U.S. Retail Investor Products and Platforms 2017

U.S. Retail Investor Products and Platforms 2017 Retooling for the Modern Investor Overview & Methodology In its eighth iteration, this annual report focuses on retail investors product use, preferences, and awareness. The report sizes the addressable retail opportunity for each product covered, including mutual funds, annuities and insurance, banking, managed accounts, exchange-traded funds (ETFs), hedge funds, and retirement accounts. Attention is given to channels through which investors purchase products, the age and asset levels of investors who purchase various products, and other key investor profiles. Data from this report comes from an ongoing survey of more than 10,000 U.S. households annually in partnership with Phoenix Marketing International, an annual survey of the largest providers in the direct-toinvestor market, and interviews with executives across the industry. Benefits: y Comprehensive sizing of the direct-to-investor channel y Review how providers are rethinking their client engagement lifecycle to address the goal-focused advice demands of investors y Assess how the growth of the retail direct segment will outpace that of traditional advisor segments as these firms evolve from brokerage platforms to wealth management providers y Gain insight into young investors preferences for engagement and future financial advice y Understand how providers better align themselves with investors primary portfolio goals Questions Answered: y What are the dynamics that are affecting service offerings in high-networth markets? y Is the availability of more resources encouraging investors to take a do-it-yourself approach? y Which direct platforms are having the most success attracting new investors? y How can providers better assist investors who are approaching their expected retirement age? Subscription details $19,000 Purchase Includes y Digital copy and hardcopy in color y Online access to 12 related reports y Unlimited online firm-wide access y Exhibits in Excel y Key findings y Analyst support y Interactive Report Dashboards NEW y Executive Summary Video NEW Research Included with Subscription y Seven years of The Cerulli Report U.S. Retail Investor Products and Platforms y Navigating the Emerging Affluent Marketplace 2006 y Retirement Income: Positioning for Success 2005 y Wealth Transfer: Product and Advice Solutions 2004 y Mass Market Advice: Challenges and Opportunities 2004 y Funding Retirement Income: Impact on Managers and Distributors 2002 For more information, contact us: ``info@cerulli.com Annual 153 PAGES 113 EXHIBITS cerulli Interactive Report Dashboards Experience Cerulli s digital analytics platform and explore interactive data from this report The following interactive dashboards are included with your subscription: NEW 1. Attitudes and Sentiments: Understand investors attitudes and sentiments by primary provider type, age group, investable assets, and advice orientation. 2. Direct Online Trading: Compare investors use of direct accounts and trading account features over the past three years. 3. Current Product Use: Gather insight into investors current product use, exploring data by investor age, investable assets, and advice orientation. Cerulli Associates info@cerulli.com www.cerulli.com

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Chapter 3 The Retail Investor Mindset Exhibit 3.04 Household Outlook Dashboard, 2016 Sources: Phoenix Marketing International, Cerulli Associates Household Goals or Concerns Short-term personal goals Economic concerns Long-term financial goals All Households Protecting current levels of wealth Cost of healthcare Assuring a comfortable standard of living for retirement 48 The Cerulli Report U.S. Retail Investor Products and Platforms 2017

Table of Contents: Expanded Key Questions Answered...16 1. How can providers better align themselves with investors primary portfolio goals?....16 2. What dynamics are affecting service offerings in high-net-worth markets?....17 3. Is the availability of more resources encouraging investors to take a do-it-yourself approach?...18 4. Which direct platforms are having the most success attracting new investors?...19 5. How can providers better assist investors who are approaching their expected retirement age?....20 Chapter 1: Retooling for the Modern Investor...21 Communication...22 Exhibit 1.01. Evolution of Direct-to-Investor Segments, 1997 vs. 2017...22 Exhibit 1.02. Wealth-Protective Investors by Age Range and Investable Assets, 2016...23 Exhibit 1.03. Primary Provider Channel of Younger Investor Households, 2016...24 Exhibit 1.04. Investors Using or Likely to Use an Investment Professional by Age Range, 2016...25 Exhibit 1.05. Investors Level of Satisfaction with Primary Provider by Age Range and Advisor Interaction, 2016...27 Cost...28 Exhibit 1.06. Willingness to Pay for Financial Advice, 2008-2016...28 Exhibit 1.07. Clients Preferred Fee Structure by Investable Assets, 2016....29 Exhibit 1.08. Investors Estimates of Mutual Fund Expenses by Age Range, 2016...30 Conscience....30 Exhibit 1.09. Investor Interest in Social or Environmental Impact Investing by Age Range and Investable Assets, 2016...31 Exhibit 1.10. Social Media Use in Guiding Investments by Age Range and Investable Assets, 2016....32 Implications....32 Chapter 2: Market Sizing....33 Exhibit 2.01. Cerulli Wealth Tiers, 2016E...35 Exhibit 2.02. Distribution of Households and Investable Assets by Investable Assets and Age Range, 2016E...36 Exhibit 2.03. Distribution of Household Investable Assets by Type of Asset and Investable Assets, 2016E...37 Exhibit 2.04. Distribution of Household Investable Assets by Type of Asset and Age Range Databank, 2016E...38 Exhibit 2.05. Distribution of Household Investable Assets by Generation, 2016E...39 Exhibit 2.06. Household Nonfinancial Assets by Investable Assets, 2016E....40 Exhibit 2.07. Household Nonfinancial Debt by Investable Assets, 2016E...41 The Cerulli Report U.S. Retail Investor Products and Platforms 2017 7

Chapter 3: The Retail Investor Mindset...42 Exhibit 3.01-Part 1. Households Economic Outlook in the Next Three Months, 2010-2016...44 Exhibit 3.01-Part 2. Households Economic Outlook in the Next Three Months Databank, 2016...45 Exhibit 3.02. Households Wanting More Control Over Investment Decisions by Age Range, 2016...46 Exhibit 3.03. Households Wanting More Control Over Investment Decisions Databank, 2016....47 Exhibit 3.04. Household Outlook Dashboard, 2016...48 Exhibit 3.05. Household Concerns, 2015-2016...49 Exhibit 3.06 - Part 1. Households Most Important Financial Goals by Investable Assets, 2016...50 Exhibit 3.06 - Part 2. Households Most Important Financial Goals by Age Range, 2016...51 Exhibit 3.07. Households Expected Changes to Financial Investments in the Next Three Months, 2016...52 Exhibit 3.08-Part 1. Household Risk Tolerance, 2011-2016...53 Exhibit 3.08-Part 2. Household Risk Tolerance Databank, 2016...54 Exhibit 3.09-Part 1. Interest in New Investment Ideas by Primary Provider Channel, 2016....55 Exhibit 3.09-Part 2. Interest in New Investment Ideas Databank, 2016....56 Exhibit 3.10. Households Preferring Environmental and Socially Responsible Investing, 2016....57 Exhibit 3.11. Households Employing Buy-and-Hold Investment Strategy by Investable Assets, 2010-2016...58 Exhibit 3.12. Households Employing Buy-and-Hold Investment Strategy Databank, 2016...59 Exhibit 3.13. Investors Willing to Take Calculated Investment Risks by Investable Assets and Age Range, 2016...60 Chapter 4: Primary Provider Profiles...61 Exhibit 4.01. Distribution of Core Retail Investor Assets by Primary Provider Channel, 2016...63 Exhibit 4.02. Primary Provider Channel by Region of the United States, 2016....64 Exhibit 4.03. Primary Provider Channel by Investable Assets, 2016....65 Exhibit 4.04. Primary Provider Channel of Investor Households by Age Range, 2016...66 Exhibit 4.05. Reasons for Beginning Relationship with Primary Provider by Primary Provider Channel, 2016....67 Exhibit 4.06. Provider Satisfaction Attributable to Specific Advisor/Representative by Primary Provider Channel, 2016...68 Exhibit 4.07. Percent of Investors Assets Held at Primary Provider by Primary Provider Channel, 2016...69 Exhibit 4.08. Private Bank Investors Profile, 2016...70 Exhibit 4.09. Wirehouse Investors Profile, 2016...71 Exhibit 4.10. Independent Advisor Investors Profile, 2016...72 Exhibit 4.11. Other Full-Service Investors Profile, 2016...73 Exhibit 4.12. Bank Advisor Investors Profile, 2016...74 Exhibit 4.13. Bank Deposit Investors Profile, 2016....75 Exhibit 4.14. Direct Investors Profile, 2016...76 Exhibit 4.15. Retirement Plan Provider Investors Profile, 2016...77 8 The Cerulli Report U.S. Retail Investor Products and Platforms 2017

Chapter 5: Direct Platforms...78 Exhibit 5.01. Direct Provider Assets and Growth, 2009-2016...80 Exhibit 5.02. Top-10 Direct Firms by Assets, 2011-2016....81 Exhibit 5.03. Direct Assets by Product and Growth Rate, 2011-2016....82 Exhibit 5.04. Direct Provider Projected Assets, 2017E-2022E...83 Exhibit 5.05. Direct or Online Trading Account Balance by Investable Assets, 2016...84 Exhibit 5.06. Direct or Online Trading Account Balance Databank, 2016...85 Exhibit 5.07. Features Used in Direct or Online Trading Account by Age Range, 2016...86 Exhibit 5.08. Features Used in Direct or Online Trading Account Databank, 2016...87 Exhibit 5.09. Reason for Establishing Direct Account by Investable Assets, 2016...88 Exhibit 5.10. Reason for Establishing Direct Account Databank, 2016...89 Exhibit 5.11. Expected Disposition of Direct Account in Next Five Years by Investable Assets, 2016...90 Exhibit 5.12. Expected Disposition of Direct Account in Next Five Years Databank, 2016...91 Chapter 6: Digital Preferences....92 Exhibit 6.01. Investors Comfortable Using Online-Only Investment Advisors, 2016...94 Exhibit 6.02. Investors Who Want 24/7 Access to Investments, 2016...95 Exhibit 6.03. Investors Who Want Access to Investments Through Multiple Channels, 2016...96 Exhibit 6.04. Top-10 Most-Used Services or Features Used in Online Trading Accounts by Age Range, 2016...97 Exhibit 6.05. Top-10 Most-Used Services or Features Used in Online Accounts Databank, 2016...98 Exhibit 6.06. Investor Familiarity with Digital Advice Firms, 2016....99 Exhibit 6.07. Assets Held at Robo-Advisors by Age Range and Investable Assets, 2016...100 Exhibit 6.08. Likeliness of Non-Robo Users to Use Robos by Age Range and Investable Assets, 2016....101 Exhibit 6.09. Reasons for Using Robo-Advisors by Age Range and Investable Assets, 2016...102 Exhibit 6.10. Reasons for Considering Using Digital Advice Provider by Age Range, 2016....103 Exhibit 6.11. Reasons Investors Are Unlikely to Use a Digital Advice Provider by Age Range and Investable Assets, 2016...104 Exhibit 6.12. Retail Direct Firms: Views on the Impact of Digital Advice Providers, 2015 vs. 2016...105 Chapter 7: Managed Account Platforms... 106 Exhibit 7.01. Managed Account Definitions, 2017....108 Exhibit 7.02. Managed Account Assets and Growth, 2002-2016....109 Exhibit 7.03. Managed Account Industry Net Cash Flow by Program Type, 2008-2016...110 Exhibit 7.04. Managed Account Assets by Distribution Channel, 2002-2016...111 Exhibit 7.05. Direct Channel Mix of Managed Account Assets by Program Type, 2002-2016...112 Exhibit 7.06. Total Number of Managed Accounts by Program Type, 2009-2016...113 The Cerulli Report U.S. Retail Investor Products and Platforms 2017 9

Exhibit 7.07-Part 1. Households with Advisor Interaction: Desired Account Features by Investable Assets, 2016....114 Exhibit 7.07-Part 2. Households without Advisor Interaction: Desired Account Features by Investable Assets, 2016....115 Exhibit 7.08. Retail Investors Views on Time Management Needed for Investments, 2016...116 Chapter 8: Mutual Funds and ETFs... 117 Exhibit 8.01. Active versus Passive Mutual Fund and ETF Assets, October 2016 March 2017....119 Exhibit 8.02. Open-End Mutual Fund Assets by Type of Fund, 2007 1Q 2017...120 Exhibit 8.03. Mutual Fund Ownership by Type of Mutual Fund and Primary Provider, 2016...121 Exhibit 8.04. Mutual Fund Ownership by Type of Mutual Fund Databank, 2016...122 Exhibit 8.05. Factors Considered When Purchasing a Mutual Fund by Primary Provider Type, 2016...123 Exhibit 8.06. Factors Considered When Purchasing a Mutual Fund Databank, 2016...124 Exhibit 8.07-Part 1. Top-25 Mutual Fund Managers by AUM, 1Q 2017...125 Exhibit 8.07-Part 2. Top-25 Mutual Fund Managers: Firm Allocation by Asset Class, 1Q 2017...126 Exhibit 8.08. ETF Assets and Number of ETFs, 2005 1Q 2017...127 Exhibit 8.09. ETF Assets and Marketshare by Asset Class, 2007 1Q 2017...128 Exhibit 8.10. Top-15 ETF Sponsors by Assets, 1Q 2017...129 Exhibit 8.11. ETF Ownership by Age Range and Investable Assets, 2016...130 Exhibit 8.12. Investor-Reported Type of ETFs Owned, 2016...131 Exhibit 8.13. Reasons Household Purchased ETF by Primary Provider Type, 2016...132 Exhibit 8.14. Reasons Household Purchased ETF Databank, 2016....133 Chapter 9: Retirement and Income Planning... 134 Exhibit 9.01. Ownership and Expected Changes to Retirement Accounts by Investable Assets, 2016....136 Exhibit 9.02. Ownership and Expected Changes to Retirement Accounts by Age Range, 2016....137 Exhibit 9.03. IRA Assets by Traditional and Nontraditional Assets, 2008-2022E...138 Exhibit 9.04. Top-15 IRA Providers by AUA, 4Q 2014-4Q 2016...139 Exhibit 9.05. Top-25 Recordkeepers: DC Assets, Plans, and Participants, 2015...140 Exhibit 9.06. Retirement Households Income Sources by Age Range, 2016...141 Exhibit 9.07. Retirement Households Income Sources by Investable Assets, 2016...142 Exhibit 9.08. Distribution of RIO Households Investable Assets by Investable Assets and Age Range, 2016E...143 Exhibit 9.09. Net Worth of RIO Households by Investable Assets and Age Range, 2016E...144 Exhibit 9.10-Part 1. Retiree Households Desired Features of Retirement Income Plans and Products by Investable Assets, 2016...145 Exhibit 9.10-Part 2. Retiree Households Desired Features of Retirement Income Plans and Products by Age Range, 2016...146 Exhibit 9.11. Breakdown of Retiree Investors Most Desired Features of Retirement Income Plans Databank, 2016...147 10 The Cerulli Report U.S. Retail Investor Products and Platforms 2017

Exhibit 9.12-Part 1. Ownership of Fixed Annuities by Age Range and Investable Assets, 2016...148 Exhibit 9.12-Part 2. Ownership of Variable Annuities by Age Range and Investable Assets, 2016...149 Exhibit 9.13. Retiree vs. Non-Retiree Households: Opinion of Annuities by Investable Assets, 2016....150 Exhibit 9.14. Retiree vs. Non-Retiree Households: Reason for Purchasing a Variable Annuity by Investable Assets, 2016...151 Index of Companies... 152 The Cerulli Report U.S. Retail Investor Products and Platforms 2017 11

Index of Companies Index of Companies Ameritrade... 79, 81 AON Hewitt... 140 Betterment... 92, 99 BlackRock/iShares... 129, 131 Charles Schwab...19, 42, 52, 78-80, 99, 101, 107, 112, 113 Dimensional Fund Advisors... 125 Edward Jones...110, 111, 113 Empower Retirement... 140 Envestnet... 113 Fidelity...42, 52, 79, 81, 101, 107, 112, 134, 139, 140 FutureAdvisor... 92, 99 J.P. Morgan... 125 John Hancock... 140 Merrill Lynch... 107, 110 MFS... 125 Morgan Stanley...26, 107, 110 Personal Capital... 92, 99 Principal... 140 SigFig... 92, 99 T. Rowe Price... 125 TD Ameritrade... 79, 81 TI... 31, 140 Transamerica... 140 Vanguard... 19, 42, 52, 78-81, 90, 99, 125, 131, 140 Wealthfront... 92, 99 WisdomTree... 129 Xerox... 140 152 The Cerulli Report U.S. Retail Investor Products and Platforms 2017