactive Report Dashboards Experience Cerulli s digital analytics platform and explore interactive data from this report We are pleased to include these interactive report dashboards with your subscription: 1. Product Use Overview: Review product use and adoption trends by channel, focusing on mutual funds, exchangetraded funds, variable annuities, separate accounts, and individual securities. 2. Growth Trends: Compare growth rates of all RIAs against hybrid and independent billion-dollar RIAs by assets under management (AUM). 3. Market Landscape: Examine historical asset, firm, and headcount marketshare by AUM segment for independent and hybrid RIAs over the past six years. 4. Analyst Teams: Explore the number of firms that have an investment analyst or chief investment officer (CIO) by AUM; RIAs portfolio construction philosophy with and without analyst or CIO; most important aspects of asset manager selection by RIAs, RIA wholesalers, and RIA analysts; RIA interactions with wholesalers; and RIAs beliefs about active and passive management. CERULLI ASSOCIATES info@cerulli.com

2 What are Interactive Report Dashboards? As part of your Cerulli report subscription, we are pleased to provide you with Interactive Report Dashboards that allow you to interact with report data in unique ways: ACCESS Access consolidated data from multiple report exhibits in a single comparative view. FILTER DATA Apply filters to Cerulli report analyses including assets under management, net new flows, product type, channel, year, marketplace, and currency. EXPORT Easily build and export custom charts. Export options include; Excel, PDF, or image file. My Account: Joe Q. Sample How to Access Interactive Report Dashboards This service is complimentary and is accessible through our website. Use your unqiue Cerulli website login credentials, and you will find a View Interactive Report Dashboards link to this platform under My Reports. Interact View Dashboard You can also jump to related Interactive Report Dashboards in the report PDF by clicking on the Interact button shown on the left for reference. USER LOGIN To obtain online access, please visit or contact our account management team at: ``info@cerulli.com ` ` CERULLI ASSOCIATES info@cerulli.com

3 Chapter 5 Client Relationships Exhibit 5.12 Reasons for Clients and Prospects Choosing RIA, 2018 Sources: Cerulli Associates, in partnership with the Investments & Wealth Institute (formerly IMCA), and the Financial Planning Association (FPA ) Reasons for Choosing Firm Independent RIA Channel Hybrid RIA All RIAs Unbiased advice 84% 64% 75% Financial planning approach 71% 71% 71% High-touch service 72% 63% 68% Warm and personable image 63% 69% 66% Retirement planning expertise 49% 66% 57% Deep investment experience and expertise 58% 50% 54% Team-based approach 43% 28% 36% Community orientation 23% 27% 24% Historical investment performance 18% 25% 21% Low cost 20% 19% 20% Exclusive or high-end image 17% 21% 18% Niche specialization (e.g., physicians, divorcees) 20% 13% 17% Common personal interests (e.g., wine, sports, art) 17% 14% 15% High-profile advisor(s) 14% 15% 15% Access to B/D resources (e.g., research, lending) 3% 17% 9% Environmental or social investing focus 6% 11% 8% RIAs cite their unbiased advice (75%), approaches to financial planning (71%), and high-touch services (68%) as being the top-three reasons why clients choose their firms. Less than one in 10 RIAs believe a focus on environmental or social investing is a key driver behind clients choosing their firms. Key Implication: RIAs continue to place significantly greater emphasis on their independence from large holding companies. So much so that the importance exceeds other heavily publicized attributes, including deep investment expertise, community orientation, fees, and environmental or social investing factors. True independence and the ability to create their own preferred firm cultures have served, and will continue to serve, as primary drivers in large advisory teams choosing to migrate to RIAs. Cerulli does not believe being affiliated with a broker/dealer (B/D) is a negative, but there are trade-offs. For example, hybrid RIAs exhibited here are less likely than an independent RIA to stress unbiased advice as their top value proposition, but can stress other attributes and resources often made accessible by their B/D. 138

4 : Expanded Key Questions Answered How is the hybrid RIA model evolving? How is advisor movement impacting the hybrid RIA channel? Which RIA segments are winning marketshare? Who primarily influences RIAs investment decision-making processes? How are distribution teams covering the largest RIA firms? How is consolidation affecting the RIA marketplace?...22 Chapter 1: The Hybrid Model: Motivations for Movement Key Questions...25 Introduction...26 Exhibit RIA Asset Growth Rates by Channel, Growth Trends...27 Exhibit Hybrid RIA Asset Growth, Exhibit Hybrid RIA Firm Growth, Exhibit Hybrid RIA Firm Growth by AUM Segment, Exhibit Advisors per Firm, Exhibit Advisor Headcount Marketshare, Exhibit Previous Channel, Exhibit Challenges Operating at a Wirehouse, Exhibit Factors Attracting Breakaway Advisors, Exhibit Concerns About Switching to Independent Model, Exhibit Wirehouse Advisors Who Prefer Hybrid Model: Profile, Exhibit Top-10 Reasons IBD Advisors Prefer RIA Model, Exhibit IBD Advisor Concerns About Opening an RIA, Exhibit IBD Advisors Who Prefer Hybrid Model: Profile, Who Is the Hybrid?...38 Exhibit Hybrid RIA Asset Breakdown, Exhibit Hybrid Type Dashboard, Exhibit Importance of B/D Services to Hybrid RIAs, Exhibit B/D Affiliation Opinions: Product Access,

5 Exhibit B/D Affiliation Opinions: Infrastructure Value, The Hybrid Evolution...44 Exhibit Most Valuable Tuck-In Features, Exhibit Hybrid RIAs: Preferred Channel, B/D Strategy Exhibit Appeal of RIA Affiliation Models, Exhibit B/D Affiliation Preference for IBD Advisors Considering RIA, Exhibit Hybrid RIA Attrition Risk, Asset Manager Strategy...50 Exhibit Hybrid RIA Coverage Strategy, Chapter 2: Market Sizing Channel Sizing Exhibit Description of Advisor Channels, Exhibit Firms, Assets, and Advisors, Exhibit Market Segmentation by Practice Type, Exhibit Advisor Headcount Marketshare, Exhibit Asset Marketshare, Exhibit Hybrid RIA Asset Breakdown, Exhibit Assets in Transition, Exhibit Assets in Transition Databank: Independent RIAs, Exhibit Assets in Transition Databank: Hybrid RIAs, Advisor-Sold Product Sizing...63 Exhibit Assets by Product, Exhibit Assets by Product Databank, Channel Projections Exhibit Projected Advisor Headcount Marketshare, E Exhibit Projected Asset Marketshare, E...66 AUM Segments...67 Exhibit Firms by AUM Segment, Exhibit Firms by AUM Segment Databank, Exhibit Part 1. Firm Marketshare by AUM Segment Databank, Exhibit Part 2. Firm Marketshare by AUM Segment Databank,

6 Exhibit RIA-Managed Assets by AUM Segment, Exhibit RIA-Managed Assets by AUM Segment Databank, Exhibit Part 1. Asset Marketshare by AUM Segment Databank, Exhibit Part 2. Asset Marketshare by AUM Segment Databank, Exhibit Headcount by AUM Segment, Exhibit Headcount by AUM Segment Databank, Exhibit Part 1. Headcount Marketshare by AUM Segment Databank, Exhibit Part 2. Headcount Marketshare by AUM Segment Databank, Exhibit Advisor Productivity by AUM Segment, Exhibit Advisor Productivity by AUM Segment Databank, Firm Rankings Exhibit Part 1. RIA Rankings by Firm AUM, Exhibit Part 2. RIA Rankings by Firm AUM, Exhibit RIA Rankings by Firm AUM Databank: Retail Independent, Exhibit RIA Rankings by Firm AUM Databank: Retail Hybrid, Exhibit RIA Rankings by Firm AUM Databank: Mixed Independent, Exhibit RIA Rankings by Firm AUM Databank: Mixed Hybrid, Exhibit Billion-Dollar RIAs by One-Year AUM Growth Rate Databank, Exhibit Billion-Dollar RIAs by Five-Year AUM CAGR Databank, Chapter 3: Advisor and Practice Profiles Advisor Profile...90 Exhibit Advisor Experience, Exhibit Time Allocation, Exhibit Time Allocation Databank, Team Structure and Staffing...93 Exhibit Staffing Levels, Exhibit Team Structure, Exhibit Specialized Staff, Services Exhibit Practice Type Segments, Exhibit Practice Type Segments Databank, Exhibit Number of Services Offered, Exhibit Services Offered Databank,

7 Exhibit Financial Planning Services Offered, Exhibit Financial Planning Services Offered Databank, Exhibit Advanced Planning Services Offered, Exhibit Advanced Planning Services Offered Databank, Exhibit Financial Planning Clients, 2018 vs. 2020E Exhibit Financial Planning Clients Databank, 2018 vs. 2020E Fees Exhibit AUM-Based Advisory Fees, Exhibit AUM-Based Advisory Fees Databank, Exhibit Financial Planning Fees, Exhibit Nontraditional Fee Use, Exhibit Nontraditional Fee Use Databank, Challenges Exhibit Challenges Operating an RIA, Exhibit Challenges Operating an RIA Databank, Chapter 4: Growth Drivers Exhibit RIA Asset Growth Rates, Exhibit IBD Advisor Reasons for Preferring RIA Model, Exhibit IBD Advisor Concerns About Opening an RIA, Exhibit IBD Advisors Considering RIA Channel, Exhibit Factors Attracting Breakaway Advisors, Exhibit Desired Transition Approach for Breakaway Advisors, Exhibit Sources of New Clients, Exhibit Sources of New Clients Databank, Exhibit Sources of New Asset Flows, Exhibit Mergers and Acquisitions,

8 Chapter 5: Client Relationships Exhibit Core Market, Exhibit Core Market Databank, Exhibit Client Investable Assets, Exhibit Average Client Size, Exhibit High-Net-Worth Clientele, Exhibit Client Age, Exhibit Number of Clients, Exhibit Client Coverage Ratios, Exhibit 5.09 Part 1. Client Coverage Ratios Databank, Exhibit 5.09 Part 2. Client Coverage Ratios Databank, Exhibit Frequency of Client Touchpoints, Exhibit 5.11 Part 1. Frequency of Client Touchpoints Databank, Exhibit 5.11 Part 2. Frequency of Client Touchpoints Databank, Exhibit Reasons for Clients and Prospects Choosing RIA, Exhibit Reasons for Client Withdrawals, Chapter 6: Portfolio Construction and Product Use Portfolio Construction and Allocations Exhibit Portfolio Construction Strategy, Exhibit Portfolio Construction Process, Exhibit Portfolio Construction Process Databank, Exhibit Asset Allocation for Moderate Risk Investors, Exhibit Product Mix, 2018 vs. 2020E Exhibit Product Mix Databank, 2018 vs. 2020E Exhibit Investment Product Use, Exhibit Investment Product Use Databank, Exhibit Retirement Income Methods, Exhibit Retirement Income Methods Databank, Active vs. Passive Exhibit Allocation to Active and Passive Products, Exhibit Beliefs about Active and Passive Management, Exhibit Beliefs about Active and Passive Management Databank, Exhibit Allocation to Passive Strategies, 2018 vs. 2020E

9 Exhibit Use of Passive Strategies in Portfolio Construction, Alternative Investments Exhibit Expected Change to Liquid Alternative Strategies, Chapter 7: Asset Management Distribution Strategy Exhibit Demand for Products and Strategies, Exhibit Firm-Level RIA Data, Exhibit Expected Changes in Salesforce Resource Allocation, 2021E Exhibit Hybrid RIA Coverage Strategy, Exhibit Service Strategies for Large RIAs, Exhibit Dedicated Coverage for Large RIAs, Exhibit Wholesaler Challenges Distributing to RIAs, Exhibit Weekly Wholesaler Interactions, Exhibit RIA Wholesalers vs. RIAs: Wholesaler Offerings, Exhibit RIA Wholesalers vs. RIAs: Asset Manager Resources, Exhibit RIA Wholesalers vs. RIAs: Firm Communications, Exhibit RIA Wholesalers vs. RIAs: Asset Manager Selection, Chapter 8: Analyst Teams Exhibit Firms with Investment Analyst or CIO, Exhibit Profile of Investment Analyst Teams, Exhibit Investment Team Staffing, Exhibit Primary Responsibilities, Exhibit Investment Decision-Making Process, Exhibit Investment Committees, Exhibit Product Mix Comparison, Exhibit Portfolio Construction Philosophy, Exhibit Model Portfolio Influencers, Exhibit Asset Manager Selection, Exhibit Initial Screening Factors, Exhibit Preferred Content Providers, Exhibit Weekly Wholesaler Interactions,

10 Chapter 9: RIA Custodians and Hybrid Platforms Hybrid RIAs Exhibit Notable B/Ds That Offer RIA Affiliation, Exhibit Hybrid RIA Retention of B/D Affiliation, Exhibit Hybrid RIA Asset Custody Location, Exhibit Reasons Hybrid RIAs Plan to Retain B/D Affiliation, Exhibit Importance of B/D Services to Hybrid RIAs, Exhibit Reasons Hybrid RIAs Plan to End Their B/D Affiliation, Exhibit B/D Affiliation Preference for IBD Advisors Considering RIA, RIA Custodians Exhibit Top RIA Custodians: Assets under Custody, Exhibit Top RIA Custodians: Number of Clients, Exhibit Top RIA Custodians: Average Client Size, Chapter 10: RIA Consolidators Exhibit Segment Overview, Exhibit Firm Summaries, Exhibit Firm Sizing, Exhibit Advisory AUM, Exhibit Advisory AUM Databank, Exhibit Total AUM Including Estimated Brokerage, Exhibit Advisory AUM Growth Rates, Exhibit Appeal of RIA Affiliation Models, Exhibit Appeal of RIA Affiliation Models Databank, Glossary Index of Companies

11 Index of Companies Company Index AMG... 16, 196, 199, 200 AMP Limited Beacon Pointe Capital Advisors Carson Group Deutsche Dynasty Financial , 206 Fidelity , 185, 188, Focus Financial... 16, 55, 58, 196, 199, 200, 202, HighTower... 16, 22, 58, 196, 199, 200, 202, 203, 207 IHT Wealth Management J.P. Morgan Lincoln Financial LPL... 34, 45, 49, 50, 184, 188 Mariner Wealth Advisors... 22, 114, 196, 199, 210 Mercer Merrill Lynch Morgan Stanley Patriot Financial Group Pershing PKS Raymond James Renn Wealth Management RBC Schwab , 185, 188, Securities America Sugarloaf Wealth Management TD Ameritrade , 193, 194 Triad... 44, 50 UBS... 35, 207 United Capital... 21, 22, 58, 163, 196, 199, 209, 210 Wealth Enhancement Group Wells Fargo... 34,