There are three unique features about the CEO Summits:

• The focus on consumer needs first and markets and products second
  
• The cross-industry characteristics of the attendees
  
• The open communications and debate with little commercialization
  

Opening General Session Presentations
The CEO Summit kicked off with three general session presentations by Chip Roame, Julie Allecta, and Paul Schaeffer. Each discussed timely topics that cut across all markets and products, including the state of the brokerage & investments industry, an update on mutual fund regulations, and the challenges & opportunities in serving the high net worth and institutional markets.

Chip Roame (Tiburon Strategic Advisors)
Chip Roame welcomed the attendees, gave an overview of Tiburon, and addressed the state of the industry. In updating the group of clients on Tiburon’s activities, Mr. Roame noted that, “Tiburon has positioned itself uniquely as a market research & strategy consulting firm; the firm’s services include a series of research reports, conference speeches, market seminars, market research projects, and strategy consulting projects, with the latter two accounting of more than half of Tiburon’s revenues.” Mr. Roame also introduced other Tiburon business activities including:

• Prior to the Summit, Tiburon held the sixth meeting of the members of its executive programs. These three programs, named CEOs-in-Residence, Financial Advisor Roundtable, and Consultant Fellows, are designed to bring additional senior level expertise to Tiburon clients
  
• At the Summit, Tiburon introduced ten new business benchmarking tools to create a family of thirteen. These free web-based tools allow a variety of types of advisors to benchmark their business operations. The tools, in turn, provide Tiburon a steady stream of aggregate industry data.
  
• Mr. Roame then highlighted the agenda for this, Tiburon’s sixth semi-annual CEO Summit and discussed highlights of past CEO Summits, including the visit by Tim Guinness from London and the dinner at the home of advisor Tif Joyce, both at the prior fifth semi-annual Tiburon CEO Summit
  

• The long list of corporate and industry scandals has impacted consumer confidence in the industry and revealed a concerning non-client-focused attitude. Specifically, Mr. Roame commented that he was, “disturbed by recent reports that up to 20% of investors may not have been given appropriate mutual fund breakpoints”
  

• The market of consumer wealth is enormous, including $17.1 trillion of investable assets and $7.5 trillion of retirement plan assets held by the 108 million US households. Mr. Roame predicted that, “the $17.1 trillion will increase to over $30 trillion by 2010 due to the pending liquefaction of consumer wealth,” making it a great time to be in the financial advice business
  
• The competitive playing field is crowded with over 400,000 financial advisors. Mr. Roame noted that, “banks and full-service brokerage firms currently dominate these assets, each controlling near $6 trillion.” He went on though to suggest that, “independent advisors may gain substantial share in the 2000s much as full-service brokers did in the 1980s and discount brokers did in the 1990s”
  
• Finally, Mr. Roame noted a series of ways to win, including, “not giving up on mutual funds, participating in the fee-accounts trend, and expanding product & service offers to better address the needs of aging baby boomers.” He predicted that wealth management services may pass investment management services in importance as boomers age, and that targeted marketing and service strategies may be increasingly critical to success and the differentiating factors
  

Julie Allecta and Mitch Nichter (Paul, Hastings, Janofsky, & Walker)
Julie Allecta, a senior partner with the hosting law firm of Paul, Hastings, Janofsky, & Walker and vice chair of that law firm’s investment management practice, gave a brief presentation on her views of trends in the mutual funds industry. She discussed the impact of recent mutual fund scandals and the impact of recently proposed and enacted regulations affecting the investment management industry with particular emphasis on the likely changes in the area of mutual funds and advisors who use mutual funds. Drawing on her 26 years of experience in the industry and her years actually working as an attorney with the SEC, Ms. Allecta suggested that, in the short run, it would be expensive for advisors to meet many of the new regulatory requirements and that there probably would be changes in and greater disclosure concerning reciprocal practices and payments among industry participants (as examples, she cited likely changes in soft dollar services and disclosure concerning mutual fund distribution payments). However, she concluded that the long run effects would leave the industry strong and healthy, and that the US investor would continue to want and need safe, easy-to-understand, pooled investments, like mutual funds, and would continue to seek out professional advisors to assist them in their wealth management.

Ms. Allecta also noted:

• That the US investment models were well positioned to become dominant global investment models as the residents of developed economies like France and emerging economies like China seek access to more investment options.
  
• That the investment industry was experiencing positive change from greater competition within the industry and the development of more efficient products and more efficient markets. She opined that these developments were as much the catalysts for change as the enforcement actions and many new regulations currently coming out of Washington, DC.
  

Paul Schaeffer (SEI Investments)
Paul Schaeffer from SEI Investments rounded out the opening session by addressing two additional areas – opportunities for product manufacturers and opportunities for asset managers in the institutional markets. Mr. Schaeffer concluded that opportunities still exist in both of these markets.

Product Breakout Sessions
Product sessions were held on mutual funds; index funds, exchange traded funds, & hedge funds; fee-accounts, turnkey asset management programs, and separately managed accounts; and wealth management, family office services, & life planning. The product sessions were generally the most widely attended, and the wealth management session was the singularly largest session.

Mutual Funds
Jim Atkinson of Orbis Marketing and Julie Allecta of Paul Hastings led the mutual funds session. Given the recent state of affairs in the mutual funds industry it isn't surprising that this panel produced a robust discussion on a variety of topics. One particularly hot topic focused on the question of the commoditization of mutual funds. Participants didn't agree on whether the industry was largely commoditized, e.g., offering functionally similar products with little differentiation. A number of panelists noted that fees within the industry were likely to decline and that margins would decline as a result of lower revenues and higher costs. A number of participants raised the prospect that 12b1 fees may be curtailed or modified greatly and wondered how that might affect the industry.

Index Funds, Exchange Traded Funds, & Hedge Funds
Andy Arenberg (Barclays Global Investors), Phil Nicolaou (Rydex Investments), and Tom Lydon (Global Trends Investments) facilitated the index funds, exchange traded funds, & hedge funds session. The session revolved around the fact that the investment process is being polarized with twin growth patterns from both indexing and alternative investments. Index funds, enhanced index funds, and exchange traded funds (ETFs) are continuing to garner a greater share of fund flows as financial advisors and individual investors seek correlation with asset classes for a reasonable price. For instance, the ETF market has ballooned to $160 billion and new ETFs continue to come to market representing all domestic assets classes and industry sectors. Similarly, with Charles Schwab’s recent introduction of its alternative investments (hedge funds-of-funds) platform, more investment advisors are helping diversify client portfolios with these non-correlated investment options. Minimums as low as $25,000, better transparency, and daily pricing make hedge funds-of-funds offerings more suitable for typical clients. In this increasingly competitive environment, investment advisors understand that creating and maintaining long-term net alpha is crucial to their businesses. The group concluded that these emerging investment products, if utilized correctly, might help provide the solution.

Fee-Accounts, Turnkey Asset Management Programs, & Separately Managed Accounts
In the Fee-Accounts, TAMPs, and SMAs session Steve Smith, Kevin Malone, and Barry Mendelson discussed these programs from the investment manager, investment research, and program sponsor perspective. Steve Smith of SEI Investments' Advisor Network discussed the challenges faced by the money managers participating in sponsors' SMA programs. There is a lot of stress in the entire system of SMAs caused by many factors. To date, sponsors have not properly considered the operational challenges they place on participating money managers. The lack of industry established standards has resulted in managers, “who participate in 25 programs, running 25 different systems, operating 25 different workflows, and having 25 different trading instructions. The impact is exponential. Achieving scale is a serious concern. This challenge is further compounded by fee compression." Kevin Malone of Greenrock Research discussed the importance of investment manager research in fee-based programs, including the analysis of portfolios, attribution of investment returns, and organizational character underlying investment performance. Barry Mendelson of Capital Market Consultants provided practical advice for institutional sponsors like brokerage firms, banks, insurance companies, trust, and RIA firms in launching and maintaining fee-based investment programs. Mr. Mendelson discussed the importance of strategic planning in the development of these programs, and noted, that “too many players have jumped into the fee-accounts arena in the last ten years without a game plan, a brand strategy, or an approach that is integrated with their overall corporate objectives. Because branding intends to produce a specific consumer experience every aspect of fee-account programs needs careful attention including program naming, asset allocation advice, product selection, investment research, performance reporting, advisor training, and so forth.” The goal he said is to “strive for consistency throughout the entire process that produces and maintains these programs.”

Wealth Management, Family Office Services, & Life Planning
In the wealth management, family office services, & life planning session, Jeff Gyomber and Steve Moeller led a dynamic dialogue on identifying and responding to consumers’ non-investment needs. Mr. Gyomber, a former research manager at Tiburon, pointed out that while the vast majority of advisors consider themselves financial planners, “only 20% of them actually create formal financial plans for their clients.” Mr. Moeller, President of American Business Visions, challenged the attendees to examine ways to move from product-oriented approaches to consumer-oriented models; he noted that, “advisors who truly understand what makes their clients happy will be able to provide added value in a commoditized market.”

Captive Channels: Wirehouses, Banks, & Insurance Companies
Paul Schaeffer of SEI Investments and Gordon Turnbull of Wells Fargo Bank led a session on the traditional captive channels, including wirehouses, banks, and insurance companies. The session began with an overview of the evolution of the broker landscape from a playing field populated largely by individual salesmen focused on commission-based sales to one increasingly filled with teams of fee-based advice-providers, concentrating on wealth management and client service. There then followed a drill-down on the drivers of fee-based pricing and on the team delivery of services, as well as a debate about the implications of convergence -- the trend away from siloed providers of proprietary products and toward financial services hubs that provide a full range of products (banking, brokerage, insurance, etc.) and feature open architecture and best-in-class products. Most concluded that pure product manufacturers will see their power diminish, and that the winners will be those firms that can best manage and grow their customer relationships. However, some worried about a potential power shift toward front-line client service personnel who could extract most of the available economic gains for themselves in the form of higher personal compensation due to their ability to move customer relationships.

Fee-Only Financial Advisors
In the fee-only financial advisors’ session, Jeff Gyomber and Evan Simonoff led a stimulating discussion on the challenges and opportunities in this increasingly competitive market. Mr. Gyomber, a former research manager at Tiburon, noted that, “there is a flood of new competitors coming into the market from two different angles. Some new players such as Ameritrade are competing for smaller advisors who are finding it more challenging to maintain relationships with the traditional custodians like Schwab, while others such as Bear Stearns are targeting larger advisors who may have historically custodied at the banks.” The session was notable in that it featured discussions amongst top executives at each of the major custodians, including Fidelity Investments, TD Waterhouse, Fiserv/First Trust, Merrill Lynch, Bear Stearns, and Ameritrade, along with numerous Schwab alumni. Mr. Simonoff, editor of Financial Advisor Magazine, commented that, “getting all the competitors in a small group setting was an impressive achievement; the interaction between them was invaluable.”

401K Market
David Elliott of RS Investments and Ward Harris of McHenry Consulting led a session devoted to the past and future of the rapidly growing 401K market. Of particular interest to the attendees was the migration of baby boomer employees, from plan participants to retirees. Also of interest is the rise of managed investment options that can relieve workplace investors of the burden of self-management. Attendee Julie Allecta of the Paul Hastings brought the perspective of a securities and retirement lawyer to these timely business issues.

Ask the Financial Advisors
Dennis Clark of Advisor Partners and Scott MacKillop of Trivium Consulting facilitated a session called Ask the Financial Advisors, which offered several service providers opportunity to conduct some direct customer research. Product providers such as Barclay’s iShares and SEI Investments, as well as custodians such as Bear Stearns and Ameritrade took this opportunity to interact in an informal setting with their key target market – high-end advisors. The advisory firms represented ranged from Harris myCFO representing the family office model to Ronald Blue & Company, a fee-only financial planning firm, which caters to the Christian community.

Management Breakout Sessions
The management sessions generally had smaller crowds but were sometimes quite passionate, as the issues of human resources, technology, marketing, and the markets were widely debated.

Human Resources & Recruiting
Mitch Vigeveno and Peter Shannahan led a dynamic session on a wide range of human resources and recruiting issues. Mr. Vigeveno leads the search firm Turning Point in Clearwater, FL and Mr. Shannahan is president of Shannahan & Company in Mill Valley, CA. Among the attendees were Dennis Clark of Advisor Partners, Lori Medlen of Financial Research Associates, and Ken George of Financial Services Resource Corporation. Key topics included interview techniques, behavioral testing recommendations, and the costs and consequences of making a bad hire. Mr. Vigeveno pointed out the importance of crafting a concise performance profile outlining specifically the first year objectives for new employees and interviewing against those requirements.

Technology
Ron LoVetri of Integrated Decision Systems and Thusith Mahanama of BTA led a session on the application of technology. Participants agreed that compliance is the new technology driver. Driven by need to archive and quickly retrieve documents, email, and instant messages, the adoption of document management is increasing. In addition, by October 2004 advisors must create disaster recovery plans that ensure business continuity including physical location, operations, and key personnel. Advisors are looking to their custodians, technology suppliers, and legal counsel to navigate these new requirements.

Marketing, Advertising, & Public Relations
Jim Atkinson of Orbis Marketing, David Smith of Financial Advisor Magazine, and Brooke Southall of Investment News facilitated a session on marketing, advertising, & public relations. The session included advice on the value of brand building & positioning, the effectiveness, the necessity (or lack thereof) of advertising, methods for dealing with the media from a public relations perspective, the merits of public relations versus advertising, and examples of various approaches to building image and driving sales a ’la carte, or by integrating marketing, advertising and public relations efforts. The discussion on dealing with the media was lead by Brooke Southall, a reporter with Investment News. Mr. Southall was clear in his advice that when seeking public relations it was important to recognize the needs of the publication and not to simply focus on self-serving needs.

The Markets & Investment Research
Tim Armour of Morningstar and Kevin Malone of Greenrock Research teamed up to lead a session on the markets & investment research starting with an analysis of the new Morningstar research tools. These tools allow research on individual securities, mutual funds, separate accounts and variable annuities all in one report. This was followed by a discussion of the current investment themes in the domestic equity and fixed income markets. Finally, the group heard from Ken Kam of Marketocracy on the new and exciting way in which Marketocracy has developed sources of research and the outstanding performance of the Marketocracy m100 mutual fund.

General Session Panel Discussions
On the second day, three critical general session panel discussions were held, involving consumer needs, winning markets, and innovative business models. All three panels included wide-open dialogue and received wide praise.

Consumer Needs
Organized ad hoc after repeated comments seeking a better understanding of consumer needs, the consumer needs panel drew wide praise. Four well-educated professional consumers joined financial advisor facilitators Scott Hanson of Hanson McClain and Tif Joyce of Joyce Financial Management, and told their unpleasant stories about their experiences with brokers, banks, and advisors. One consumer summed up her experience by noting, “the investments industry is stuck in a self-imposed state of confusion. Companies spend so much time developing more complicated products that advisors can’t explain to their clients, and yet they wonder why consumers are baffled.”

Innovative Business Models
Six Tiburon clients joined Tiburon Managing Principal Chip Roame on stage to discuss their innovative business models. These included two financial advisors, two markets companies, and two product companies. Scott Hanson of Hanson McClain told of raising multiple billions of dollars of assets by narrowly targeting the needs of telephone company employees. Jeff Roush of Harris myCFO spoke of addressing the wealth management needs of the ultra affluent. David Johnson of Powell Johnson spoke of building a full-service fee-oriented brokerage firm that is attractive due to its culture. Scott Dell’Orfano from SEI Investments told of narrowing one’s target market as a strategy to deepen client relationships. Lee Kranefuss from Barclay’s discussed the booming exchange traded funds market. And Ken Kam from Marketocracy spoke of a new research source being used to beat the market.

Winning Channels Debate
Eight leading financial services executives participated on a panel to debate the likely winning channels. While some took sides, others said many channels will excel. Panelists included Derek Bruton of Merrill Lynch, John Coghlan, formerly of Charles Schwab, David Johnson of Powell Johnson, Jay Lanigan of Fidelity Investments, Chuck Robinson of Northwestern Mutual Life, Skip Schweiss of Fiserv/First Trust, Gordon Turnbull of Wells Fargo, and Jim Wangsness of Ameritrade.

Closing General Session Presentations
The CEO Summit closed with four short general session presentations from Tim Armour, Bob Barrett, Keith Mitchell, and Chip Roame.

Tim Armour (Morningstar)
Tim Armour from Morningstar was a guest speaker on Friday afternoon; he addressed a number of key areas that Morningstar has identified as likely to drive future growth in investment management. These included retirement income management, discretionary management of 401k plans, the capture of IRA rollover assets, the growth of alternative investments, and institutional products that control risks and taxes such as ETFs. These are all areas that Morningstar is actively addressing and developing capabilities for its clients.

Bob Barrett (FT Ventures)
Bob Barrett from FT Ventures, a venture capital firm specializing in investing in financial services related technology companies, gave an overview presentation on current trends in the venture capital markets and market areas FT Ventures is currently reviewing. Bob also shared his firm’s unique strategy for competing in the market (leveraging its financial services company investors) and summarized various best practices for venture capital firms.

Keith Mitchell (Mitchell Advisers)
Keith Mitchell from Mitchell Advisers brought the group a perspective on the impact of M&A on strategic plans within the asset and wealth management sector. He cited open architecture, regulatory compliance costs, and distribution requirements as driving factors behind many strategic initiatives and seemed to be prompting a much higher level of dialogue around M&A in 2004. While acquisitions in the wealth management space continue to be an area of intense interest, it is still very much focused on very highly developed practices in prime wealth creating markets as a way for some firms to expand nationally.

Mr. Mitchell spoke about the increasing costs and administrative burdens likely to be incurred by mutual funds companies as a result of the recent problems as driving factors leading many groups to seek strategic solutions with larger firms. As importantly, if not more so, Keith said, is the issue of distribution and the rationalization of the investment many groups have made in human, promotional, and technology areas relating to increasing assets under management. Some will determine that a better solution will be to combine with stronger organizations.

Mr. Mitchell also spoke about the focus on the structure of transactions being an evolutionary aspect of M&A within asset management deals and that those being negotiated today are far more effectively developed than those of just a decade ago. Mr. Mitchell stated that he believes that smarter deals are being contemplated and completed today by more experienced executives and with much higher levels of strategic clarity.

Chip Roame (Tiburon Strategic Advisors)
Tiburon’s Managing Principal Chip Roame closed the Summit first by offering an open forum for any unaddressed industry topics. Topics that arose included identifying and preventing potential industry scandals in the future, discussing practical methods of training & retaining qualified employees, and further defining the wealth management trend. He then reminded attendees of a few key points:

• Boomers are key to the future of the industry
  
• Boomers financial needs will evolve towards wealth management as they age
  
• The independent advisor channels are well positioned to pick up market share
  
• Superficial responses such as more product choices, claiming the ethics of fee-based investing, and simply utilizing buzz words like wealth management and life planning will be meaningless
  
• Rather, Mr. Roame closed by stating that, “understanding and addressing client needs will be the key factor driving success as boomers age.”
  

General Feedback
General feedback for the CEO Summit included overwhelmingly positive comments. The balance of general session speakers, general session panel discussions, & breakout groups, the diversity of content, and the personal interaction were all frequently complimented. Some of the highlights for attendees included:

• The consumer panel which highlighted the industry’s need to better understand client needs
  
• The innovative business models panel which allowed six separate business models to be introduced in a limited time, forcing other attendees to consider their own strategies
  
• The state of the industry speech by Mr. Roame, and the parallel speech by Mr. Schaeffer, that offered a solid common understanding of the markets to all participants, regardless of their industry backgrounds
  
• The fee-only financial advisors market session which brought together long-time custodial competitors from Charles Schwab, Fidelity Investments, TD Waterhouse, and Fiserv, along with representatives of other competitors including Merrill Lynch, Bear Stearns, and Ameritrade
  
• The wealth management, family office services, & life planning breakout session that helped set the stage for the consumer panel
  
• And the group dinner held in Tiburon, CA, which fostered informal communications amongst members from dozens of market segments
  

Next Steps: Seventh Tiburon CEO Summit
The seventh semi-annual Tiburon CEO Summit will be held on October 21-22, 2004 at Paul Hastings in San Francisco, CA. It is expected that some of the same clients will attend while others may defer for a year. The CEO Summits will continue to be limited to about 75 attendees to foster a sense of collaboration and openness.

• Tiburon’s CEO Summits are held semi-annually. Attendance is by invitation only and approximately 75 senior industry executives attend each meeting. The list of attendees at this most recent CEO Summit is included on Tiburon’s web site. Please contact Tiburon’s managing Principal Chip Roame at CRoame@TiburonAdvisors.Com or (415) 789-2541 if you have an interest in attending a future CEO Summit.
  
• Tiburon has built its three executive programs (CEOs-in-Residence, Financial Advisor Roundtable, and Consulting Fellows) in an effort to bring the experiences of additional senior level industry executives to Tiburon clients. All executive program members are invited to Tiburon’s CEO Summits. Feel free to contact any of the members of Tiburon’s executive programs directly or ask that they be included in any ongoing Tiburon project.
  
• Tiburon’s online benchmarking tools are available to all types of financial advisors in an effort to help them benchmark their business practices and build more successful businesses. The sites include www.FABestPractices.Com for fee-only financial advisors, www.IndependentRepBestPractices.Com for independent reps, and www.TaxProBestPractices.Com for CPAs, EAs, & other tax professionals. Almost 4,000 advisors have used these tools thus far. Ten new sites were announced at the CEO Summit. By completing one of the online surveys, financial advisors can access FREE copies of Tiburon’s summary research reports.
  
• Tiburon has published fourteen ~100-300+ page research reports, which offer detailed analyses of growing business segments; each is available for $2,500; these reports can be ordered by contacting Krista Jenssen at Tiburon at KJenssen@TiburonAdvisors.Com or (415) 789-2540.
  
• Tiburon’s weekly research releases, like this one, are emailed for free to interested industry executives, media representatives, conference planners, and individual financial advisors. Feel free to sign up to receive future research releases at Tiburon’s web site (www.TiburonAdvisors.Com) if this release was passed to you by a colleague and you would like to receive them directly in the future.