Chip Roame welcomed the attendees, gave an overview of Tiburon, and addressed the state of the financial services 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 services, and strategy consulting services, with the latter two accounting for more than half of Tiburon’s revenues.”

The firm has served over 250 corporate clients and completed over 600 projects since its founding in 1998 and today, its knowledge base includes mutual funds distribution, separately managed account programs, alternative investments, wealth management services, insurance products, banking services, the fee-only financial advisor market, the CPA firms market, the family office market, and various international markets.

Mr. Roame also introduced other Tiburon business activities:

• Tiburon holds this series of CEO Summits semi-annually. Attendance is by invitation only and is generally limited to 75 senior industry executives
  
• 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. All executive program members are invited to Tiburon’s CEO Summits and are encouraged to participate in leadership roles in the CEO Summits on issues related to their respective specialties
  
• 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. Almost 4,000 advisors have used these tools thus far
  
• Tiburon has published eleven ~100-300+ page research reports, which offer detailed analyses of growing business segments; each is available for $2,500
  
• Tiburon’s weekly research releases are emailed for free to interested industry executives, media representatives, conference planners, and individual financial advisors. Over 12,000 industry executives now receive these releases each week

Mr. Roame then highlighted the agenda for this, Tiburon’s Seventh Semi-Annual CEO Summit, and discussed highlights of past CEO Summits, including the consumer and innovative business models panels, the state of the industry speeches, and the popular product & market break-out sessions.

After sharing the short update on Tiburon and addressing the CEO Summit agenda, Mr. Roame discussed the state of the financial services industry broadly. This included comments on short-term challenges, consumer wealth, the competitive playing field, and ways to win in the increasingly competitive market. Specifically, Mr. Roame noted that:

• 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 nearly $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 target market strategies may be increasingly critical to success
  

Bill Hambrecht (Founder & Former CEO, Hambrecht & Quist and Founder & CEO, WR Hambrecht & Company)

Bill Hambrecht and Clay Corbas from WR Hambrecht & Company presented a historical and future look at the investments industry, Google, and the Dutch Auction process. Kevin Malone of Greenrock Research introduced Mr. Hambrecht by calling him, "not only one of the great thought leaders in the investments business in the second half of the twentieth century, but also one of its most innovative leaders during this time.”

Mr. Hambrecht reviewed the history of his previous firm, Hambrecht & Quist, which was started by himself and George Quist in 1968 to provide investment banking to companies in Silicon Valley. The growth of technology stocks in the 1980s was the catalyst for Hambrecht & Quist becoming a substantial investment banking, brokerage, and venture capital firm.

The experience of bringing his own firm public in 1996 caused Mr. Hambrecht to question the IPO process. Hambrecht & Quist had several institutional investors interested in purchasing stock of its IPO; however, none of these firms were large Wall Street brokerage firms. Most of these firms did not receive the amount of stock they desired. Over time, he followed these investors and discovered eighteen months later that these firms still owned 50% of their stock purchases, while the large Wall Street firms owned none. He concluded that Wall Street, not potential long-term investors of Hambrecht & Quist, controlled its distribution of stock.

Bill Hambrecht left Hambrecht & Quist in 1998 to start WR Hambrecht & Company, in an attempt to change the IPO process. Since 1998, WR Hambrecht & Company has completed eleven IPOs using a Dutch Auction process, that is, a method that publicly collects bids on IPOs through the Internet to determine the final price. All of the subscribers pay the same price, and Mr. Hambrecht believes that the final price is more efficient.

In fact, Google used this method for its IPO. Google was interested in distributing stock to its users, but the traditional Wall Street IPO method would have eliminated these common investors from participation. Mr. Hambrecht believes that the Dutch Auction process allowed Google to receive a higher price on its offering, and Google investors were able to own shares at the offering price, instead of 25% higher where the stock traded after the offering.

Clay Corbas, a senior managing director of WR Hambrecht & Company, took the group through a review of an actual Dutch Auction process. Kevin Malone summed up the presentation by predicting that the influence of internet-based Dutch Auctions would become pervasive in future IPOs. Tiburon Managing Principal Chip Roame applauded Mr. Hambrecht's efforts saying, "few industry executives bring the consumer-centric passion that Bill Hambrecht displays. The industry should be proud of Bill Hambrecht."

General Session Panel Discussions

Kevin Malone, from Greenrock Research, Frank Maiorano from Nuveen Investments, Dick Saalfeld from Axa Investment Management, and Mitch Nichter & Greg Pusch from Paul Hastings gave a brief presentation on their views of opportunities and issues in the investment management markets, including the impact of the mutual funds regulatory environment. Mr. Malone noted, "while the shadow of the mutual funds scandal hangs over all of us, the integrity of the investments industry has been verified."

Mr. Nichter discussed the impact of recent mutual funds scandals as well as the impact of recently enacted regulations affecting the investment management industry, with particular emphasis on the likely changes in the areas of mutual funds and advisors who use mutual funds.

Mr. Nichter suggested that in the short-run, it will be expensive for advisors to meet many of the new regulatory requirements and that there may be changes in and greater disclosure concerning reciprocal payments among industry participants. However, he concluded that the long-run effects will leave the industry strong and healthy, and that US investors will continue to want and need safe, easy-to-understand, pooled investment vehicles, like mutual funds, and will continue to seek out professional advisors to assist them in their wealth management.

Mr. Pusch also noted:

• US investment models are positioned to become global investment models as the residents of developed economies such as France and emerging economies like China seek access to more investment options
• The investments industry is experiencing positive change from greater competition within the industry and the development of more efficient products and more efficient markets. He estimated that these developments were as much the catalysts for change as the government enforcement actions and regulations

Mr. Malone then transitioned to a discussion of the general health of the institutional investment management business. Mr. Saalfeld outlined his keys to success in the institutional investments business with the weight for each; he assigned the largest weights to competitive investment performance (25%) and distribution partnerships (20%). All other factors ranged in importance from 5% to 10% each.

Mr. Maiorano discussed his views on the second of Mr. Saalfeld's points - specifically, on the role of marketing in the institutional business. He stressed the need for client-centered marketing solutions. Industry participants applauded this session as a terrific top-down look at the opportunities and issues for investment management organizations.

Innovative Business Models

Finally, six Tiburon clients joined Tiburon's Chip Roame in a general session panel to discuss their respective innovative business models. Panelists included financial advisors Ken Schapiro (Condor Capital Management) and Vince Birley (Ron Blue & Company), market participants Tom Bradley (TD Waterhouse) and Jeff Montgomery (National Financial Partners), and product executives Greg Vigrass (Foliofn) and Craig Litman (Litman Gregory Asset Management).

One of the most interesting models was the diversification of Craig Litman's investment advisory business, which manages $1.8 billion in client assets. Litman Gregory has developed a separate business to assist other advisory firms - some of which are direct competitors. The firm has opened its business to sharing best practices, templates, research, and model portfolios by offering a subscription to Advisor Intelligence to over 1,000 other advisory firms. In addition, Litman Gregory offers more mutual fund research through the Litman Gregory No Load Fund Analyst and also offers its research implemented in a series of mutual funds hiring best-of-breed stock pickers. Another interesting fact came from Tom Bradley who said that advisors now account for 62% of the net asset flows at TD Waterhouse.

Product Break-Out Sessions

Product break-out sessions were held on mutual funds & exchange traded funds; fee-accounts, turnkey asset management programs, & separately managed accounts; hedge funds, venture capital & private equity, real estate, & other alternative investments; and wealth management & family office services.

Mutual Funds & Exchange Traded Funds

Andy Arenberg from Barclays Global Investors, Christopher Lanzafame from Franklin Templeton, Keith Mitchell from Mitchell Advisors, Mitch Nichter from Paul Hastings, and Greg Pusch also from Paul Hastings led a discussion on key trends in the mutual funds and exchange traded funds marketplace.

Despite rapid growth in assets, Mr. Arenberg stated that a significant percentage of financial advisors were either not aware of exchange traded funds or how they might be used within their clients' portfolios. The conversation turned to the development of actively managed ETFs and Mr. Pusch commented that several questions remain about their viability or acceptance in the marketplace. The issue of potentially trading at discounts to net asset value, as has been the case with closed-ended mutual funds for example, was one of the unanswered questions.

Many of the attendees mentioned the impact of ETFs within their own wealth management practices, including ways in which ETFs add value to client portfolios. The group seemed to agree that by using ETFs to fill certain asset classes and sectors, advisors are able to seek other products and services to increase overall return or minimize tax liabilities for their clients.

As the discussion transitioned to the mutual funds industry, Mr. Lanzafame said that his firm and others are seeking to focus distribution and product development efforts toward registered investment advisors, as well as continuing to seek distribution outside the US. Many felt that the mutual funds industry was still seeking its footing within the new regulatory environment.

Mr. Mitchell stated that "the number of large mutual fund groups that are continuing to operate with business strategies oriented to the environment of the 1980s and 1990s is a key issue." He suggested that with increased competition from ETFs, separately managed accounts, and alternative products, mutual fund companies need to sharpen their focus on core competencies. Mr. Mitchell observed that "there is a creaking sound in the mutual funds industry today and it is emanating from the old approaches that are failing to work in this new environment. Many are facing financial pressures that will lead them to decisions that will result in smaller, more nimble offerings."

The group then discussed absolute returns, which continue to be a hot topic. Andrew Rudd from Advisor Software commented that "there is a key distinction in the investment decisions required to meet the needs of individual investors versus those of institutions." The longer time horizons of endowments, pension plans, and foundations allow them to think in more relative return terms, where individuals often face more finite horizons and tend to focus on absolute terms. The ability to deliver hedge fund results to smaller investors is still a point of debate and many attendees felt the risk/return equation could be diluted with the higher costs associated with more retail-oriented product approaches.

Dennis Clark from Advisor Partners, Kevin Malone from Greenrock Research, and Barry Mendelson from Capital Markets Consultants facilitated the discussion in the fee-accounts, TAMPs, & SMAs break-out session from the perspectives of separately managed account providers, investment research providers, and program sponsors.

Mr. Clark asked the audience to consider what seems to be a contradiction between the promised benefits of separately managed accounts - customization and tax management - and what is actually being sold and delivered. The conclusion was that wirehouse brokers are selling separately managed accounts as a product and that they are responsible for at least 85% of separately managed account assets (Tiburon data supports this conclusion).

The group also made the observation that while fee-only financial advisors are slow in adoption, these independent advisors are in the best position to implement the promised benefits of separately managed accounts as a solution versus a product. Mr. Malone 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.

Mr. Mendelson provided practical advice for institutional sponsors like brokerage firms, banks, insurance companies, and RIA firms in launching and maintaining fee-based investment programs. He discussed the importance of strategic planning in the development of these programs, and noted “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.”

Kevin Malone of Greenrock Research facilitated the hedge funds, venture capital & private equity, real estate, & other alternative investments break-out session, and Tim Armour from Morningstar, Ron Suber from Bear Stearns & Company, and Jeremy Evnine from Evnine-Vaughn Associates addressed the group. Attendees at this session expressed appreciation for the thorough discussion of the hedge funds industry. Mr. Malone began by defining hedge funds in two ways: one being a hedge or balance against another investment, and the other being an investment company that typically charges an incentive fee. Mr. Malone noted that the growth of hedge funds has been directly related to the second definition.

Mr. Armour addressed the group with a presentation on hedge fund opportunities from Morningstar's perspective. Morningstar estimates that the hedge funds industry is made up of approximately 11,000 funds with $1 trillion assets under management (Tiburon data generally supports these conclusions). He also noted that currently $10 billion is invested in investable hedge fund indices offered by the likes of S&P and MSCI.

Mr. Suber addressed the group on the practical realities of hedge funds and warned the attendees that, "your clients want and/or need hedge funds or funds-of-funds based on asset allocation or competition." He also advised that, "the growth of hedge funds is here to stay." Mr. Suber took the group through the life cycle of hedge funds, which included the start-up phase, the growth phase, and the maturity phase. He suggested looking for hedge funds in the growth phase of their businesses.

Mr. Suber and Mr. Malone then interviewed Mr. Evnine, CEO of Evnine-Vaughn Associates. Mr. Evnine described his investment process, which attempts to uncover abnormal relationships between two variables, in this case stocks. By shorting one stock and buying the other stock, Evnine-Vaughn Associates waits for the relationship to normalize. The time horizons of these trades are eight-to-ten days, so turnover is very high. Diversification is also extremely high, with hundreds of trades occurring weekly. When asked to compare his knowledge of any particular company to that of an active traditional investment manager, Mr. Evnine speculated that traditional managers might need more fundamental information on firms prior to investing.

Wealth Management & Family Office Services

In the wealth management & family office services break-out session, Brent Hicks from Focus Financial Partners, Jeff Roush from CEG Worldwide, Kevin Rowell from Charles Schwab & Company, and Yari Wajid from Tiburon Strategic Advisors led a dynamic dialogue on identifying and responding to consumers' non-investment needs.

Mr. Roush drove the discussion, focusing on the often misunderstood family office market. He noted that family office services are made up of highly specialized highly complex offerings intended for exceptionally wealthy clients, and suggested that while the number of family offices will likely grow 30% by 2008, most advisors should carefully examine their resources and capabilities before entering this highly competitive niche.

Others suggested that smaller advisors should market their non-investment services as a family office for those who cannot afford a family office and outsource the necessary specialized services. Mr. Hicks added that the media is a major driver behind the rush for advisors to enter the family office services arena, and noted that many advisors now feel guilty if they are not providing these services. Mr. Rowell confirmed these experiences across the Schwab advisor client base.

Markets Break-Out Sessions

Markets break-out sessions were held on wirehouses & regional brokerage firms; banks & insurance companies; fee-only financial advisors & independent reps; and institutional markets including the 401K business.

Wirehouses & Regional Brokerage Firms

In the wirehouses & regional brokerage firms session, Evan Cooper from On Wall Street & Bank Investment Consultant, Servio Lee from Tiburon Strategic Advisors, Barry Mendelson from Capital Market Consultants, and John Tyers from Bear Stearns addressed the continuing dominance of wirehouses and the rapid evolution of the brokerage industry. Mr. Cooper noted that while the industry, and in particular the wirehouses, has most of the investment assets of US investors, the wirehouses' market share seems to be declining against the independents (Tiburon data would support this conclusion).

The session solicited active participation with a general agreement that multiple models are likely to succeed including both traditional wirehouse as well as the independents. While there continues to be a migration of advisors to independent status the wirehouses will remain formidable and ferocious competitors with national brand name recognition, significant capital to continue to evolve their offerings, and ample golden handcuffs to hang on to their biggest producers.

The changing nature of the wirehouse sales force was discussed. Session participants concluded that wirehouses now seem to have bifurcated sales forces with successful, entrenched, and seasoned advisors not needing to change their practices significantly towards managed accounts and other fee-based offerings, while younger advisors are taking greater advantage of the entirety of the wirehouse fee-based and wealth management offerings.

It is the younger, up-and-coming wirehouse advisors that these firms are staking their continued dominance on. Mr. Tyers noted that there is "massive convergence and therefore competition in the financial services industry and the wirehouses are tough competitors. We have enormous resources to partner with producers to help them with the needs of their high-end clients."

Mr. Mendelson noted that “the scandals over the last five years have tainted the brands of major firms on Wall Street and elsewhere in corporate America. Objectivity, independence, transparency, and full-disclosure will continue to grow in importance with the informed wealthy investor. High-end advisors will not want to be forced to carry the baggage of unneeded conflicts of interest, paying for services they do not use and indiscretions that seem to occur in other parts of their firms from time to time. If wirehouses are to retain their best advisors over time they will need to offer new and alternative financial arrangements to take away some of the allure of total independence.”

The regional firms appear to be caught in the middle, with less capital to compete and less brand recognition. If they are to survive, they will have to deliver boutique offerings and take advantage of their local appeal.

The CEO Summit closed with four short general session presentations by Mark Lopez from LPL Financial Services, Morgan White from Woodside Asset Management, Cameron Miller from Lovell Minnick Partners, and Chip Roame from Tiburon Strategic Advisors.

Mark Lopez (Managing Director, LPL Financial Services)

Mark Lopez from LPL Financial Services presented a terrific case study of this leading independent broker/dealer. Mr. Lopez cited three major reasons for his firm's success:

• The firm has conducted independent research to deliver non-proprietary best-of-breed products and services
• The firm has been focused on selling infrastructure and support, with no retail offering
• Finally, the firm has stayed focused on the needs of advisors by asking themselves the question: What should we be doing to make the lives of our advisors better?

Morgan White (CEO, Woodside Asset Management)

Morgan White from Woodside Asset Management provided a case study for the CEO Summit’s traditional mergers & acquisitions session, having sold his financial advisory business to Silicon Valley Bank. Mr. White’s key learnings were:

• Sellers should be prepared for cultural differences; combining a corporate culture and an entrepreneurial culture has challenges
• Sellers should not underestimate the amount of time compliance takes in a corporate environment
• Sellers should have clear written business development and cross-selling plans in place
• Sellers should remember that earn-out assumptions are almost always based on retaining key contributors; therefore employee incentives are key to successful transitions

Mr. White also added that open lines of communication need to be built because changes will happen. Fast, open, and direct communications make changes easier.

Cameron Miller from recently established Lovell Minnick Partners (formerly of Putnam Lovell) discussed his firm, the M&A environment, and the type of transactions that are being done in the current environment. He stated that there has been a huge decline in the value of deals since 2000, even though there has been an increase in the number of deals. Mr. Miller believes this has occurred due to the impact of Eliot Spitzer, Sarbone Oxley, the elections, stock prices, and geopolitical issues.

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

• The state of the financial services industry speech by Tiburon's Chip Roame, and the parallel investment management strategies panel that offered a solid common understanding of the markets to all participants, regardless of their industry backgrounds
• The guest appearance of Bill Hambrecht from WR Hambrecht & Company, and the terrific case example presentations by Mark Lopez from LPL Financial Services and Morgan White from Woodside Asset Management
• The consumers panel, which highlighted the industry’s need to better understand client needs, and the advisors panel that allowed attendees to better understand the thought process of leading financial advisors
  
• 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 wealth management & family office services break-out session that helped set the stage for the consumer panel and the hedge funds & other alternative investments break-out session that many said gave them their first comprehensive understanding of hedge funds
  
• The fee-only financial advisors & independent reps market break-out session which brought together long-time custodial competitors from Charles Schwab, Fidelity Investments, TD Waterhouse, and Fiserv, along with representatives of new innovative competitors including Merrill Lynch, Bear Stearns, and Ameritrade
  
• And the group dinner held in Tiburon, CA, which fostered informal communications amongst members from dozens of market segments