Tim Armour (Managing Director, Morningstar) and Kevin Malone (President, Greenrock Research) facilitated a discussion on separately managed accounts & other fee-account programs. Mr. Armour started the discussion with a review of Tiburon research on these topics. Amongst other facts, the research showed that:

• Packaged fee-account programs have grown substantially over the past eight years to include over $1.5 trillion assets under management; this includes all of the client assets in the proprietary programs built by the wirehouses, as well as those built by the turnkey asset management programs (TAMPs) and used through many other channels
  
• Many report that the wirehouses dominate the fee-accounts market (they control 68% of the assets of the packaged programs) but due to the historical bias of the asset base towards commission accounts, still just 16% of wirehouses’ client assets are invested in fee-accounts
  
• A similar share of independent reps’ (16%) and banks' (17%) client assets are invested in fee-accounts
  
• Banks though struggle with using third-party managers (just 4% of their trust department assets)
  
• There are eight types of packaged fee-account programs, including separately managed accounts, multiple style portfolios, mutual fund wrap account programs, annuity wrap account programs, exchange traded fund wrap account programs, unified managed account programs, broker wrap account programs, and fee-based brokerage account programs, which are currently under threat
  
• Wirehouses have long relied on separately managed accounts; their trend is toward multiple style portfolios and unified managed accounts
  
• Multiple style portfolio programs create an exciting new model, solving many of the separately managed account program issues
  
• Meanwhile, mutual fund wrap account programs have also continued to grow steadily but a lot of the business is coming from outside of the wirehouses, with Ameriprise Financial, Fidelity Investments, SEI Investments, and LPL having the four largest programs
  
• The homerun is on the horizon. Unified managed accounts are what clients originally wanted; these programs will ultimately combine single proposal systems, multiple products (e.g., separately managed accounts, mutual funds, exchange traded funds, & individual securities), advisor customization ability, single account & related paperwork, coordinated pricing, automatic account rebalancing, account level tax treatment, & consolidated performance reporting
  
• However, the most central point made in the Tiburon research presentation was that the real fee-accounts market should be defined to include the fee-only financial advisors market (RIAs) ($1.1 trillion), the bank trust accounts market ($1.0 trillion), and the high net worth money managers direct market ($0.5 trillion); when including these markets, new conclusions will be made, as opposed to analyzing just the $1.5 trillion packaged fee-accounts market, which the wirehouses do dominate with separately managed accounts
  

After the opening presentation, the group seemed to reach consensus that separately managed account programs have genuine momentum in the financial press but that several viable alternatives provide better solutions for many financial advisors and their clients. Often the major separately managed account players will spin their growth by highlighting share of flows rather than share of assets, which is below 20%. Mr. Malone remarked that, “the impression created in the press is that packaged fee-accounts are huge, when 84% of wirehouse client assets were still sold with commissions.” Furthermore, even within fee-accounts the most popular discussion topics were mutual fund and exchange traded fund solutions.

Art Lutschaunig (President, Morningstar Investment Services, Morningstar) chimed in to express strong opposition to the new “model” or “list” approach for separately managed accounts in which money managers are relegated to simply providing purchase lists to overlay managers. Jim Riepe (Retired Vice Chairman & Senior Advisor, T. Rowe Price Group) agreed that such approaches risk uneven treatment of portfolio trades, ultimately potentially diminishing the value of the research and portfolio management processes of money managers.

There though was interest in separately managed accounts. One financial advisor in the group said that the difficulty in moving large sums in and out of mutual funds left him considering separately managed accounts as an alternative for his practice. But strong sentiment was expressed that such a change would be a mistake, and that he should instead reconsider the size of the funds in which he invests. John Tyers (Senior Managing Director, Broker/Dealer Clearing & Investment Advisor Services, The Bear Stearns Companies) mentioned that among other concerns, “the likelihood for transaction errors would potentially increase significantly.” Mike Gianoni (Executive Vice President, Investment Services Division, Check Free) said that, “the significant capital invested in its Check Free APL system has resulted in a significantly more efficient and error-free transaction experience.”

Ron Cordes (Chairman, Asset Mark Investment Services, Genworth Financial) mentioned that his firm is having great success with multiple style portfolios. He attributed the success to greater efficiency and back-office simplicity and noted that his firm’s collaboration with Parametric provided a powerful tax overlay to optimize portfolio decisions. Additionally, he outlined a unique retirement product which combines growth, balanced, and income sleeves, which are offered as three separate tiers of one unified managed retirement account.

The group debated the lack of (and need for) customization and tax planning in separately managed accounts. Mr. Cordes related that, “the active customization that Asset Mark brings to investors with concentrated portfolios is significant, offering diversification while balancing the economic risks of concentrated portfolios.”

Mutual fund wrap account programs seem to be regaining momentum. Mr. Lutschaunig remarked that his, “diversified mutual fund wrap account program has gathered nearly $2 billion by offering a wide variety of low-cost institutional and diverse mutual funds, which will benefit from direct custody relationships with the mutual funds themselves.” That said, there was general agreement that soft-dollar payouts will continue to decline as 12b-1 fees come under renewed regulatory scrutiny.

Mr. Roame closed by saying, that “all is sorting out in the fee-accounts market; unified managed accounts are the product that should have existed all along”.

Wealth Management & Family Office Services

• The definition of wealth management can be very broad, including many unrelated services such as auto purchasing, legal services, tax preparation, and estate planning
  
• Baby boomers are evolving into the years where wealth management may surpass investment management as their priority need. One all encompassing Tiburon chart explained clearly how baby boomers are exiting their accumulation years and entering their liquefaction years, where annuities, life insurance, wills, trusts, and charitable giving may be on the top of their needs list
  
• Over-half of high net worth investors (58%) want holistic advice beyond investments, and almost all financial advisors (92%) desire to offer wealth management services
  
• Merrill Lynch’s Total Merrill program may be the best example of a comprehensive wealth management offer systematically in the market
  
• Many financial advisors (80%) claim that poor technology impedes their ability to effectively offer wealth management services
  
• Tiburon defines the key components of wealth management as four groups of services beyond investments, including aggregation financial/tax planning, risk management (insurance), private banking, and estate planning & charitable giving
  
• Disability and long-term care insurance provide near-term opportunities
• Umbrella insurance policies may become more critical , with so much wealth held by small business owners
• The retirement income challenge may lead to both annuitization and more conservative investment strategies
  
• Estate planning & charitable giving should grow in popularity, leading to increases in life insurance and trust account sales
  
• More than half (53%) of consumers believe that they need more life insurance, only half (58%) have even wills, just one-fifth (21%) have created trusts, and three-quarters (76%) want to learn more about charitable giving strategies
  
• In short, wealth management services are important at all levels of wealth, but especially amongst the most affluent
  

Mr. Michie opened a lively discussion regarding the definition of wealth management services. Session participants believed that while most organizations believe they are providing wealth management services, they are really primarily focused on investment advice. Organizations that are providing wealth management services are providing broader bundles, including aggregation, financial planning, asset allocation, banking, estate planning, and/or insurance.

According to Steve Lockshin (CEO, Lydian Wealth Management, Lydian Trust Company), "we all live in Lake Wobegon, where all financial advisors truly believe that they are above average, so they bestowed the title of wealth manager on themselves in order to show that they are somehow elite. When in the financial analysis, it always comes back to the basics of gaining trust and providing superior service.”

Ken Fisher (CEO, Fisher Investments) dissented, saying, "I don't want to be a wealth manager." Mr. Fisher has built a $38 billion investment management firm but he certainly was in the minority. Tiburon research affirmed that, “more than 90% of financial advisors desire to offer services traditionally only available through family offices.

	Chuck Robinson (Senior Vice President, Investment Products & Services, Northwestern Mutual) discusses Northwestern Mutual's strategies with Tiburon CEO Summit Planning Committee member Tim Armour (Managing Director, Morningstar) at a break-out session at Tiburon CEO Summit XII

Markets Break-Out Sessions

Markets break-out sessions were held on: consumer wealth, liquefaction, & the retirement income challenge; captive advisors, (brokers, private bankers, & insurance agents); and independent advisors (fee-only financial advisors & independent reps).

Consumer Wealth, Liquefaction, & the Retirement Income Challenge

Tim Armour (Managing Director, Morningstar) and John Cammack (Head of Third-Party Distribution, T. Rowe Price) facilitated a discussion on consumer wealth, liquefaction, & the retirement income challenge. Mr. Armour opened the session by reviewing Tiburon research which outlined the amount of consumer wealth, the pending liquefaction, and the likely retirement income challenge. Amongst other facts, the research showed that:

• US consumers have almost $20 trillion of investable assets, $28 trillion of financial assets, and $50 trillion of total assets
  
• The bad news is that over three-quarters of baby boomers over the age of 55 have less than $100,000 in investable assets (similar to a fact that would be shared the following day by John Hancock CEO John DesPrez), the savings rate continues to hit all time lows (0.2%), and very few (2%) of US households will receive an inheritance over $100,000
  
• But the good news is that baby boomers’ pending retirement will drive more assets into the investable assets market due to the liquefaction of their retirement plans, homes, & businesses; specifically, the amount of wealth that will transfer will raise overall investable assets from approximately $20 trillion to almost $30 trillion by 2015, creating a tremendous opportunity for financial advisors (a good example of this is the $300+ billion rolling out of retirement plans and into individual retirement accounts each year)
  
• At the same time, however, investors' post-retirement life expectancies have increased dramatically, creating a challenge for financial advisors who must design portfolios for their clients that will provide for their needs during their retirement years
  
• Specifically while the average life expectancy is 76.5, the average 65 year old male has a 65% chance of living past 85, and amongst 65 year old couples, there is a 50% chance that one (or both) of them will live another 25 years
  
• Retirement income products are likely to include annuitization and less volatile investment strategies
  

The breakout session attracted a large audience and first responded to the Tiburon research findings with a wide ranging discussion about the significant issues facing the mass of retirees that are presently unprepared for retirement. Brian Reid (Chief Economist, Investment Company Institute) observed that, “there is a market demand to provide comprehensive solutions using mutual funds in retirement portfolios, following the defined benefit model, like the old days when more of the workforce had pensions as a safety retirement net.”

The group then easily reached a consensus on the daunting public policy issues surrounding retirement income planning. Mr. Armour reminded the group of a thought from CEO Summit XI by David Carroll (President, Capital Management Group, Wachovia Corporation) who said that, “the retirement issue persists because there is no immediate consequence of doing nothing.” As such, "the future breadth and magnitude of this issue is likely to overwhelm efforts to marshal needed resources to deal with it." Mr. Cammack observed that, “the session attendees seemed to have a consensus that private industry programs and resources may be inadequate given the magnitude of the retirement challenge and will require some form of government intervention or guarantees to bolster private solutions."

Paul Schaeffer (Managing Director, SEI Investments) observed that some means of pooling retirement resources in individuals' balance sheets must be found. Jeff Cusack (Managing Director, Sales & Marketing, Rex & Company) agreed and explained his firm’s unique solution that allows a partial forward sale of real estate to provide needed liquidity.

On a more practical level, the group agreed that the IRA rollover opportunity in the future will be significant but that no player has determined an effective way to capture a high share of dollars that are flowing out. Randy Merk (President, Schwab Financial Products, The Charles Schwab Corporation) identified, “the difficulty that firms will have profitably serving mass affluent households with just greater than $100,000 in investable assets.” In addition, he identified the challenge that, “the affluent market will have to insure adequate health care in retirement.” “Paying a retainer for guaranteed quality care from physicians,” was an example of an emerging solution.

Shifting the group to a channels discussion, Mr. Armour added that, "while financial advisors have developed the needed level of trust with retirees, they do not necessarily have the needed retirement planning expertise that resides with insurance firms.” Chuck Robinson (Senior Vice President, Investment Products & Services, Northwestern Mutual) agreed, observing that his firm is, “preparing to deal with what it sees as the five basic retirement needs - investments, guaranteed income, consolidation & monitoring, medical issues, and estate & legacy issues.” The group observed that the combination of asset managers and insurance firms will be a frequent emerging partnership in the future.

Finally, the discussion touched on the need for coordinated pricing between insurance and non-insurance products. Gurinder Ahluwalia (President, Genworth Financial Asset Management, Genworth Financial) observed that, “a number of broker/dealer clients trying to deliver more symmetrical pricing across a diversified portfolio of guaranteed income and financial products.” The consensus of the group was that client demand to meet the retirement income challenge is significant and will continue to be a top priority for both manufacturers and distributors.”

Mr. Roame summarized Tiburon’s view that, “the pending liquefaction and retirement income challenge will make it a great time to be a financial advisor, at least for the next two decades”.

Captive Advisors (Brokers, Private Bankers, & Insurance Agents)

	Attendees listening at a break-out sessions at Tiburon CEO Summit XII

John Cammack (Head of Third-Party Distribution, T. Rowe Price) and Tif Joyce (President, Joyce Financial Management) facilitated a discussion that addressed captive advisors, including brokers, private bankers, & insurance agents. Mr. Joyce opened the session by reviewing some Tiburon research. Amongst other facts, the research showed that:

• There are now 250,000 captive advisors, including over 92,000 wirehouse, other national, regional, and boutique brokers, over 80,000 life and property & casualty insurance agents, and over 80,000 bank brokers and trust officers
  
• Captive advisors dominate consumers’ investable assets, with wirehouses and banks each controlling about one-third (31% and 27% respectively) or $6.2 trillion and $5.4 trillion in client assets
  
• But captive advisors are growing slower than other channels; with independent advisors growing client assets at 14%-18% per annum, full-service brokers (11%), retail banks & trust officers (3%), and life and property & casualty insurance companies (2%) losing ground
  
• Several brokerage firms have 10,000+ person sales forces, with Merrill Lynch having 13,600, Smith Barney having 12,800, and Wachovia Securities having 10,600 (and Wachovia Securities made a big post-CEO Summit announcement to acquire AG Edwards)
  
• The average wirehouse broker controls almost $75 million in client assets, reflecting strong growth and an amount far higher than that of independent advisors, especially independent reps
  
• The average bank-based financial advisor’s production was up 33% in 2005 but still to just $173,800, and bank brokers continue to rely heavily on fixed annuities (41%), variable annuities (27%), and mutual funds (22%)
  

After Mr. Joyce’s opening presentation, the group first established the definition of captive advisors as financial advisors operating under employment contracts. And correctly, the group agreed that open architecture is less of a distinction between independent and captive advisors, as Alan Spiegelman (Wealth Management Advisor, Northwestern Mutual) stated that, “both groups now enjoyed a high degree of open architecture”, dispelling old myths about captive advisors.

Bill Dwyer (President, LPL Independent Advisor Services, LPL Financial Services) explained that the primary reason brokers leave captive firms to join independent broker/dealers is to “control their own destiny.” A secondary reason, but one growing in importance, is the ability to “monitize their practice value.” Mr. Joyce then explained his own personal situation, saying that, “he left a bank broker/dealer role after many years because he could no longer solve his clients’ problems.”

On a more tactical level, Mr. Joyce, who himself was also previously a rep at Ameriprise Financial, explained the merits of independence, stating that it can be a competitive advantage for an independent rep to promote their independence from the large corporate wirehouses. But Chuck Robinson (Senior Vice President, Investment Products & Services, Northwestern Mutual) and Alan Spiegelman (Wealth Management Advisor, Northwestern Mutual) balanced the view saying that the captive environment serves many financial advisors well. Mr. Robinson also noted that Northwestern Mutual was now the fifth largest broker/dealer.

That said, the group debated the significance of the breakaway broker trend. The general consensus was that the trend would slow as the captive broker/dealers (wirehouses) become more accommodating and permit brokers to select the form of relationship they prefer with their broker/dealer. A few present felt that, "the growing complexity of the regulatory environment will slow the flow of financial advisors to the independents.” Ken Fisher (CEO, Fisher Investments) took a contrarian view, saying that, “for most financial advisors, compliance within today’s regulatory environment is not a big deal, given the simplicity of their business models.” Mr. Roame agreed, pointing out that, “there may be more compliance complexity today operating as a commission based broker under NASD regulations than as a RIA.”

The group debated client ownership, whether the clients belong to the financial advisors or the firms. The consensus was that even in the wirehouses, control is gradually shifting to the financial advisors. Mr. Dwyer stated that, “clients will decide who to do business with and will follow their financial advisors if their relationships are strong.” John Bowen (CEO, CEG Worldwide) agreed that with convergence, the independent and captive brokers are calling on the same customers and offering the same services, especially in the high net worth marketplace.”

From a product manufacturers' perspective, David Smilow (Chairman, Jefferson National Financial, Inviva Securities Corporation) offered that distribution to captive advisors and independent advisors is very different when selling insurance products, and that wirehouse brokers are less interested than RIAs in his firm's no-load annuities.

The session ended with a brief summary of the Merrill Lynch rule, provided by Julie Allecta (Partner, Paul, Hastings, Janofsky, & Walker).

Mr. Roame summarized Tiburon’s view that, "the independent market will likely far outgrow the captive environment in numbers of financial advisors and assets under management, but the captive environment's profitability will continue to make it a force."

Independent Advisors (Fee-Only Financial Advisors & Independent Reps)

Dennis Clark (CEO, Advisor Partners) and David Smith

	Tiburon CEO Summit Planning Committee member David Smith (Group Publisher, Financial Advisor Magazine, Charter Financial Publishing Network) presents Tiburon research during a break-out session at Tiburon CEO Summit XII

(Group Publisher, Financial Advisor Magazine, Charter Financial Publishing Network) facilitated a discussion that addressed independent advisors, including fee-only financial advisors, independent reps, and the emerging group of hybrids. Mr. Smith, using Tiburon research, presented underlying data; amongst other facts, he shared that:

• There are now over 110,000 independent advisors (82,000 independent reps and 30,000 partners at fee-only financial advisors), well more than the number of wirehouse brokers (92,000)
  
• Independent advisors though still control just one-third of the assets of full-service brokers ($2.1 trillion versus $6.2 trillion); this includes $1.1 trillion controlled by the fee-only financial advisors and $1.0 trillion controlled by the independent reps
  
• In terms of client assets, fee-only financial advisors (18%) and independent reps (14%) are far outgrowing the other channels – full-service brokers (11%), discount brokers (9%), banks (3%), and insurance agents (2%)
  
• Although both referred to as independent advisors, the independent rep and fee-only financial advisor markets are quite different (e.g, independent reps average $12 million assets under administration while fee-only financial advisors average $56 million assets under management; independent reps invest 15% of client assets in fee-accounts while self-reported fee-only financial advisors invest 85% of client assets in fee-accounts; independent reps have an average account size of $142,000 while fee-only financial advisors average $510,000)
  
• LPL, HD Vest, and Raymond James Financial Services are the leading independent broker/dealers in terms of number of reps, with rep forces of 5,800+, 5,500+, and 4,800+
  
• LPL and Raymond James Financial Services have a huge lead in terms of the number of reps producing at least $100,000 of revenues, with 3,200+ and 2,000+
  
• The Charles Schwab Corporation, TD Ameritrade, and Fidelity Investments dominate the fee-only financial advisor market with 5,200, 4,200, and 2,700 financial advisor clients respectfully (and TD Ameritrade made a post-CEO Summit announcement to acquire the 500 financial advisor clients of Fiserv)
  
• The Charles Schwab Corporation is further out in front when measuring fee-only financial advisor client assets, with $468 billion versus $137 billion at Fidelity Investments and $58 billion at TD Ameritrade
  

After Mr. Smith’s presentation, the group initially focused on gaining a more clear distinction of the regulatory, practice ethics, revenue, and valuation factors that distinguish independent reps and fee-only financial advisors. Mr. Clark, citing Tiburon research, asserted that, “fee-only advisors generate more revenues, work with wealthier clients, and ultimately develop businesses with higher valuations.” However, everybody agreed that the broker/dealer model or commission model was not going away.

Beyond this stage setting, the most relevant topic affecting this segment of the distribution chain was widely agreed to be the Merrill Lynch rule recommended by the SEC and recently rejected by a federal appeals court. The SEC’s broker/dealer exemption rule was struck down because, “the commission lacks authority to grant brokers broad exceptions to rules that apply to investment advisors.” Julie Allecta (Partner, Paul, Hastings, Janofsky, & Walker) remarked that, “this is not the first time that the SEC has been rebuffed by the courts.”

Mike DiGirolamo (Managing Director, Investment Advisors Division, Raymond James Financial Services, Raymond James) said that, “his firm and others have already taken steps to accommodate the potential impact.” Raymond James Financial’s representatives are, “able to accept their responsibilities as fiduciaries and may continue to charge fees versus commissions no matter what action is taken by the ruling.” Skip Schweiss (Executive Vice President, Fiserv Investment Support Services, Fiserv), which has a huge business with dually registered reps sees, “the ruling and the discussion around the ruling as good for the overall business and good for the ultimate consumer of financial advice.”

However, the group did agree that because the SEC has so many issues on its agenda and because Washington is in a state of flux, any real action is not going to happen soon. Furthermore, the group also agreed that the industry should also not wait for the government and should coalesce around the issue, and take the lead in educating and embracing consumers, versus arguing and confusing consumers.

Mr. Roame added that, "independent reps will continue to grow in numbers but fee-only financial advisors seem to be capturing the greatest share of the assets". Mr. Roame also noted that, "for the first time, the number of independent reps was greater than the number of wirehouse brokers."

Financial Advisor Issues Break-Out Sessions

Financial Advisor issues break-out sessions were held on sales & marketing strategies; technology; and mergers & acquisitions.

Financial Advisor Sales & Marketing

Dennis Clark (CEO, Advisor Partners), Tom Lydon (President, Global Trends Investments), and David Smith (Group Publisher, Financial Advisor Magazine, Charter Financial Publishing Network) facilitated a discussion around sales & marketing strategies. Mr. Clark highlighted key findings from Tiburon research, including opportunities in targeting prospective clients by type (retirement plan rollovers continue to be the largest pool), by size (mass affluent are often overlooked), gender (women are more inclined to rely on financial advisors than men), and ethnicity (there are changing dynamics in minority segments of the US population). Amongst other facts, the research showed that:

• Beyond age, the most obvious way to segment consumers is by wealth; the sweet spots seems to be the 24 million households that have $100,000-$1 million (28% of total US investable assets) and the 4.3 million households that have $1 -$5 million of investable assets (50% of total US investable assets). Full-service brokerage firms (and all other financial advisors) have been desperately trying to push their brokers up market
  
• Private business owners (39%), corporate executives (28%), and professional occupations (25%) are the key sources of wealth
  
• Retirement plan rollovers (44%) and other sources of new money (19%) account for two-thirds of the incremental assets being captured by the fast growing fee-only financial advisors market
  
• Wealth is concentrated primarily on the coasts; California now has 859,000 $1 million+ households; it is followed by Florida (265,000), Texas (204,000), New York (185,000), New Jersey (175,000), Illinois (172,000), Massachusetts (120,000), and Virginia (107,000)
  
• Other states have far fewer affluent households, such as Wyoming (755), South Dakota (1,085) and North Dakota (1,620)
  
• Other unique segments exist as well; for instance traditional family structures are blurring; there are now 5.5 million unmarried couple households. Similarly, women heads of households present another unique segment opportunity because they are more likely to rely entirely on the advice of financial advisors (42% versus 33% of men). And Asian Americans have passed African Americans as the largest minority population (13%)
  
• A key opportunity for all types of financial advisors is to break out of the heavy reliance upon client referrals (54% even amongst the fastest growing fee-only financial advisors segment)
  
• Niche marketing oriented firms seem to be most successful in marketing, with 80% of the Hanson McClain Retirement Network financial advisors, for example, marketing more than five hours per week
  
• Tiburon's research suggests that segment marketing has three clear benefits, including an increased flow of referrals, decreased competition & better close rates, and lower costs to serve clients
  

After Mr. Clark’s opening presentation, a variety of case examples were discussed: John Tyers (Senior Managing Director, Broker/Dealer Clearing & Investment Advisor Services, The Bear Stearns Companies) suggested that the wirehouse firms are doing a much better job of marketing because of their shift to fee-based compensation and their huge investments in technology and infrastructure.

Art Lutschaunig (President, Morningstar Investment Services, Morningstar) found that many of his firm's financial advisor clients are focused on financial planning which naturally lends itself to building their businesses through referrals. He suggested that, “there is more emphasis on production when looking at the broker/dealer or independent rep channels.”

John Iachello (Chief Operating Officer, Pershing Advisor Solutions, Pershing, The Bank of New York Mellon Corporation) mentioned that Pershing is providing marketing people to, “consult with larger clients to assist in marketing, public relations, and the creation of collateral materials.”

Jon Parker (President, Western Region, Boston Private Financial Holdings) mentioned that, “the principals of the wealth management firms that his firm has recently acquired often share marketing ideas on and in turn have increased their growth rates.”

Nick Stuller (President, Discovery Database, The Financial Information Group) expressed that his firm is just rolling out a program for financial advisors that offers direct mail, email marketing, public relations, and marketing advice.”

However, the most colorful example came when Pat McClain (Senior Financial Advisor, Hanson McClain) chimed in to support Tiburon’s view about the success of target marketing, saying that, “my dog with a pen in his mouth could sell 80% of what I offer. Focusing on a specific client (AT&T employees) has been our best marketing decision.”

Against that backdrop of increasing opportunity, however the primary finding amongst the participants was the heavy reliance on passive client referrals as the primary strategy for developing new business. Mr. Lydon noted that, "a wide variety of sales & marketing strategies exist but most financial advisors do nothing." Most of the attendees left the break-out session shaking their heads over the opportunities they’re not pursuing, and with a fresh resolve to take more strategic and focused actions consistent with the best practices gleaned from the research, and a few of their more proactive peers.

Mr. Roame summarized that, "with a competitive playing field crowded with over 400,000 financial advisors, marketing through referrals, advertising & public relations, focused target & niche marketing, seminars & direct marketing, and other marketing strategies will be key to success. Numerous opportunities exist; execution is the key".

Financial Advisor Technology

	Tiburon CEO Summit Planning Committee members Tif Joyce (President, Joyce Financial Management) and Kirk Michie (Managing Director, Lenox Advisors) facilitate a break-out session at Tiburon CEO Summit XII

Tom Lydon (President, Global Trends Investments) and Kirk Michie (Managing Director, Lenox Advisors) facilitated a discussion on recent innovations in technology. Mr. Lydon opened the session by providing highlights of the conclusions from Tiburon’s technology developments research report. Amongst other facts, the research showed that:

• Financial advisor technology can be organized and considered in eight categories, including sales-enabling technology, financial planning software, asset allocation software, portfolio management software, account aggregation software, trade order management systems, data download software, data & research services, and contact management software; all of these technologies are combined in a handful of financial advisor workstation offerings
  
• The most often used financial advisor technologies by the fast growing independent rep market are data & research services (76%), financial planning software (68%), and contact management software (64%)
  
• Data & research services have evolved from the days of desktop predominance to the proliferation of web research. However, Yahoo is still the second most widely used data & research service (37%) to Morningstar (67%). Morningstar is also the dominant data & research service used by fee-only financial advisors (76%)
  
• Financial planning software grew out of the proliferation of financial planning workbooks, and evolved through a focus on comprehensive programs to modular solutions. There are now 57 financial planning software programs on the market; the most popular financial planning software programs are Morningstar (61%), Financial Profiles (25%), and Brentmark (14%) amongst independent reps, and Morningstar (68%), Quicken (29%), and custom or proprietary (20%) amongst fee-only financial advisors, but that said most financial advisors (91%) think that their financial planning software is just ok or poor
  
• Contact management software for financial advisors has evolved from the days of generic software use to programs customized for financial advisors. There are now about twenty contact management software programs for financial advisors, with both pros and cons for custom programs, and the most popular being Act (29%) and ProTracker (24%) for independent reps, and Outlook (22%) and Act (20%) for fee-only financial advisors
  
• Portfolio management software has evolved from the days of tools development to be the key technology for fee-only financial advisors. The 32 portfolio management software products include leaders such as Advent’s Axys, The Charles Schwab Corporation’s Portfolio Center, and db Cams+. Although none is used widely, db Cams+ is the most popular portfolio management software product utilized by independent reps. Meanwhile, Portfolio Center is the most popular portfolio management software (33%) amongst fee-only financial advisors, while Advent is most popular amongst larger financial advisors (25% overall)
  

After Mr. Lydon’s opening comments, a series of case studies were discussed, with evolution, preferences, and challenges around incompatible products driving a lively session.

John Iachello (Chief Operating Officer, Pershing Advisor Solutions, Pershing, The Bank of New York Mellon Corporation) discussed the difference between, “what custodians or broker/dealers can provide and what solutions are more accurately the responsibility of the financial advisors.” Mike DiGirolamo (Managing Director, Investment Advisors Division, Raymond James Financial Services, Raymond James) pushed back a bit on Mr. Iachello’s comments by discussing, “a seemless solution on the financial advisors’ desktop at Raymond James,” almost setting up a point to be made by Chris Boruff (President, Advisor Business, Morningstar).

The participants included a number of technology providers, including Mr. Boruff whose Advisor Workstation is in development towards, “providing an end-to-end solution” to the challenges faced by truly independent financial advisors. Knowledge, inclination, and the lack of financial resources were recurring themes, as well difficulties with integration.

In closing, Mr. Michie challenged the group from his role as a financial advisor to provide purely independent best in class solutions, and Allison Couch (CEO, The Financial Services Network (FSN)) chimed in, saying that, “if all that is available, somebody please tell me because I have 200 financial advisors there who want it.” Bryce James (CEO, Smart Portfolios) dimensioned a number of challenges and road blocks for financial advisors, but in the end provided some hope by saying that, “tons of companies are developing tools to integrate all of these products and solutions.” However, regardless of products in development, Mr. Iachello summed up the persistent challenge related to technology by saying that, “best of breed is going to change in six months anyway.”

Mr. Roame encouraged the group to, “consider technology as one of the two driving factors of success in financial advisory businesses.”

Financial Advisor Mergers & Acquisitions

Tif Joyce (President, Joyce Financial Management) and Tom Lydon (President, Global Trends Investments) facilitated a discussion on mergers & acquisitions. Mr. Lydon opened the session presenting highlights of Tiburon’s recently released research report on succession planning, firm valuations, & the growing acquisition market for financial advisors. Amongst other facts, the research showed that:

• Half of all independent financial advisors (50%) intend to sell their businesses upon retirement, with selling to an existing partner or employee being the most popular planned strategy (32%)
  
• Six types of buyers have emerged for financial advisor businesses, including financial buyers, strategic buyers, and competitors, employees, and others
  
• The most successful acquirer to date has been National Financial Partners, which is a nearing 200 acquisitions to date (184)
  
• Amazingly, three-quarters (71%) of independent financial advisors still believe that a revenue multiple is the most logical valuation method (assuming that the business will be ongoing, Tiburon believes that discounted cash flows is the only logical way to value firms)
  
• Fee-only financial advisor businesses have been selling for twice the value of commission-based businesses
  
• There is still a great disparity between the number of listing buyers and sellers, and over three-quarters (84%) of listing sellers have less than $50 million assets under management
  

After Mr. Joyce’s opening comments, a series of case studies were discussed:

Peter Bain (Senior Executive Vice President, US Asset Management, Legg Mason) and Steve Lockshin (CEO, Lydian Wealth Management, Lydian Trust Company) pointed out that buying businesses and buying practices are much different strategies. Mr. Bain stated that, “Legg Mason will never buy a firm where it is the founder’s exit strategy.” Most buyers want to buy firms that are going to continue to grow.

Evan Simonoff (Editor-in-Chief, Financial Advisor Magazine, Charter Financial Publishing Network) pointed out that Business Transitions recently said that, “there were 24 buyers for every firm for sale, resulting in multiples that have grown to levels we have never seen before.”

Jeffrey Dunham (CEO, Dunham & Associates Investment Counsel) and Keith Gregg (Executive Vice President, Sales, Dunham & Associates Investment Counsel) mentioned that they are in the process of purchasing a mutual fund company this year. Mr. Gregg also noted that, “two venture firms have been created to acquire financial advisors, with each commanding $250 million.”

As a case example, Mr. Joyce outlined his business structure and lifestyle choices. The attendees in the room asked him personal questions about his succession plan as his profile is typical of a medium size firm.

Ken Fisher (CEO, Fisher Investments) said that “there are social and psychological issues involved in selling a business or practice.” And Steve Lockshin (CEO, Lydian Wealth Management, Lydian Trust Company) added that, “ego is also a large component as financial advisors are primarily entrepreneurial.”

Interestingly, little discussion in the session focused on either price or whether the number of deals actually done merits all of the attention this area seems to generate. Tiburon’s recent findings indicate that there are a large number of potential buyers, very few sellers, and fewer still with meaningful levels of assets or revenues. Mr. Roame concluded that, "this is a very small market compared to the 120,000+ independent financial advisory firms."

Upcoming Tiburon CEO Summit XIII: October 9-10, 2007

Tiburon CEO Summit XIII will be held October 9-10, 2007 in San Francisco, CA at the Ritz Carlton Hotel. The meeting will start at 7:45am on Tuesday, October 9, include a group dinner that night in Tiburon, and finish at 2:00pm on Wednesday, October 10. There are almost twenty planned sessions. Along with Tiburon's Managing Principal Chip Roame, guest speakers will include Stephanie DiMarco (CEO, Advent Software), Mike Fraizer (CEO, Genworth Financial), George Gatch (CEO, JP Morgan Funds Management, JP Morgan Chase), John Gunn (CEO, Dodge & Cox), Ron Peyton (CEO, Callan Associates), and others to be announced soon. Click here for more details on the upcoming Tiburon CEO Summit XIII. Follow on links will include the tentative invitee list, tentative meeting agenda, and details on hotels & other logistics.

2008-2009 Tiburon CEO Summits

Tiburon will continue to hold semi-annual CEO Summits in 2008-2009. Dates are April 10-11, 2008, October 14-15, 2008, April 9-10, 2009, and October 7-8, 2009.

Spring 2008 speakers will include Walt Bettinger (President, The Charles Schwab Corporation), John Hailer (CEO, IXIS Asset Management Advisors, Groupe Caisse D'Epargne), John Murphy (CEO, Oppenheimer Funds, Mass Mutual Financial Group), Ron Ryan (CEO, Ryan ALM), and others to be announced soon.

Starting in 2008, Tiburon will hold its Spring CEO Summits at the Ritz Carlton Hotel in New York, NY in an effort to help the firm's predominately east coast & European clientele attend more easily.

Additional Information
Please click the links below for more information on Tiburon's CEO Summits:

					Recent Releases Tiburon New Research Report -- Indexing & ETFs Tiburon New Research Report -- Hedge Funds Tiburon's New Research Reports (Mutual Funds, Indexing & Exchange Traded Funds, and Hedge Funds) Tiburon Research Report Retainer
	Related Links Tiburon CEO Summits Tiburon CEO Summit XIII Agenda Tiburon CEO Summit XIII Invitee List Prior CEO Summits		Related Releases Tiburon CEO Summit XII Guest Speakers Summary Highlights Tiburon CEO Summit XII Keynote Speaker Summary Highlights Tiburon CEO Summit XII General Session Panel Discussions Summary Highlights Tiburon CEO Summit XII Meeting Agenda Tiburon CEO Summit XII Attendee List

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Tiburon Strategic Advisors

Tiburon Strategic Advisors, based in Tiburon, CA, was formed in 1998 to offer market research & strategy consulting services to all types of financial institutions and investment managers:

• The firm has served over 300 corporate clients and completed almost 1,000 projects since its founding, and today, its knowledge base includes mutual fund distribution, separately managed account programs, alternative investments, wealth management, insurance products, banking services, the fee-only financial advisor market, the CPA firm market, the family office market, and various international markets.
  
• Tiburon holds a series of CEO Summits semi-annually for its executive-level clients. The next CEO Summit is scheduled for October 9-10, 2007 at the Ritz Carlton Hotel in San Francisco, CA. 2008-2009 dates are April 10-11, 2008 (New York, NY), October 14-15, 2008 (San Francisco, CA), April 9-10, 2009 (New York, NY), and October 7-8, 2009 (San Francisco, CA). Attendance is by invitation only and attendance at each Summit is limited to 100 senior industry executives. Visit the CEO Summits section of Tiburon's web site for details on current and past CEO Summits, including attendee lists, meeting agendas, and highlights. Please contact Tiburon’s Managing Principal Chip Roame at CRoame@TiburonAdvisors.Com or (415) 789-2541 if you are a Tiburon client and have an interest in attending a future Tiburon CEO Summit.
• Tiburon offers thirteen online business benchmarking tools that 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.BrokerBestPractice.Com for wirehouse & regional brokers, www.FABestPractices.Com for fee-only financial advisors, www.IndependentRepBestPractices.Com for independent reps, and www.PrivateBankerBestPractices.Com for private bankers. Almost 5,000 advisors have used these tools. By completing one of the online surveys, financial advisors can access a FREE copy of the relevant comprehensive Tiburon research report, which summarizes and analyzes the collective results.
• Tiburon has published twenty-six ~300-400+ page research reports, which offer detailed analyses of growing business segments; each is available for $5,000; these reports can be ordered by contacting Brian Cotter at BCotter@TiburonAdvisors.Com or (415) 789-2546.
• Tiburon’s weekly research releases, like this one, are emailed for free to interested industry executives, media representatives, conference planners, and individual financial advisors. Over 40,000 industry executives now receive these releases. 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.
• Tiburon plans to expand its workforce in 2007 and 2008. New research managers will develop proprietary research content for Tiburon research reports and client projects and new marketing managers will enhance the firm's web site, weekly research releases program, and the firm's relationships with media representatives, conference planners, and its clients & executive program members. The firm is also seeking to add a research president, principal candidates, and possibly a chief consulting officer in 2007 or 2008.
• Tiburon has built 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. 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.
  

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