Tiburon CEO Summit XVI Guest Speaker Jud Bergman (CEO, Envestnet Asset Management)

Broken Trust

Lineup of luminaries that are now fallen is staggering

Change of players has been remarkable
Brands will need significant re-tooling
Wirehouses were the Tiffany in 1999
Too Big to Fail (stabilization of firms left standing)
Integration to new fee-based business model
Recovering credibility
Re-allocation of capital on infrastructure
New regulations
Independent brand value not yet fully recognized on Main Street
Securities America & Commonwealth have done very well in pointing to the brand of the independent advisor rather than the custodians
E-Money & Assetmark have done good jobs on branding independent advisors

Broken Portfolios

Risk/Reward comfort level
Time horizon for meeting goals & objectives
Strategic asset allocation
Emotional frontier & current frame of mind

The Benefits of Independence

• Objectivity
• Alignment
• Flexibility

Business Impacts for Product & Platform Providers

Platform providers will become increasingly important much in the same way as cable providers have, but branding will be more closely associated with the independent advisors themselves (cable channels) versus the platform provider (cable providers)
As a product provider, trying to increase performance predictability is a key motivator

		Tiburon CEO Summit XVI Guest Speaker Jessica Bibliowicz (CEO, National Financial Partners)

Jessica Bibliowicz (CEO, National Financial Partners)

Jessica Bibliowicz has served as CEO of National Financial Partners since 1999 and as chairman of the board of directors since 2003.

After a brief introduction by Chip Roame, Ms. Bibliowicz discussed the new challenges of operating as a public company, addressed the opportunities she sees for the firm after its run of acquisitions, and talked about trends across National Financial Partners' three core businesses, including large case life insurance, employee benefits, & investment advice. Ms. Bibliowicz made the following points:

Lower Employment, Compensation, & Contributions

Lower employment affects broker side the most
Compensation is under scrutiny

Potential Health Care Reform

Medical cost inflation continues
Rate increases are passed on to employees
Tighter underwriting
Employers unbundle and price-shop benefits
Employer-based
Plus coverage for 47 million uninsured

Early Recovery Typical of Insurance

• People don't want to see volatility, just to see the wealth transfer
• Creative product innovation returning vibrancy to the insurance world and post-retirement investing community

Federal Regulation of Insurance

• Will allow products to come to market more quickly, rather than having to be approved across the 50 state level

Intra Wirehouse Movement

• Brokers are still moving within the wirehouses, but now clients are leaving
• There is an opportunity to improve all the wirehouses by working to improve client confidence

Winning Business from the Wirehouses

• Open architecture is here to stay

Conserving Cash

• Conserve cash by working on networking opportunities with friends in the investment management industry

Helping Firms

Using all assets to help all businesses
Selling all businesses on the fiduciary strengths of the greater firm

		Tiburon CEO Summit XVI Guest Speaker Mark Casady (CEO, LPL Financial)

Mark Casady (CEO, LPL Financial)

Mark Casady has served as CEO of LPL Financial since 2004 and added the chairman title in 2006. He has been instrumental in leading the company to become a multi-faceted organization. He joined the firm in 2002.

After a brief introduction by Tif Joyce (President, Joyce Financial Management), Mr. Casady addressed how both growth in the independent rep market and recent market turmoil have brought about new challenges for this market, including some of the ways in which LPL Financial plans to stay ahead of trends as the nation's largest independent broker/dealer. He focused on scale, branding, & the changing regulatory environment. Mr. Casady made the following points:

Opportunity for the Independent Model Has Never Been Greater

LPL research of today's consumers shows effects of the market decline:
25% trust their full-service brokers less
42% view full-service brokers more negatively
50% are contacted less than monthly or not at all by their full-service brokers
53% now using independent advisors are more satisfied
61% claim advisor relationship is more important than brand

Different Investors Emerging from the Economic Crisis

Scared & uncertain about the future
Serious impact to long-term financial plans
42% concerned about job loss
31% decrease in average net-worth
38% will delay retirement

Importance of Scale

Consolidation leading to greater resources will create more competitiveness, and this cycle will serve to allow certain firms to focus on scale

Changing Regulatory Landscape

Rebuilding trust between Wall Street & Main Street
Single regulatory organization
Protection of assets custody rule
Greater transparency

		Tiburon CEO Summit XVI Guest Speaker Kip Condron (CEO, Axa Financial)

Kip Condron (CEO, Axa Financial)

Kip Condron has served as CEO of Axa Financial and a member of the Axa Group Management Board since 2001. In addition, Mr. Condron is chairman & CEO of Axa Financial's principal insurance subsidiary, Axa Equitable Life Insurance.

After a brief introduction by John Cammack (Head, Third-Party Distribution, T. Rowe Price Group), Mr. Condron discussed how Axa Financial is addressing the challenges presented by the current state of the financial protection & wealth management markets as well as the direction of the new regulatory climate. Mr. Condron made the following points:

Disadvantage for Federal Relief

• Axa has been encouraging the implementation of a federal regulator for the insurance industry
• When TARP money became available to banks, which were regulated, insurance companies were without access to the funds unless they purchased a bank
• The regulation of the insurance industry is antiquated

Public Policy to Create Savings Incentives

• The Financial Services Roundtable, which Mr. Condron is currently chairing, is looking to make recommendations on the issue of savings incentives
  • 77 million baby boomers lost 40% of their retirement assets over the last year

In-Plan Guarantees

• Guarantees within the 401k plan
• Axa sees these as the wave of the future
  • Started a business in late 2007 to create the model product for in-plan guarantees
• Market research shows that 50% of 401k beneficiaries would buy a guarantee, especially after the recent downturn
• In a $3 trillion business, that's $1.5 trillion, but capacity is limiting the growth of the business

Life Insurers Consolidation

Acquisitions must currently be marked on the balance sheet, and no companies are currently prepared to mark their balance sheets
Current market capitalization does not allow consolidation
Mr. Condron sees forced marriages by regulators, modeled similarly to the PNC Financial & National City deal
He is concerned by the risks he sees competitors taking due to the fact that they are now operating on borrowed funds

		Tiburon CEO Summit XVI Guest Speaker Jeffrey Dunham (CEO, Dunham & Associates Investment Counsel)

Jeffrey Dunham (CEO, Dunham & Associates Investment Counsel)

Jeffrey Dunham has served as CEO of Dunham & Associates Investment Counsel since its founding in 1985, and also as chairman of Dunham Trust Company. He also serves as a trustee, president, & principal executive officer of Dunham Funds.

After a brief introduction by Sal Capizzi (Chief Marketing Officer, Dunham & Associates Investment Counsel), Mr. Dunham introduced his consumer oriented model, harkening back to the genesis of the concept and identifying the garnering of trust as the main driver of the building of long-term client relationships that are by definition fiduciary in nature. Mr. Dunham made the following points:

Performance (Fulcrum) Fees

• Fair value for services received
• Adjustment of fees based on performance against the index
• Paid based on results is by nature a fiduciary responsibility
• Better aligns investors' objectives with industry compensation
• Other firms offering performance fees include Vanguard, Janus, Fidelity, Riversource, & USAA, but only Dunham offers 100% performance fees on its funds

Inside Mutual Funds

• Measured on a relative basis on investment-to-investment professional relationship
• Consumers don't care about relative performance, they only care about dollars gained and/or lost
• If fund managers beat the index, the fees go up; if fund underperforms the market, the fees go to zero
• Maximum fees vary from 50 to 100 basis points, with measurement based on rolling 12-months
• Minimum fees vary from 0 to 25 basis points

Financial Advisor Fees

Can be paid on a fixed fee basis or can be paid on a performance fee basis
Performance fees for financial advisors are based only on absolute return basis
Fees based on a monthly accounting of portfolio balance, with the balance at the beginning of each month resetting the benchmark for absolute returns
Qualified investors must be one of the following:
$1.5 million net worth
$750,000 invested with Dunham
$5 million in assetsa

		Tiburon CEO Summit XVI Guest Speaker Ken Fisher (CEO, Fisher Investments)

Ken Fisher (CEO, Fisher Investments)

Ken Fisher has served as the CEO of Fisher Investments since founding the firm in 1979. His recent research, published in professional and scholarly journals, focuses on the emerging field of behavioral finance. Mr. Fisher is known for his Portfolio Strategy financial investment column featured monthly in Forbes magazine, where his 24-year tenure makes him the fourth longest-running columnist in the magazine's 92-year history. Mr. Fisher has also written five finance & business books including 1984’s best seller, Super Stocks and his 2008 New York Times best seller, The Ten Roads to Riches. Mr. Fisher holds a Berstein Fabozzi/Jacobs Levy Award for outstanding published research, has been on the Forbes 400 list of richest Americans since 2005, and is on Investment Advisor magazine’s IA-25 list of the most influential people in that industry. His firm is the largest direct marketer in asset management.

After a brief introduction by Tif Joyce (President, Joyce Financial Management), Mr. Fisher addressed ways in which Fisher Investments will win market share in the new market conditions. Mr. Fisher made the following points:

Consumer Focus

• Mr. Fisher discussed his series of consumer conferences, highlighting key metrics he uses in evaluating clients' needs; he also addressed ways that his firm builds trust by encouraging clients to speak to one another at these conferences
• Focus on the woman of the house, for she is likely to play a larger role in the family finance after this latest downturn

Core Focus

• Cut programs that cost money and focus on free or cheap programs that increase innovation

Legal Risks

• Mr. Fisher spent considerable time addressing the coming wave of lawsuits that he believes will besiege the financial services industry
  • Statute is five years
  • Most aggressive prosecutors will build up their case files against biggest firms for massive class-action suits
  • Now is the time to invite these prosecutors to upcoming CEO Summits to participate in panel discussions on the current landscape

Marketing Effects

• Stick to the core, cut costs, and boost budget
• Market share is the number one target for Fisher

Service Formalization

• Increase service standards in formalized programs for existing and new clients

Reconsider Employees

Cut the less-talented
Mr. Fisher shared a program he uses within Fisher Investments to utilize his human capital to increase firm-wide innovation - by paying bonuses to employees who come up with ideas that management has failed to identify

		Tiburon CEO Summit XVI Guest Speaker Roger Ibbotson (Professor, Yale University; Chairman, Zebra Capital Management; & Former CEO, Ibbotson Associates)

Roger Ibbotson (Professor, Yale University; Chairman, Zebra Capital Management, & Former CEO, Ibbotson Associates)

Roger Ibbotson is Professor in Practice at Yale School of Management and chairman of Zebra Capital Management, a quantitative equity hedge fund manager. He was also the founder & former Chairman of Ibbotson Associates, now a Morningstar Company, where he still serves as an advisor. Professor Ibbotson conducts research on a broad range of financial topics, including investment returns, mutual funds, international markets, portfolio management, & valuation.

After a brief introduction by Patrick Reinkemeyer (President, Morningstar Associates, Morningstar), Mr. Ibbotson addressed long-term economic growth, current unemployment, and the new U.S. administration. He compared the current economic climate to past bear markets and discussed the role hedge funds have played in the past and will continue to play in the future. Mr. Ibbotson made the following points:

Hedge Funds & Alternatives Golden Years Ended in 2007

• 2008 was second-worst stock return year in United States history (1931)
• Hedge funds down 20%
• Real estate, private equity, & hedge funds all had high returns & growth in AUM

Ten Year Returns Still Positive

• Hedge funds lost about half as much as stock markets in 2008
• Beta impacted returns, but equity market neutral has low risk
• Ten year returns still positive, with 2008 (-18.4% & -6.2%) driving 1998-2007 at 9.9% & 6.3% down to 1999-2008 at 7.5% & 4.5% for weighted composite & equity market neutral returns, respectively

Economy to Fall in 2009

• Continual job losses
• A year of negative growth

Stock Market to See High Volatility & High Returns from Lows

• Volatility as high as the 1930s
• Market will bottom at first sign of improvement
• Large positive stock returns will occur before the recession ends

Hedge Funds: More Withdrawals in 2009

Higher return opportunities

		Tiburon CEO Summit XVI Guest Speaker Scott Powers (CEO, State Street Global Advisors)

Scott Powers (CEO, State Street Global Advisors)

Scott Powers has served as CEO of State Street Global Advisors since 2008; State Street Global Advisors is the investment management arm of State Street Corporation. He is also a member of State Street's Operating Group, the company's senior-most strategy and policy-making team.

After a brief introduction by Tony Rochte (Senior Managing Director, Intermediary Business Group, State Street Global Advisors, State Street Corporation), Mr. Powers addressed the ways in which State Street Global Advisors will continue to attract high-net-worth investors. His presentation specifically addressed the challenges of capital preservation in the current market. Mr. Powers made the following points:

Modern Portfolio Theory Questioned

• Investors today are seeing absolute negative returns, and the questions are prevalent
• But nobody knows what to do next, what the alternatives are
• Clients will pay for the floor and give up some of the upside

Liability Driven Investment Strategies Receiving Attention

• Much more of a sense of urgency in conversations surrounding this concept
• The risk of inflation must be considered
• Matching liabilities with overlay strategies with growth pockets that add value over time
• Becoming much more prevalent at the large planned sponsor level because unfunded liabilities become a balance sheet obligation

Hedge Funds-of-Funds Disappointed Badly

• Managed volatility and absolute return space has not been a shining light of returns recently
• How much is skill versus how much is beta that is leveraged?

Demand for Absolute Return Strategies Strong

• People are not giving up on hedge funds (uncorrolated sources of return)
• Focus is on predictability of return

Many Considering Hiring Fewer Managers with Larger Mandates

• Handling multiple asset classes
• Handling multiple outcome oriented strategies
• Negotiated down to an attractive fee structure
• If they can deliver alpha, they will be paid hansomely

Pension Plans Significantly Underfunded

• The -40% rate of return in the last year has caused a serious problem
• The portfolios have been de-risked as liabilities have been off-loaded, so at this point, there is a requirement for either greater risk or the injection of new capital

Value of Investment Consultants Being Questioned

• Nine style box theory (modern portfolio theory) being questioned
• Under fire due to their inability (lack of resources) to do adequate research to justify investment decisions

		Tiburon CEO Summit XVI Guest Speaker Paul Stevens (CEO, Investment Company Institute)

Paul Stevens (CEO, Investment Company Institute)

Paul Stevens has served as CEO of the Investment Company Institute since 2004. He also is a director of ICI Mutual Insurance.

After a brief introduction by Tif Joyce (President, Joyce Financial Management), Mr. Stevens addressed the state of the mutual funds market, including a review of the historical success of mutual funds’ role in 401K plans since their introduction in 1981. He specifically addressed the relationship between government & business, and how the current economic landscape presents new & unprecedented challenges in retirement planning. Mr. Stevens made the following points:

Systemic Risk

• Washington will implement some kind of device to measure this; the Fed lost credibility as it fell asleep in dealing with the early stages of the subprime crisis
• Congress will most likely opt to assemble a coucil of regulators, perhaps led by the Secretary of the Treasury, with a statutory mandate and an independent staff of its own, working outside of the system, but addressing identified risks through operating regulating agencies

Regulatory Gaps

• Unregistered pools
  • Hedge funds & private equity will have to live with new forms of regulation, with perhaps non-public visibility to the regulators, but there seems to be an appetite to go beyond that even
• OTC derivatives
  • Credit default swaps will incur public action, by making the market more standardized through regular clearing mechanisms subject to oversight
• Broker/dealer & investment advisor regulations
  • In Washington, issues with fiduciary responsibility are never resolved to a lesser extent
  • Brokers want fee-based business model without having the fiduciary responsibility, but the ICI believes there should be increased harmony between fees & responsibility
  • Suitability has been defined as not completely unsuitable, and that is likely to change

Municipal securities

• A very substantial market that ought to have a better regulatory framework to improve disclosure, although this issue is highly political

Capital Markets Regulation

• SEC must be re-invigorated, with a staff reorganization, relationships with industry revamped, and active management without a requirement for lawyers

Desire to Increase Coverage of 401k Plans

• Continued congressional scrutiny
  • Adequacy
  • Disclosure
  • Targe-date funds
  • Retirement income
• Auto IRA
• ICI response
  • Highlight success of 401k system & support ways to improve it
  • Work with Congress and Department of Labor to implement better disclosure
  • Fix social security

Liquidity Standards

• Daily & weekly minimum (5% & 20%, respectively)

Portfolio Maturity Limits

• Adopt a second WAM calculation

Enhanced Credit Analysis

• Prohibit money market funds from investing in second-tier securities

Client Procedures

• Understand client requirements
  • Liquidity & redemption needs with respect to concentrated client base

Board Suspension of Redemptions

Recommend the SEC authorize fund boards to suspend redemptions under certain circumstances