Products & Services Research Report Series State of the Financial Products & Services Businesses: Rapid Evolution in Progress November 2010
TABLE OF CONTENTS INTRODUCTION, KEY FINDINGS, & EXECUTIVE SUMMARY...36 THE FUTURE OF ADVICE: DEFINING THE WINNING PRODUCT, CHANNEL, & TACTICAL STRATEGIES...178 EVOLUTION OF THE FINANCIAL PRODUCTS & SERVICES BUSINESSES...216 Market History...216 Early Phase...216 Middle Phase...216 Recent Phase...216 Market Definition...217 Investable Assets...217 Lending Products...217 Insurance Products...217 Wealth Management Services...217 Market Growth...217 Firms...217 Employees...217 Clients...217 Assets Under Management...218 Revenues...218 Net Profits...218 Leading Financial Products & Services Companies...218 Employees...218 Clients...218 Assets Under Management...218 Revenues...218 Net Profits...218 STATE OF THE FINANCIAL PRODUCTS & SERVICES BUSINESSES...220 Investable Asset Products...220 Cash Investments & Bank Savings Products...220 Evolution of Cash Investments & Bank Savings Products...220 Market History...220 Early Phase...220 Innovation Phase...220 Restructuring Phase...220 Market Definition...220 Cash Investments...221 Bank Savings Products...221 Market Growth...221 Firms...221 Accounts...221 Assets Under Management...221 Net Flows...222 Revenues...222 Net Profits...222 Leading Cash Investments & Bank Savings Products Companies...222 Accounts...222 Assets Under Management...222 2
Net Flows...222 Revenues...222 Net Profits...222 Market Segmentation...222 Cash Investments...223 Bank Savings Products...224 Markets & Distribution Channels...225 Direct Distribution...225 Online Financial Services...225 Financial Advisor Markets...225 Retail Banks...225 Full-Service Brokerage...225 Fee-Based Financial Advisors...225 Other Financial Advisors...225 Life Insurance Companies & Agencies...226 CPA Firms...226 Property & Casualty Insurance Agents...226 Mortgage Brokers...226 Upscale Channels...226 Private Banks...226 Money Managers...226 Investment Banks...226 Sports Agents & Entertainment Managers...226 Other Boutique & Upscale Firms...226 Institutional Markets...226 Defined Contribution Plans...226 Defined Benefit Plans...226 Endowments & Foundations...226 Corporate Cash & Treasury Services...227 Sovereign Wealth Funds & Other Foreign Investors...227 International Markets...227 English Speaking Countries Markets...227 Europe, Middle East, & Africa Markets...227 Asia Pacific Markets...227 Latin America Markets...227 Offshore Markets...227 Future Predictions for Cash Investments & Bank Savings Products...227 Slow Decline of Money Market Funds & Shift Back to Bank Savings Products...227 Continued Evolving Product Structure Shifts...227 Increasing Importance of Direct Distribution & Institutional Channels...228 Individual Securities & Capital Markets...228 Evolution of the Individual Securities & Capital Markets Industry...228 Market History...228 Early Phase...228 Middle Phase...228 Recent Phase...228 Market Definition...228 Securities Exchanges...228 Specialists...228 Market Makers...228 3
Electronic Communication Networks (ECNs)...229 Technology & Data Service Providers...229 Market Growth...229 Firms...230 Revenues...230 Net Profits...230 Leading Individual Securities & Capital Markets Firms...230 Revenues...230 Net Profits...231 Market Segmentation...231 Securities Exchanges...231 Specialists...231 Market Makers...231 Electronic Communication Networks (ECNs)...231 Technology & Data Service Providers...231 Markets & Distribution Channels...231 Direct Distribution...231 Financial Advisor Markets...231 Institutional Markets...232 International Markets...232 Future Predictions for Individual Securities & Capital Markets...232 Impact of Switch to T+1 Settlement...232 Impact of the Switch to Decimalization...232 Emergence of After-Hours Electronic Trading...232 Directed Brokerage & Soft Dollar Practices Under Attack...232 Leveraging Portfolios through Securities Lending...232 Technology Leading to Cost Reductions in Trade Execution...232 Mutual Funds...232 Evolution of the Mutual Funds Industry...232 Market History...232 Formation...232 Early Expansion...232 More Rapid Expansion...233 Scandal & Commoditization...233 Market Definition...233 Open-End Mutual Funds...233 Closed-End Mutual Funds...234 Unit Investment Trusts...234 Non-US Mutual Funds...234 Market Growth...234 Firms...234 Accounts...234 Assets Under Management...234 Revenues...234 Net Flows...234 Net Profits...234 Key Issues...235 Product Structures...236 Decreasing Investment Minimums...237 Decreasing Fees...237 Brokerage Firms Shift from Money Market Funds...237 4
Decreasing Redemption Rates...237 Increasing Compliance...237 Increasing Technology Innovations...237 Mutual Fund Mergers & Acquisitions...238 Evolving Independent Board Member Roles...238 Leading Mutual Fund Companies...239 Accounts...239 Assets Under Management...240 Revenues...240 Net Flows...240 Net Profits...240 Market Segmentation...240 Open-End Mutual Funds...240 Closed-End Mutual Funds...240 Unit Investment Trusts...240 Non-US Mutual Funds...240 Markets & Distribution Channels...241 Mutual Fund Companies Direct & Discount Brokers...241 Direct Distribution...241 Direct to Consumer...241 Discount Brokers & Mutual Fund Supermarkets...241 Discount Brokers...241 Mutual Fund Supermarkets...242 Financial Advisor Markets...242 Commission Mutual Fund Sales...242 Mutual Fund Wrap Account Programs...242 Fee-Based Financial Advisors...243 Independent Reps...245 Turnkey Asset Management Programs...245 Retail Banks...245 Insurance Agents...246 Institutional Markets...247 International Markets...247 Future Predictions for Mutual Funds...248 Moderate Industry Growth...248 Interesting Investment Style Shifts...248 Slower than Expected Exit from Equity Mutual Funds...248 Exit from Money Market Funds...248 Increased International Focus...248 Evolving Investment Styles...248 Evolving Product Structures...249 Expansion of Share Classes...249 Increased Utilization of Closed-End Funds...249 Increased Utilization of Funds-of-Funds...249 Increased Utilization of Mutual Fund Wrap Account Programs...249 Increased Exposure of Unified Managed Account Programs...249 Growing Popularity of Performance Fees...249 Evolving Markets & Distribution Channels...250 Increasing Importance of Distribution Networks...250 Opportunities in the International Market...250 Evolving Wholesaler Models...250 5
Brand Building...250 Intellectual Wholesaling...250 Increased Telephone & Virtual Wholesaling Strategies...250 Distancing of the Leaders...250 Bifurcation of the Industry...251 Increased Focus on Value...251 Declining Cost of Investment Products...251 Increased Compliance...251 Mutual Fund Scandals...251 Consolidation of Mutual Fund Companies...251 Large Company Market...251 Mid-Size Company Market...251 Small Company Market...251 Fee-Accounts...251 Evolution of the Separately Managed Accounts & Other Packaged Fee-Account Programs Business...251 Market History...252 Commissions Dominate Retail Business...252 Introduction But Slow Growth...252 Explosive Growth in Fee-Accounts...252 Recasting of Fee-Accounts...253 Regulatory Actions Against Fee-Based Brokerage Account Sponsors...254 Key Driving Factors...254 Fees Versus Commissions...255 Fiduciary Responsibility...255 Market Definition...255 Proprietary Fee-Account Programs...255 Turnkey Asset Management Programs...255 Packaged Fee-Account Programs...255 Fee-Based Financial Advisors...255 Bank Trust Departments...255 Separate Account Managers...255 Market Growth...255 Packaged Fee-Account Programs...255 Packaged Fee-Account Clients...255 Packaged Fee-Accounts...255 Packaged Fee-Account Assets...255 Packaged Fee-Account Revenues...256 Packaged Fee-Account Profits...256 Key Issues...256 Client Profiling, Asset Allocation, & Proposal Generation...256 Client Profiling...256 Asset Allocation...256 Proposal Generation...257 Investment Vehicle & Manager Selection...257 Ongoing Monitoring, Rebalancing, Performance Reporting, Billing, & Reallocation...262 Ongoing Monitoring...262 Rebalancing...262 Performance Reporting...262 Reallocation...262 6
Training, Payouts, Operations & Client Support, Technology, & Compliance Issues...262 Training...263 Payouts...263 Operations & Client Support...264 Technology...264 Compliance Issues...264 Leading Fee-Account Program Sponsors (Proprietary & TAMPs)...264 Packaged Fee-Account Clients...264 Packaged Fee-Accounts...265 Packaged Fee-Account Assets...265 Packaged Fee-Account Net Flows...265 Packaged Fee-Account Revenues...265 Packaged Fee-Account Profits...265 Market Segmentation...266 Proprietary Fee-Account Programs...266 Turnkey Asset Management Programs...266 Reasons to Use a TAMP...268 Widespread Market Consolidation...268 Explosive Assets Growth...268 Intense Market Concentration...268 Products Usage (Mutual Funds & Separately Managed Accounts)...268 Product Segmentation...268 Unified Managed Accounts...269 Market Definition...269 Market Growth...269 Programs...269 Clients...270 Accounts...270 Assets Under Management...270 Net Flows...270 Revenues...270 Net Profits...270 Leading Unified Managed Account Program Sponsors...270 Clients...270 Accounts...270 Net Profits...270 Separately Managed Accounts...270 Market Definition...273 Market Growth...273 Programs...273 Clients...273 Accounts...273 Assets Under Management...273 Net Flows...273 Revenues...273 Net Profits...274 Leading Separately Managed Account Program Sponsors...274 Clients...274 Accounts...274 Net Profits...274 7
Multiple Style Portfolios...274 Market Definition...274 Market Growth...275 Programs...275 Clients...275 Accounts...275 Assets Under Management...275 Net Flows...275 Revenues...275 Net Profits...275 Leading Multiple Style Portfolio Program Sponsors...275 Clients...275 Accounts...275 Net Profits...275 Mutual Fund Wrap Accounts...275 Market Definition...276 Market Growth...276 Programs...276 Clients...276 Accounts...276 Assets Under Management...276 Net Flows...277 Revenues...277 Net Profits...277 Leading Mutual Fund Wrap Account Program Sponsors...277 Clients...277 Accounts...277 Net Profits...277 Annuity Wrap Accounts...277 Market Definition...277 Market Growth...277 Programs...277 Clients...277 Accounts...278 Assets Under Management...278 Net Flows...278 Revenues...278 Net Profits...278 Leading Annuity Wrap Account Program Sponsors...278 Clients...278 Accounts...278 Net Profits...278 ETF Wrap Accounts...278 Market Definition...279 Market Growth...279 Programs...279 Clients...279 Accounts...279 Assets Under Management...279 Net Flows...279 Revenues...279 8
Net Profits...279 Leading ETF Wrap Account Program Sponsors...279 Clients...279 Accounts...279 Net Profits...280 Broker Wrap Accounts...280 Market Definition...280 Market Growth...280 Programs...280 Clients...280 Accounts...280 Assets Under Management...280 Net Flows...280 Revenues...280 Net Profits...280 Leading Brokerage Wrap Accounts Program Sponsors...281 Clients...281 Accounts...281 Net Profits...281 Fee-Based Brokerage Accounts...281 Market Definition...281 Market Growth...281 Programs...281 Clients...281 Accounts...282 Assets Under Management...282 Net Flows...282 Revenues...282 Net Profits...282 Leading Fee-Based Brokerage Account Sponsors...282 Clients...282 Accounts...282 Net Profits...282 Markets & Distribution Channels...282 Direct Distribution...282 Financial Advisor Markets...283 Wirehouses, Regional, & Boutique Brokerage Firms...288 Independent Broker/Dealers...288 Fee-Based Financial Advisors...288 National, Regional, & Community Banks...288 Insurance Companies...288 CPA & Law Firms...288 Other Financial Advisors...288 Upscale Channels...288 Institutional Markets...288 Defined Contribution Plans...288 Defined Benefit Plans...288 Endowments & Foundations...288 Corporate Cash & Treasury Management...288 Sovereign Wealth Funds & Other Foreign Investors...288 International Markets...288 9
English Speaking Countries Markets...288 Europe, Middle East, & Africa Markets...288 Asia Pacific Markets...288 Latin America Markets...289 Offshore Markets...289 Future Predictions for Fee-Accounts...289 Substantial Expected Growth for Both the Packaged Fee-Accounts & Broader Fee-Accounts Markets...289 Growth in Seven of the Eight Types of Fee-Account Programs...289 Broader Fee-Account Growth Projections...293 Emerging Distribution Opportunities...293 Expected Process Improvements...296 Potentially New Pricing Models...298 ETFs & Indexing...299 Evolution of the ETFs & Indexing Industry...299 Market History...299 Indexed Separate Accounts Emerge...299 Index Mutual Funds Emerge...299 Indexing Growth & Product Innovation...299 Exchange Traded Funds Emerge...299 Market Definition...299 Indexed Separate Accounts...300 Index Mutual Funds...300 Exchange Traded Funds...300 Key Driving Factors...300 Stock Analysts & Mutual Funds Scandals...301 Market History...301 Indexed Separate Accounts Emergence Phase...301 Index Mutual Funds Emergence Phase...301 Indexing Growth & Product Innovation Phase...301 Exchange Traded Funds Emergence Phase...301 Market Definition...301 Exchange Traded Funds...301 Index Mutual Funds...301 Indexed Separate Accounts...302 Market Growth...302 Number of Companies...302 Number of Products...302 Assets Under Management...302 Net Flows...302 Revenues...302 Net Profits...302 Key Issues...302 Index Portfolio Strategies...303 Core & Explore...303 Completion Strategies...303 Three Holding Pattern Strategies...303 Sector Rotation Strategies...303 Investment Styles...304 Recent Innovations...304 Lack of High-Yield, Municipal Bond, & Small Cap International Products...304 10
Admitting Defeat...304 Ignores Corporate Governance Issues...304 Leading ETF & Index Companies...305 Products...305 Assets Under Management...305 Net Flows...305 Revenues...306 Net Profits...306 Market Segmentation...306 Indexed Separate Accounts...306 Index Mutual Funds...306 Exchange Traded Funds...306 Markets & Distribution Channels...310 Direct Distribution...310 Online Tools & Advice...310 Online Brokerage...310 Online Banking & Mortgages...310 Online Insurance...310 Financial Advisor Markets...310 Retail Banks...310 Full-Service Brokerage Firms...310 Independent Advisors...312 Other Types of Financial Advisors...312 Upscale Channels...312 Institutional Markets...312 Defined Contribution Plans...312 Defined Benefit Plans...313 Endowments & Foundations...313 Other Markets...313 Fee-Accounts & TAMP Programs...314 International Markets...314 English Speaking Countries Markets...314 Europe, Middle East, & Africa Markets...314 Asia Pacific Markets...315 Latin America Markets...315 Offshore Markets...315 Future Predictions for the Market-Linked Products Business...315 Accelerated Growth in Market-Linked Products...315 Continued Expansion of Exchange Traded Funds...315 Reallocation Shift to Index Mutual Funds...316 Increased Product Innovation in Indexed Separate Accounts...317 Hedge Funds...318 Evolution of the Hedge Funds Business...318 Market History...318 Emergence Phase...318 Strategy Diversification Phase...318 High Returns & Initial Collapses Phase...318 Risk Management & Continued Collapses Phase...319 Market Definition...320 US Hedge Funds...320 Managed Futures Funds...320 11
Hedge Fund Mutual Funds...320 Non-US Hedge Funds...320 Global Hedge Funds...320 Market Growth...320 Hedge Fund Managers...320 Hedge Fund Clients...320 Hedge Fund Accounts...321 Hedge Fund Assets Under Management...321 Hedge Fund Net Flows...321 Hedge Fund Revenues...321 Hedge Fund Net Profits...321 Key Issues...322 Hedge Fund Failures...322 Evolving Role of Hedge Funds...323 Limited Partnership Structure...323 Various Investment Strategies...323 Hedging...323 Leverage...324 High Investment Minimums...324 High Fees...324 Limited Transparency...325 Limited Liquidity...325 Inexperience...325 Limited Data Integrity & Performance Reporting...326 Internal Investment...326 Increased Auditing & Regulation...326 Leading Hedge Fund Companies...327 Hedge Fund Firms...327 Hedge Fund Partners...328 Hedge Fund Employees...328 Hedge Fund Accounts...328 Hedge Fund Assets Under Management...328 Hedge Fund Net Flows...329 Hedge Fund Revenue...329 Hedge Fund Net Profits...329 Market Segmentation...329 Investment Strategies...329 Equity Strategies...329 Emerging Markets Hedged Equities...330 Equity Market Neutral...330 Dedicated Short Selling...330 Fixed Income Arbitrage...330 Convertible Bond Arbitrage...330 Statistical Arbitrage...331 Event Driven Strategies...331 Merger Arbitrage...331 Distressed Securities & Bankruptcies...331 Global Macro Strategies...331 Multi-Strategy Funds-of-Funds...331 Product Structures...332 Hedge Funds-of-Funds...332 12
Hedge Fund Index Funds...332 Registered Hedge Funds...333 Mutual Funds with Hedge Fund Strategies...334 Hedge Funds in Variable Life Wrappers...334 Offshore Hedge Funds...334 US Hedge Funds...335 Managed Futures Funds...335 Hedge Fund Mutual Funds...335 Non-US Hedge Funds...335 Global Hedge Funds...335 Markets & Distribution Channels...336 Direct Distribution...336 Online Tools & Advice...336 Online Banking & Mortgages...336 Online Brokerage...336 Online Insurance...336 Financial Advisors Markets...336 Retail Banks...336 Full-Service Brokerage Firms...337 Discount Brokerage Firms...337 Independent Reps...337 Fee-Based Financial Advisors...337 Upscale Channels...337 Private Banks...337 Family Offices...337 Institutional Markets...338 Defined Contribution Plans...338 Defined Benefit Plans...338 Endowments & Foundations...338 Corporate Cash & Treasury Services...338 Sovereign Wealth Funds & Other Foreign Investors...338 International Markets...338 English Speaking Countries Markets...338 Europe, Middle East, & Africa Markets...338 Asia Pacific Markets...339 Latin America Markets...339 Offshore Markets...339 Future Predictions for Hedge Funds...339 Continual Blow Ups But Still Steady Market Growth...339 Continual Blow-Ups...339 Steady Market Growth...339 Disproportional Market Impacts...340 Retailization of Hedge Fund Products...340 Hedge Funds-of-Funds...340 Hedge Fund Index Funds...340 Registered Hedge Funds...341 Mutual Funds with Hedge Fund Strategies...341 Hedge Funds in Variable Life Wrappers...341 Emerging Market Opportunities...341 Emerging Affluent Consumer Households...342 Increased Regulation...342 13
Institutionalization & Consolidation of the Hedge Funds Business...343 Venture Capital & Private Equity...343 Evolution of the Venture Capital & Private Equity Businesses...343 Market History...343 Early Days...343 Private Equity Growth...344 Venture Capital Prominence...344 Private Equity Renewal...344 Market Definition...344 Venture Capital...344 Private Equity...344 Mezzanine Finance...344 Market Growth...345 Venture Capital & Private Equity Firms...345 Venture Capital & Private Equity Funds...345 Venture Capital & Private Equity Fund Flows...345 Venture Capital & Private Equity Fund Assets Under Management...345 Venture Capital & Private Equity Fund Commitments...345 Key Issues...345 Volatile Initial Public Offering Market...346 Investment Product Polarization...347 Emergence of Indices...348 Emergence of Secondary Market...348 Fees Vary...348 Due Diligence & Manager Selection...348 Liquidity Problems...349 Retailization...349 Larger Funds...349 Internal Rate of Return...349 New Firms Enter Industry...349 Management Strategy...349 Funds-of-Funds...350 Contract Negotiation...350 Performance Reporting...350 Diversification Requirements...350 Leading Venture Capital & Private Equity Firms...350 Venture Capital & Private Equity Funds...350 Venture Capital & Private Equity Fund Flows...350 Venture Capital & Private Equity Fund Assets Under Management...350 Venture Capital & Private Equity Fund Commitments...350 Market Segmentation...350 Venture Capital...350 Private Equity...353 Mezzanine Finance...355 Markets & Distribution Channels...355 Direct Distribution...356 Financial Advisor Markets...356 Institutional Markets...356 International Markets...356 Future Predictions for Venture Capital & Private Equity...356 Impressive Industry Growth...357 14
Evolving Markets & Distribution Channels...358 New Fund Structures...358 Rise of Compliance Issues...358 Evolving Investments...358 Early Signs of Bifurcation...359 Real Estate...359 Evolution of the Real Estate Investment Business...359 Market History...359 Early Phase...359 Middle Phase...359 Recent Phase...359 Market Definition...359 Pooled Partnerships...359 REITs...360 Mortgage Backed Securities...360 Direct...360 Mutual Funds...360 Market Growth...360 Funds...360 Assets Under Management...360 Revenues...360 Net Profits...360 Key Issues...360 Leading Real Estate Investment Product Companies...361 Funds...361 Assets Under Management...361 Revenues...362 Net Profits...362 Market Segmentation...362 Pooled Partnerships...362 REITs...362 Mortgage Backed Securities...362 Direct...362 Mutual Funds...363 Product Segmentation...363 Traditional Real Estate...363 Timberland...364 Farmland...365 Energy Property Investments...365 Markets & Distribution Channels...366 Direct Distribution...366 Online Tools & Advice...366 Online Banking & Mortgages...366 Online Brokerage...366 Online Insurance...366 Financial Advisor Markets...366 Retail Banks...366 Full-Service Brokerage Firms...366 Discount Brokerage Firms...366 Independent Reps...366 Fee-Based Financial Advisors...366 15
Other Financial Advisors...366 Upscale Channels...366 Institutional Markets...367 Defined Contribution Plans...367 Defined Benefit Plans...367 Endowments & Foundations...367 Corporate Cash & Treasury Services...367 Sovereign Wealth Funds & Other Foreign Investors...367 International Markets...367 English Speaking Countries Markets...367 Europe, Middle East, & Africa Markets...367 Asia Pacific Markets...367 Latin America Markets...367 Offshore Markets...367 Future Predictions for Real Estate...367 Stagnant Growth in the Real Estate Investments Business...368 Slowed Growth in All Types of Real Estate Investments...368 Emerging Market Opportunities...368 Wine Investments...368 Evolution of the Wine Industry...368 Market History...368 Early Development Phase...368 Phylloxera Phase...368 US Prohibition & World War II Phase...368 Maturation Phase...369 Market Definition...369 California Wineries...369 Other US & Canada Wineries...369 France, Italy, & Other Europe Wineries...370 Other New World Wineries...370 Market Growth...370 Growers...370 Wineries...370 Acres...370 Cases Produced...370 Revenues...370 Net Profits...370 Leading Wineries...376 Acres...376 Cases Produced...377 Revenues...377 Net Profits...377 Market Segmentation...377 California Wineries...378 Napa Valley...379 Sonoma Valley...379 Mendocino & Lake Counties...380 Livermore Valley & Central Valley...380 Sierra Foothills...380 Marin County...380 Santa Clara & the Santa Cruz Mountains...380 16
Southern California...380 Other US & Canada Wineries...380 Oregon...381 Washington...383 Other American Wine Growing Regions...383 France, Italy, & Other European Wineries...385 France...386 Bordeaux...386 Cote d Rhone...386 Loire Valley...386 Provence...386 Sauternes...386 Italy...386 Piedmont...386 Tuscany...386 Other European Wine Growing Regions...386 Germany...387 Spain...387 Portugal...387 Austria...388 Other New World Wineries...388 Australia...389 New Zealand...389 South Africa...389 South America...389 Chile...389 Argentina...391 Mexico...391 Peru...391 Brazil...391 Uruguay...391 Alternative Segmentations...392 Varietals...392 Red Grape Varietals...392 Barbera...392 Cabernet Franc...392 Cabernet Sauvignon...392 Carignan...392 Charbono...392 Gamay...392 Grenache...392 Malbec...392 Merlot...392 Mourvedre...392 Nebbiolo...392 Petit Verdot...392 Petit Syrah...392 Pinotage...393 Pinot Noir...393 Syrah...393 Sangiovese...393 17
Tempanillo...393 Zinfandel...393 White Grape Varietals...393 Albarino...393 Chardonnay...393 Chennin Blanc...393 Gewurtzaminer...393 Gruner Veltliner...393 Malvasia Blanco...393 Marsanne...393 Muller-Tyurga...393 Muscat...393 Muscadet...393 Pinot Blanc...394 Pinot Gris (Pinot Grigio)...394 Riesling...394 Rousanne...394 Sauvignon Blanc...394 Semillon...394 Viognier...394 Vintages...394 1800s...394 1900s...394 Early 1970s...394 Late 1970s...394 Early 1980s...394 Late 1980s...394 Early 1990s...394 Late 1990s...394 Markets & Distribution Channels...395 United States...395 Market Growth...395 Market Size...395 International & Import/Export Markets...395 Argentina...395 Canada...395 Australia...395 United Kingdom...395 Chile...396 France...396 Italy...396 Developing Countries...396 Future Predictions for Wine Investments...396 Continued Growth of High-End Wines...396 Emergence of New World Wineries...397 Emergence of New US Wine Growing Areas...397 Reversal of Trends to Chardonnay & Merlot...397 Streamlining of Distribution...397 Production Careers...397 Distribution Careers...397 Retail Careers...397 18
Industry Consolidation...398 Opportunities for Investing in the Wine Industry...398 Vineyards...399 Collections...399 Futures...399 Other Financial Alternative Investments...399 Investment Product Polarization...399 Evolution of Other Financial Alternative Investments...399 Market History...399 Early Phase...399 Middle Phase...400 Recent Phase...400 Market Definition...400 Old-Line Limited Partnerships...400 Stock Market & Individual Stock Options...400 Folios...400 Structured Debt...400 Treasury Inflation Protection Securities (TIPS)...400 Bank Loan Funds...400 Catastrophe Bonds...400 Stable Value & Principal Protected Funds...400 Structured Settlements...401 Commodity & Financial Futures...401 Market Growth...401 Leading Firms...401 Market Segmentation...401 Old-Line Limited Partnerships...401 Stock Market & Individual Stock Options...401 Folios...402 Structured Debt...403 Treasury Inflation Protection Securities (TIPS)...404 Bank Loan Funds...405 Catastrophe Bonds...405 Stable Value & Principal Protected Funds...405 Structured Settlements...405 Commodity & Financial Futures...405 Markets & Distribution Channels...409 Direct Distribution...409 Financial Advisor Markets...409 Institutional Markets...409 International Markets...410 Future Predictions for Other Financial Alternative Investments...410 Other Financial Alternative Investments Will Grow in Popularity...410 Other Non-Financial Alternative Investments...410 Investment Product Polarization...410 Evolution of Other Non-Financial Alternative Investments...411 Market History...411 Early Phase...411 Middle Phase...411 Recent Phase...412 Market Definition...412 19
Commodities...412 Fine Art, Antiques, & Collectibles...412 Jewelry & Watches...412 Coins & Stamps...412 Antique & Racing Cars...412 Baseball Cards, Comic Books, & Beer Cans...412 Sports Teams...412 Market Growth...412 Leading Firms...413 Market Segmentation...413 Commodities...413 Fine Art, Antiques, & Collectibles...415 Wine Investments...416 Jewelry & Watches...416 Coins & Stamps...416 Antique & Racing Cars...416 Baseball Cards, Comic Books, & Beer Cans...416 Sports Teams...416 Markets & Distribution Channels...416 Direct Distribution...416 Online Tools & Advice...416 Online Banking & Mortgages...417 Online Brokerage...417 Online Insurance...417 Financial Advisor Markets...417 Retail Banks...417 Full-Service Brokerage Firms...417 Discount Brokerage Firms...418 Independent Reps...418 Fee-Based Financial Advisors...418 Other Financial Advisors...418 Upscale Channels...418 Institutional Markets...418 Defined Contribution Plans...418 Defined Benefit Plans...419 Endowments & Foundations...419 Corporate Cash & Treasury Services...419 Sovereign Wealth Funds & Other Foreign Investors...419 International Markets...419 English Speaking Countries Markets...419 Europe, Middle East, & Africa Markets...419 Asia Pacific Markets...419 Latin America Markets...419 Offshore Markets...419 Future Predictions for Other Non-Financial Alternative Investments...419 Other Non-Financial Alternative Investments Will Grow in Popularity...419 Lending Products...420 Lending Services...420 Evolution of Lending Services...420 Market History...420 Early Phase...420 20
Middle Phase...420 Recent Phase...421 Market Definition...421 Credit Cards...421 Mortgages & Home Equity Loans...421 Specialized Lending...421 Market Growth...421 Companies...421 Employees...421 Clients...421 Accounts...421 Credit Card Loans...421 Mortgage Originations...421 Home Equity Loans...421 Revenues...421 Net Income...421 Key Issues...421 Growing Importance of Private Banking Services...422 Growing Importance of Specialized Lending...422 Leading Lending Firms...422 Employees...422 Clients...423 Accounts...423 Credit Card Loans...423 Mortgage Originations...423 Home Equity Loans...423 Revenues...423 Net Income...423 Market Segmentation...423 Credit Cards...423 Mortgages & Home Equity Loans...424 Specialized Lending...425 Markets & Distribution Channels...425 Direct Distribution...425 Financial Advisor Markets...425 Institutional Markets...426 International Markets...426 Future Predictions for Lending Services...426 Impending Credit Card Crisis...426 Continuing Mortgage & Home Equity Losses...427 Insurance Products...427 Insurance Products...428 Evolution of the Insurance Business...428 Market History...428 Early Phase...428 Demutualization Phase...428 Recent Phase...428 Market Definition...428 Health Care Insurance...428 Disability Insurance...428 Long-Term Care Insurance...428 21
Property & Casualty Insurance...428 Retirement Income (Annuities)...428 Life Insurance...428 Market Growth...429 Insurance Companies...429 Insurance Industry Employees...429 Agents, Brokers, & Service Employees...429 Number of People Insured...429 Number of Policies in Force...429 Amount of Coverage in Force...429 Revenues...429 Premiums...429 First Year Premium...429 Net Income...429 Key Issues...430 Leading Insurance Companies...430 Employees...430 People Insured...430 Number of Policies in Force...430 Insurance Liabilities...430 Insurance Coverage in Force...430 Assets...430 Policy Holders Surplus...430 Premiums...430 First Year Premiums...430 Revenues...430 Losses...431 Net Income...431 Market Segmentation...431 Health Care Insurance...431 Disability Insurance...435 Long-Term Care Insurance...437 Property & Casualty Insurance...439 Retirement Income (Annuities)...444 Life Insurance...449 Markets & Distribution Channels...454 Direct Distribution...460 Financial Advisor Channels...460 Institutional Channels...460 International Channels...460 Future Predictions for Insurance Products...460 Continued Overall Industry Growth...460 Emerging Products in Annuities, Property & Casualty Insurance, & Life Insurance...461 Product Commoditization & Focus on Cost Management...461 Factors Driving Demand for Various Products...463 Selective Health Care Opportunities...465 Annuities...465 Life Settlements...465 Life Insurance...465 Increasing Consumer Needs Driving Product Innovation...466 22
Lack of Wholesaling Model...466 Disasters Impacting the Property & Casualty Market...466 Decline in Reinsurance Market...467 Evolving Markets in the Financial Advisor & International Markets...467 Insurance Agents to Continue Entering Related Businesses...467 New Distribution Channels Entering Insurance Industry...468 Banks...469 Full-Service Brokers...469 Online Financial Advisors...469 Independent Advisors...469 Global Markets...470 Evolving Industry Structure Due to Acquisitions & Demutualization...470 Insurance Company Acquisitions to Continue...470 Demutualization to Continue...471 Regulations to Tighten and Possibly Move to the Federal Level...471 Capture Increasing Share of Life Insurance & Annuities Premium Income..471 Wealth Management Services...471 Aggregation & Financial Planning Services...471 Evolution of Aggregation & Financial Planning Services...471 Market History...471 Early Phase...472 Middle Phase...472 Recent Phase...472 Market Definition...472 Aggregation...472 Financial Planning...472 Life Planning...472 Market Growth...472 Leading Aggregation & Financial Planning Services Firms...472 Market Segmentation...472 Aggregation...472 Financial Planning...472 Life Planning...472 Markets & Distribution Channels...472 Direct Distribution...472 Financial Advisor Markets...472 Institutional Markets...472 International Markets...473 Future Predictions for Wealth Management Services...473 Future Predictions for Aggregation & Financial Planning Services...473 Aggregation & Financial Planning Services Will Grow in Importance...473 529 Plans...473 Key Driving Factors...473 Evolution of 529 Plans...473 Market History...473 Early Phase...473 Dot Com Troubles Phase...473 Recovery Phase...473 Market Struggles Phase...473 Market Definition...473 529 Plans & State-Paid Tuition Programs...473 23
Coverdell Educational Savings Accounts...473 Custodial Accounts...473 Market Growth...473 Firms...474 Accounts...474 Assets Under Management...474 Net Flows...474 Revenues...474 Net Profits...474 Leading Firms...474 Accounts...474 Assets Under Management...474 Net Flows...474 Revenues...474 Net Profits...474 Market Segmentation...474 529 Plans & State Pre-Paid Tuition Programs...474 Coverdell Educational Savings Accounts...474 Custodial Accounts...474 Markets & Distribution Channels...475 Direct Distribution...475 Financial Advisor Markets...475 Institutional Markets...475 International Markets...475 Future Predictions for 529 Plans...475 Growth in 529 Plans Market...475 Growth in National Plans...475 Growth of Age-Based Investment Options...475 Growth in ETF-Based Plans...475 Growth in Direct Sold Plans...475 Emergence of 529 Plan Comparison Tools...475 Estate Planning & Charitable Giving...475 Evolution of the Estate Planning & Charitable Giving Market...475 Key Driving Factors...475 Market History...481 Creation Phase...481 Estate Tax Additions Phase...481 Estate Tax Modification Phase...481 Market Definition...482 Trust Services...482 Revocable Living Trusts...482 Testamentary Trusts...482 Marital & Bypass Trusts...482 Qualified Terminal Interest Property Trusts...482 Bypass Trusts...482 AB Trusts...482 Grantor Trusts...482 Qualified Personal Residence Trusts...482 Grantor Retained Annuity Trusts...482 Grantor Retained Unitrusts...482 Private Annuities...482 24
Defective Grantor Trusts...482 Dynasty Trusts...482 Irrevocable Life Insurance Trusts...482 Life Insurance...483 Term Life...483 Whole Life...483 Variable Life...483 Market Growth...483 Leading Estate Planning & Charitable Giving Companies...484 Market Segmentation...484 Trust Services...484 Revocable Living Trusts...486 Testamentary Trusts...486 Marital & Bypass Trusts...486 Qualified Terminal Interest Property Trusts...486 Bypass Trusts...486 AB Trusts...486 Grantor Trusts...486 Qualified Personal Residence Trusts...487 Grantor Retained Annuity Trusts...487 Grantor Retained Unitrusts...487 Private Annuities...487 Defective Grantor Trusts...487 Dynasty Trusts...488 Irrevocable Life Insurance Trusts...488 Life Insurance...490 Term Life...493 Whole Life...493 Variable Life...493 Markets & Distribution Channels...493 Direct Distribution...493 Financial Advisor Markets...493 Retail Banks...496 Full-Service Brokers...497 Independent Advisors...497 Fee-Based Financial Advisors...497 Independent Reps...497 Life Insurance Agents...497 CPA Firms...497 Estate Attorneys...497 Real Estate Agents...497 Private Banks...497 Boutique Brokers...497 Other Upscale Firms...497 Future Predictions for Estate Planning & Charitable Giving...497 Growing Estate Planning & Charitable Giving Market...497 Return of Estate Tax...498 Growth of Donor Advised Funds & Community Foundations...498 Emergence of Independent Trust Companies...498 Impact Investing...501 Evolution of the Impact Investing Market...501 25
Key Driving Factors...501 Market History...501 Market Definition...501 Market Growth...502 Leading Impact Investing Firms...502 Market Segmentation...502 Socially Responsible Investing...502 Community Lending...502 Microfinance...502 Markets & Distribution Channels...502 Direct Distribution...502 Financial Advisor Markets...502 Institutional Markets...502 International Markets...502 Future Predictions for the Impact Investing Market...503 Institutionalization of the Business...503 Emergence of Platform Development...503 Increased Adoption by Brokerage Firms...503 Reverse Mortgages...503 Evolution of the Reverse Mortgages Market...503 Key Driving Factors...503 Market History...503 Emergence Phase...504 Growth Phase...504 Stagnation Phase...504 Maturation Phase...504 Market Definition...504 Federally Insured Reverse Mortgages...504 Singe Purpose Reverse Mortgages...504 Proprietary Reverse Mortgages...504 Market Growth...505 Companies...505 Employees...505 Clients...505 Accounts...505 Mortgage Originations...505 Revenues...505 Net Profits...505 Leading Reverse Mortgages Firms...505 Employees...505 Clients...505 Accounts...505 Mortgage Originations...505 Revenues...505 Net Profits...505 Market Segmentation...506 Federally Insured Reverse Mortgages...506 Market History...506 Early Phase...506 Middle Phase...506 Recent Phase...506 26
Market Definition...506 Market Growth...506 Companies...506 Employees...506 Clients...507 Accounts...507 Mortgage Originations...507 Revenues...507 Net Profits...507 Leading Federally Insured Reverse Mortgages Firms...507 Employees...507 Clients...507 Accounts...507 Mortgage Originations...507 Revenues...508 Net Profits...508 Single Purpose Reverse Mortgages...508 Market History...508 Early Phase...508 Middle Phase...508 Recent Phase...508 Market Definition...508 Market Growth...508 Companies...508 Employees...508 Clients...508 Accounts...508 Mortgage Originations...508 Revenues...509 Net Profits...509 Leading Single Purpose Reverse Mortgages Firms...509 Employees...509 Clients...509 Accounts...509 Mortgage Originations...509 Revenues...509 Net Profits...509 Proprietary Reverse Mortgages...509 Market History...509 Early Phase...509 Middle Phase...509 Recent Phase...509 Market Definition...509 Market Growth...510 Companies...510 Employees...510 Clients...510 Accounts...510 Mortgage Originations...510 Revenues...510 Net Profits...510 27
Leading Proprietary Firms...510 Employees...510 Clients...510 Accounts...510 Mortgage Originations...510 Revenues...510 Net Profits...511 Markets & Distribution Channels...511 Direct Distribution...511 Online Tools & Advice...511 Online Brokerage...511 Online Banking & Mortgages...511 Online Insurance...511 Financial Advisor Markets...511 Retail Banks...511 Full-Service Brokerage Firms...511 Fee-Based Financial Advisors...511 Independent Reps...511 Estate Attorneys...511 Real Estate Agents...512 Mortgage Brokers...512 Upscale Channels...512 Institutional Markets...512 Defined Contribution Plans...512 Defined Benefit Plans...512 Endowments & Foundations...512 International Markets...512 English Speaking Countries Markets...512 Europe, Middle East, & Africa Markets...512 Asia Pacific Markets...512 Latin America Markets...512 Offshore Markets...512 Future Predictions for the Reverse Mortgages Market...513 Short-Term Stagnation in Growth but Overall Long-Term Boom...513 Emergence of Stricter Reverse Mortgage Standards...513 Family Office Services...513 Evolution of Family Office Services...513 Market History...513 Early...513 Middle...513 Recent...513 Market Definition...513 Tax Preparation...513 Family Counseling...513 Market Growth...513 Firms...513 Clients...514 Accounts...514 Assets Under Management...514 Revenues...514 Net Profits...514 28
Leading Family Offices...514 Clients...514 Accounts...514 Assets Under Management...514 Revenues...514 Net Profits...514 Market Segmentation...514 Tax Preparation...514 Family Counseling...514 Markets & Distribution Channels...514 Direct Distribution...514 Financial Advisor Markets...514 Institutional Markets...515 International Markets...515 Future Predictions for Family Office Services...515 Increase Opportunities in Family Office Services...515 FUTURE PREDICTIONS FOR THE INVESTMENT & WEALTH MANAGEMENT PRODUCTS & SERVICES BUSINESSES...516 Consumers Risk Aversion...516 Accelerating Product Shifts: Accelerated Growth in Exchange Traded Funds, Fee- Accounts, & Wealth Management Services...521 Investable Asset Products...524 Lending Service Products...533 Insurance Products...533 Wealth Management Services...536 Predicted Products & Services Company Winners...537 APPENDIX...538 Profiles of Leading Financial Services Industry Companies...538 Advisor Software...538 History...538 Early Development Phase...538 Transition Phase...538 Growth & Institutionalization Phase...539 Re-Trenchment Phase...539 Statistics...540 Businesses...541 Rules Based Platform...541 Wealth Manager Financial Planning & Advice Solution...542 Underlying Portfolio Diagnostic Tools...543 Advisor Partners...543 Organization & Ownership...545 Alston + Bird...547 History...547 Early Phase...547 Middle Phase...547 Recent Phase...547 Statistics...547 Businesses...547 Corporate & Finance...547 Intellectual Property...547 29
Litigation...547 Tax...547 Legislative & Public Policy...547 Enviornment & Land Development...548 Life Sciences...548 Industries...548 Organization & Ownership...548 Charter Financial Publishing Network (CFPN)...548 History...548 Early Phase...548 Growth Phase...549 Opportunities Phase...549 Statistics...549 Businesses...549 Financial Advisor Magazine...549 FA News...552 FA Connection.Com...552 Nick Murray Interactive...554 Journal of Indexes...554 Risk-Controlled Investing...554 Organization & Ownership...555 Dunham & Associates...555 History...555 Retail Phase...555 Build Out Phase...556 Institutional Ramped Up Phase...556 Statistics...557 Businesses...559 Limited Partnerships...562 Mutual Funds...563 Mutual Fund Wrap Account Program...566 Trust Company...570 Dunham & Associates Securities...581 Organization & Ownership...581 Envestnet Asset Management...583 History...583 Portfolio Management Consultants Acquisition Phase...584 Net Asset Management & Oberson Acquisition Phase...585 Business Growth Phase...587 Statistics...590 Businesses...598 TAMP...598 Investment Management...637 Licensing...637 Organization & Ownership...638 EverBank Financial...645 History...645 Early Phase...645 Separate Alliance Mortgage & EverBank Years...645 Combined EverBank Years...646 Statistics...646 30
Businesses...649 EverBank National Banking Group...649 EverBank of Florida...652 EverHome Mortgage Company...653 BNY Mortgage Company...654 Priceline Mortgage...654 EverBank Specialty Lending Group...654 EverBank Wholesale Lending...654 EverBank National Home Loan Group...655 EverBank Commercial Real Estate Lending Group...655 EverBank Reverse Mortgage Group...655 EverBank Correspondent Lending Group...655 EverBank World Markets...655 EverTrade Direct Brokerage...657 Organization & Ownership...662 Fidelity Investments...663 History...663 Management & Research Years...663 Peter Lynch Domination Phase...664 Rapid Growth Years...664 Continued Growth & Executive Restructuring Phase...665 Statistics...668 Businesses...674 Personal & Workplace Investing...675 Fidelity Institutional...685 National Financial Services Corporation...690 Fidelity Institutional Wealth Services...696 Fidelity Management & Research...707 Fidelity Shared Services...717 Organization & Ownership...717 Fiserv Corporation...719 History...719 Initial Public Offering & Early Acquisitions Phase...719 Les Muma & Late Stage Acquisitions Phase...723 Jeff Yabuki, Check Free Acquisition, & Strategic Divestments Phase...725 Statistics...726 Businesses...727 Process Outsourcing...727 Core Systems...730 Payments & Related Services...730 Lending Services...734 Corporate Banking...735 Health Plan Services...735 International Services...735 Investment Services...735 Organization & Ownership...742 Genworth Financial...744 History...744 GE Financial Businesses Phase...744 GE Financial Assurance Phase...746 Genworth Financial Phase...751 31
Genworth Financial Acquisition Phase...751 Statistics...753 Businesses...754 Protection Business Unit...754 Mortgage Insurance...756 Retirement Income & Investments...757 Organization & Ownership...804 Jefferson National...806 History...806 Inviva Term Life Business Phase...806 Jefferson National Annuities Business Phase...806 Statistics...809 Businesses...809 Jefferson National Life...809 American Life of New York...815 Organization & Ownership...816 LPL Financial...817 History...817 Linsco Phase...817 LPL Emergence & Expansion Phase...818 Mark Casady Institutionalization Phase...820 Statistics...823 Businesses...824 Core LPL Independent Broker/Dealer...824 Bank Business...967 Clearing Business...968 Organization & Ownership...971 Meridian-IQ...977 History...977 Early Phase...977 Middle Phase...977 Recent Phase...977 Statistics...977 Businesses...977 Meridian-IQ RIA...978 Meridian-IQ DHS...978 Organization & Ownership...978 News Corporation...978 History...978 Early Phase...978 Middle Phase...978 Dow Jones & Company Acquisition Phase...979 Statistics...979 Businesses...979 Filmed Entertainment...979 Television...980 Cable Network Programming...980 Direct Broadcast Satellite Television...980 Integrated Marketing Services...980 Newspapers & Information Services...980 Dow Jones & Company...980 32
The Wall Street Journal...981 Barron s...981 Dow Jones Information Services...982 Venture Edge...983 Venture Capital & Healthcare...983 Venture Capital & Information Technology...983 Books...984 Other Assets...984 Organization & Ownership...984 Penton Media...985 History...985 Early Phase...986 Middle Phase...986 Recent Phase...986 Statistics...986 Businesses...986 Agriculture...986 Business Aviation...986 Commercial Aviation...986 Commercial Real Estate & Finance...986 Business Finance...986 Lodging Hospitality...987 National Real Estate Investor...987 Retail Traffic...987 Business Performance Management...987 Design Engineering...987 Digital Media & Communications...987 Electronics...987 Electrical Systems, Energy, & Construction...987 Food & Food Services...987 Health Lifestyle...987 IT & Developer...987 Manufacturing & Supply Chain...987 Marketing & Meetings...987 Chief Marketer...987 Multichannel Merchant...987 Association Meetings...988 Financial & Insurance Meetings...988 Corporate Meetings & Incentives...988 Religious Conference Manager...988 Special Events...988 Meetings Net...988 Medical Meetings...988 Mechanical Systems...988 Public Infrastructure...988 Wealth Management...988 Registered Rep...988 Trust & Estates...988 Organization & Ownership...988 Source Media...989 History...989 33
Early Phase...989 Middle Phase...989 Recent Phase...989 Statistics...989 Businesses...989 Accounting...989 Accounting Today...989 Banking...989 American Banker...990 US Banker...990 Bank Technology News...990 Credit Union Journal...990 Benefits...990 Employee Benefit News...990 Employee Benefit Adviser...990 Business Technology...990 Health Data Management...990 Information Management...990 Insurance Networking News...990 Traders Magazine...990 Capital Markets...990 The Bond Buyer...991 Asset Securitization Report...991 Bank Loan Report...991 Investment Dealers Digest...991 Investment Management Weekly...991 Mergers & Acquisitions Magazine...991 Money Management Executive...991 Private Placement Letter...991 Investment Advisors...991 Financial Planning Magazine...991 On Wall Street...991 Bank Investment Consultant...991 Mortgage...991 Mortgage Servicing News...991 Mortgage Technology...992 National Mortgage News...992 Origination News...992 Payments...992 ISO & Agent...992 National Regulatory Services...992 Securities...993 Accuity Solutions...993 Organization & Ownership...993 State Street Corporation...993 History...993 Union Bank Phase...993 Emergence Phase...994 Expansion Phase...994 Restructuring Phase...996 Statistics...998 34
Businesses...999 Investment Management (State Street Global Advisors)...999 Investment Research & Trading...1004 Investment Servicing...1005 Organization & Ownership...1007 Sutton Place Associates...1008 History...1009 Founding Phase...1009 Reflow Introduction Phase...1009 Acquisitions Phase...1009 Statistics...1011 Businesses...1011 Forward Management...1011 Reflow...1015 Plump Jack...1016 Organization & Ownership...1016 TD Bank Financial Group...1018 History...1018 Canadian Banking Phase...1018 Maturation Phase...1018 US Acquisitions Phase...1022 Statistics...1031 Businesses...1032 Retail Banking...1032 Wealth Management...1033 TD Ameritrade...1035 Wholesale Banking...1075 Organization & Ownership...1075 The Charles Schwab Corporation...1079 History...1079 Early Discount Brokerage Firm Phase...1079 Bank of America Subsidiary Phase...1079 Independent Pre-Web Years Phase...1080 Online Explosion Years Phase...1082 Retrenchment & Resurrection of Chuck Schwab Phase...1088 Statistics...1097 Businesses...1101 Schwab Investor Services...1102 Corporate & Retirement Services...1115 Schwab Institutional...1116 Schwab Financial Products...1135 Charles Schwab Bank...1145 Organization & Ownership...1147 Duplication or distribution of this report, and/or the data in this report, is strictly prohibited without the written consent of Tiburon Strategic Advisors, LLC 35