ceo summit opening

CEO Summit XIV Welcome &State of the Financial Services Industry

Tiburon CEO Summit XIVNew York, NYApril 10, 2008

08.04.10 – Tiburon CEO Summit XIV © Tiburon Strategic Advisors, LLC™ 2

Tiburon CEO Summit XIV – Vision & History

State of the Financial Services Industry

– Recap of the Semi-Annual News: Six Months of Amazing Industry News Stories

– Fundamental Industry Trends: Reinforcing Tiburon Research Findings

Leveraging Tiburon Strategic Advisors

Tiburon CEO Summit XIV – Schedule & Tactics

Outline


The Vision for Tiburon’s CEO Summits Has Not Changed Since CEO Summit I in 2001 (the M Financial Group Story)

Source: Tiburon Research & Analysis

“The financial services industry lacks a CEO level conference that runs across traditional industry

lines. I have come to realize that CEOs from many segments are dealing with the same issues from different perspectives. I have benefited greatly from hearing these perspectives, and Tiburon’s

clients would as well. My vision is probably most like Allen & Company’s Media Summit, as I

envision all CEOs attendees from just the financial services industry”

Tiburon CEO Summits Vision


Tiburon CEO Summit Themes

Tiburon’s CEO Summits Have Come to Support Two Key Themes, Including Challenging Conventional Wisdom and Maintaining a Consumer Orientation

Challenging Conventional Wisdom

Maintaining aConsumer Orientation

• Tiburon research leads with skeptical view of industry truths

• General session guest speakers encouraged to discuss the tough issues

• General session panel discussion leaders and break-out session leaders encouraged to stir up true discussion & debate

• Tiburon opening speech leads with consumer wealth

• Three general session panel discussions focus on levels of consumers



The Tiburon CEO Summit Planning Committee Deserves Recognition for Helping to Plan & Execute CEO Summit XIV; Thanks!


Tiburon CEO Summits Planning Committee

•Tom Lydon (Global Trends)•Scott MacKillop (Frontier Asset Management)•Kevin Malone (Greenrock Research)

•Kirk Michie (Triton Pacific)•Skip Schweiss (TD Ameritrade)•Gib Watson (Prima Capital Management)

•Tim Armour (Janus Capital Group)•Dennis Clark (Advisor Partners)•Tif Joyce (Joyce Financial Management)


Tiburon CEO Summit XIV Includes Nine Terrific Guest Speakers…


Tiburon CEO Summit XIV Speakers

• John Hailer (CEO, Natixis Global Associates)

• Joe Moglia (CEO, TD Ameritrade)

• John Murphy (CEO, Oppenheimer Funds & Chairman, Investment Company Institute)

• Bob Pozen (Chairman, MFS Investment Management)

• Ron Ryan (CEO, Ryan ALM)

• Michael Steinhardt (Chairman, Wisdom Tree Investments)

• Walt Bettinger (President, The Charles Schwab Corporation)

• Mike Byrum (President, Rydex Investments)

• Joe Deitch (CEO, Commonwealth Financial Network)


Tiburon CEO Summit XIV Has Fifteen Terrific Sponsors who Made the Move to the Ritz Carlton Hotel Possible; Thank You!


Tiburon CEO Summit XIV Sponsors


Tiburon CEO Summit XIV Has 150 Registered Attendees, All C-Level Executives & Executive Vice Presidents, and All Executives from Tiburon Client Companies


Tiburon CEO Summit XIVAttendees

9 11 12 1624

7483 86

7077 75

107

150

108

CEOSummit I

CEOSummit

II

CEOSummit

III

CEOSummit

IV

CEOSummit

V

CEOSummit

VI

CEOSummit

VII

CEOSummit

VIII

CEOSummit

IX

CEOSummit

X

CEOSummit

XI

CEOSummit

XII

CEOSummit

XIII

CEOSummit

XIV








Outline


The Past Six Months Has Brought Dozens of Amazing Financial News Stories (Leaving Aside Eliot Spitzer)


• Auction Rate Securities Market Collapse

• Money Market Fund Bailouts

• Stock Market Disaster• Senior Executive

Ousters• Wall Street Layoffs• Ratings Agency

Conflicts• Bond Insurers

Confusion• Consumer Mortgage

Defaults & Quasi Bailout

• Housing Values Down, Challenging the Liquefaction

• Financial Services Stocks Down (Even More than Others)

• Presidential (& Congressional Elections) & the Related Spin

• Proposed Regulatory Changes

• Pending Recession

• Sub-Prime Mortgage Write-Offs

• Capital Raising• Sovereign Wealth

Funds• The Bear Stearns

Companies• Societe Generale• Countrywide• Thornburg Mortgage• E*Trade Financial• Private Equity Industry

Collapse• Hedge Fund Troubles

Tiburon Semi-Annual News Review


The Most Recent Industry Headache of Sub-Prime Mortgages Seems to be Self-Created…


“The basic premise is that the investment banks create CDOs to buy risky paper, pool

those risks, and then sell those CDOs so that they can then go buy more risky

paper… And we are surprised when this business ultimately blows up?”

Tiburon View


The Write-Offs Have Been Staggering, Led by those at UBS, Merrill Lynch, & Citigroup

Note: Other write-offs have included Washington Mutual ($5.8 billion), JP Morgan Chase ($5.0 billion), Wachovia Corporation ($4.9 billion), CIBC ($4.1 billion), & Societe Generale ($3.8 billion)


Sub-Prime Mortgage CrisisWrite-Offs($ Billions)

$6.4

$6.5

$8.2

$9.0

$11.7

$12.4

$23.9

$25.1

$37.1

$6.4Deutsche Bank

Credit Suisse

Credit Agricole

Bank of America

IKD Deutsche

Morgan Stanley

HSBC

Citigroup

Merrill Lynch

UBS


The Sovereign Wealth Funds Stepped in to Solve Many Capital Issues, with Singapore Leading the Way, Taking Stakes in UBS, Citi, Merrill Lynch, & Barclays

Note: Other sovereign wealth fund investments included China in Bear Stearns ($1.0 billion) and Qatar in Credit Suisse ($0.5 billion)Source: Tiburon Research & Analysis

Sovereign Wealth Fund Investments($ Billions)

$2.0

$3.0

$4.4

$5.0

$5.6

$6.6

$6.8

$7.5

$9.8

$1.5China & Canada (CIBC)

Singapore (Barclays)

China (Barclays)

Singapore (Merrill)

China (Morgan Stanley)

Kuwait (Citi)

Korea & Kuwait (Merrill)

Singapore (Citi)

Abu Dhabi (Citi)

Singapore (UBS)


And We as a Country Feel the Need to Bail these Folks Out….


“The damage caused by a default by Bear Stearns could have been extremely difficult to contain. We did what we did because we

felt that it was necessary to sustain the viability of the American financial system”

- Ben Bernanke

Federal Reserve View


The Individuals Have the Same View, Seeking a Bail Out After their Gambles Went Wrong…


“How will you make us whole?”

- Bear Stearns Senior Managing DirectorQuestion to JP Morgan’s Jamie Dimon

Bear Stearns View


We May be Losing Perspective… $4.0 Billion was One of the Smaller Write-Offs…


“When is a good time to write off $4 billion (Deutsche Bank)? The same day that your

European neighbor (UBS) writes off $19 billion!”

- Wall Street Journal Reporter

Wall Street Journal Comment


And there Seemed to be a Clear Outcome Involving CEO Heads Rolling Until We Got to HSBC and Morgan Stanley….


“Am I the only one that noticed that the CEOs of HSBC and Morgan Stanley slipped

through as did every board of directors”

Tiburon View


Unfortunately, Tiburon’s Belief is that this is Going to Continue to Happen… What is Unclear About the Outcomes that will Result from the Compensation System?


“I am afraid that the investment banking compensation system incentivize

executives to take extreme risks (moral hazard). Just think back to the bonuses in the good years; do they give those back?

Then why not take another big risk?”

Tiburon View


$7.8$8.3

$9.3

$10.4$10.9

$9.6

2002 2003 2004 2005 2006 2007

Consumer Households Real Estate Equity

($ Trillions)

The Bigger Public Policy Issue Here is the Threat to Baby Boomers’ Ability to Retire; Lost Real Estate Equity Will Challenge the Liquefaction….

Source: 12/31/07 Federal Reserve Flow of Funds Report; 3/31/07 Federal Reserve Flow of Funds Report; Tiburon Research & Analysis


And on the Regulatory Front, the Skeptics are Not So Sure that the Power Should Go to the Federal Reserve…


“It is like giving a bigger shovel to the guy who dug the hole”

Chairman Chris Dodd View

- Chris DoddChairman, Senate Banking Committee








Outline


#1: Tiburon’s Focus Has Recently Been Based on the Fact that US Households Control Almost Three-Quarters of All Investable Assets, Two-Thirds of that Invested Via Financial Advisors

Investable Assets by Market Segment

Consumer Assets Invested Via

Financial Advisors45%

Consumer Assets Invested Directly

25%

Retirement Plans, Endowments, &

Foundations30%



#2: More than Three-Quarters of Baby Boomers Over the Age of 55 Have Less Than $100,000 in Investable Assets…

Source: 2/3/05 New York Times; Tiburon Research & Analysis

Baby Boomers Over Age 55 by Investable Assets

<$100,00079%

>$100,00021%


$132.4

$184.7$174.9 $174.3

-$34.8

-$96.4-$82.3

Consumer Household Personal Savings($ Billions)

#3: Baby Boomers are Not Saving the Traditional Way…

Source: 3/31/07 Federal Reserve Flow of Funds Report; Tiburon Research & Analysis

2001 2002 2003 2004

2005 2006 2007


#4: Only 2% of Baby Boomers Will Receive an Inheritance of More than $100,000

Inheritance >$100,000

2%

Inheritance <$100,000

98%

Source: 2/04 Journal of Financial Planning; 8/12/01 US Bancorp Piper Jaffray Web Site (Gallup); 12/00 SunAmerica Brochure; 7/96 Commonwealth Club Newsletter; 2/19/96 US News & World Report; Tiburon Research & Analysis

Baby Boomers by Size of Inheritance


#5: And Most Underestimate Life Expectancies…

Source: 12/11/06 Investment News; 8/12/01 US Bancorp Piper Jaffray Web Site; 8/12/01 Allstate Brochure; 12/00 SunAmerica Brochure; 7/22/96 Business Week; Tiburon Research & Analysis

100+6%

90-9418%

85-8920%

95-9911%

65-8445%

65 Year Old Person Life Expectancy


#6: The Solution to the Perceived Savings Crisis is Baby Boomers’ Liquefaction, Including Retirement Plan Rollovers & Small Business Sales

Source: 6/07 Fisher Investments Brochure (Federal Reserve Flow of Funds Report); 3/31/07 Federal Reserve Flow of Funds Report; 1/22/04 McKinsey Quarterly; 5/22/02 Wachovia Presentation (Spectrem; McKinsey & Company); 5/9/02 Wachovia Bank Wealth Management Presentation (Blythe); 5/9/02 Spectrem Presentation (Doe); 8/14/01 Wall Street Journal; 7/01 Registered Rep (Cerulli); 6/19/00 Investment News; Tiburon Research & Analysis

Consumer Households Net Worth($ Trillions)

$56.3

$22.8

$12.2

$27.0

$7.5

InvestableAssets

RetirementPlan Assets

PersonalAssets

Other IlliquidAssets

TotalHousehold

Assets


#7: Mutual Funds are the Dominant Investment Product… Why all the Confusion and Sensational Reporting & Presentations?

Source: 3/05 ICI Web Site; 7/19/04 Barron’s; 4/04 Research (MMI); 12/15/03 Investment News (Cerulli); 7/03 Ticker; 5/27/02 Merrill Lynch Presentation (Cerulli) (Doe); 10/01 Investment Consulting News; 7/13/01 Cerulli Presentation (Strategic Insight) (Cerulli); 7/11/01 RunMoney Conversation (Jorgensen); 7/2/01 RunMoney Quarterly Report; 7/01 Financial Advisor; 6/25/01 Investment News; 4/01 AIM Brochure (Cerulli); Tiburon Research & Analysis

Leading Investment ProductsAssets Under Management

($ Billions)

$460 $720

$1,743 $1,800 $1,900

$3,000

$10,800

ExchangeTradedFunds

SeparatelyManagedAccounts

VentureCapital &PrivateEquity

Annuities HedgeFunds

LifeInsurance

(Cash Value)

MutualFunds


$8 $12 $15$26

$44

$70

$104

$150

2000 2001 2002 2003 2004 2005 2006 2007

Source: 1/23/07 Wall Street Journal (ICI); 1/07 Financial Advisor (FRC); Tiburon Research & Analysis

Target Date (Lifecycle) Mutual FundsAssets Under Management

($ Billions)

#8: The Target Date (Lifecycle) Mutual Funds Market is Booming… Tiburon May Stand Alone in Reality…


#9: Packaged Fee-Account Assets Have Grown Substantially Over the Past Eight Years to Over $1.5 Trillion; Gatekeepers Now Rule!

Source: 8/23/05 Fund Fire; 8/12/05 Mutual Fund Daily; 5/25/04 Money Management Executive (FRC); 4/04 Research (MMI); 2/10/04 MMI Press Release; 12/15/03 Investment News (Cerulli); 12/15/03 FRA Conference Brochure; 3/27/03 Wealth Management Letter; 3/10/03 American Banker; 9/30/02 IIR Conference Brochure (Cerulli); 9/23/02 Investment News; 8/7/02 Wealth Management Letter; 6/02 Ticker; Tiburon Research & Analysis

Packaged Fee-Account Assets($ Billions)

$82 $115 $117 $120$180

$235$356

$452

$662$769 $800

$927

$1,081

$1,208

$1,500

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


#10: Exchange Traded Funds are the Most Significant Product Development Since Mutual Funds in the 1940s

Source: 1/8/07 Investment News (SSGA); 1/23/06 Ignites Email (ICI); 1/18/06 Dow Jones Email (Ryan); 12/19/05 Rydex Investments Brochure (ICI); 11/30/05 ICI Web Site;11/9/05 Morgan Stanley Analyst Report; 10/24/05 Investment News; 10/05 Research; 9/12/05 New Millennium Advisors Presentation (Carty) (ICI); 8/29/05 Investment News (ICI); 8/05 Morgan Stanley Analyst Report (Bloomberg); 7/12/05 IIR Conference Brochure; Tiburon Research & Analysis

Exchange Traded Fund Assets($ Billions)

$1 $7 $20 $36$70 $83

$102

$151

$226

$290

$407

$578$608

1993 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008


#11: US Hedge Funds Assets Under Management Have Grown Significantly to Almost $2 Trillion But are Sputtering

US Hedge FundsAssets Under Management

($ Billions)

Source: 1/18/08 Hedge Fund Review (Hedge Fund Research); 7/31/07 Bloomberg Web Site (Bhaktavatsalam); 3/21/07 American Banker Online (Hedge Fund Net) ; 3/19/07 Investment News; 3/6/06 Business Week (Hedge Fund Research); 12/5/05 Money Management Executive (Hedge Fund Research); 10/15/05 Financial Times; 6/8/05 Wall Street Journal; 1/5/05 Wall Street Journal (Hennessee); Tiburon Research & Analysis

$55$200

$435$500

$600$750

$980

$1,530

$1,900 $1,870 $1,900

1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008


#12: For the Vast Majority of Consumer Households, the Twin Retirement Challenges Revolve Around Health Care & Retirement Income


Consumer Household Retirement Challenges

Retirement Income

• Annuities• Reverse mortgages• Other ideas to tap into home values• Government intervention?

Health Care

• Cost up twice as fast as overall costs

• Employer coverage down


Life and P&C Insurace Agents

(87,609)23%

Bank Brokers & Trust Officers

(82,729)22%

Independent Reps (82,306)

22%

Wirehouse, Other National, Regional, &

Boutique Brokers (92,648)

23%

Partners at Fee-Only Financial Advisor

Firms (30,024)8%

Discount Broker & Mutual Fund

Company Reps (6,951)

2%

Financial Advisors By Market

#13: Close to 400,000 Financial Advisors are in the Market; the Numbers of Brokers, Insurance Agents, Bankers, & Independent Reps are Each About the Same

Source: 7/25/05 Forbes; 6/05 Research; 2/21/05 Money Management; 2/04 Registered Representative; 11/24/03 Cerulli Edge; 2/9/00 Prima Capital Meeting (Watson); 1/00 Prima FA, CPA, & FO Interviews; 12/10/99 Prima Capital Conversation (McColl); Tiburon Research & Analysis


#14: But Independent Advisors Collectively Continue to Outgrow the Competition…

Client Assets Annual Growth Rate by Market(1995 - 2007)

Source: 7/19/04 Federal Reserve Bulletin; 12/97 Securities Industry Yearbook; 7/22/97 American Banker; 5/12/97 Pensions & Investments; 3/97 Federal Reserve Bulletin; 12/96 ACLI Life Insurance Factbook; 11/95 Best’s Review; Tiburon Research & Analysis

18%

14%

11%9%

3%2%

Fee-OnlyFinancial Advisors

Independent Reps Discount Brokers& Mutual Fund

Companies Direct

Wirehouses,Regional, &

Boutique Brokers

Retail Banks &Bank Trust

Officers

Life and P&CInsurance

Companies



#15: Fidelity Investments Has Become the Largest Financial Services Firm and Soon Schwab Will Move into Second Place, Signaling the Growth of New Business Models

Financial Services Firmsby Client Assets Under Administration

($ Trillions)

$1.1

$1.4

$1.5

$1.6

$1.0Bank of America

Citi

The CharlesSchwab

Corporation

Merrill Lynch

FidelityInvestments


Global Mutual Funds Assets Under Management By Product Type

#16: For Product Companies, it is Worth Noting that Non-US Mutual Funds Assets Under Management Have Surpassed those of US Mutual Funds

Source: 4/3/08 ICI Web Site; 11/07 ICI Web Site; 5/28/07 Strategic Insight Email (Nachmany); Tiburon Research & Analysis

58% 59% 60% 56% 53% 50% 50% 48% 44%

42% 41% 40% 44% 47% 50% 50% 52% 56%

1999 2000 2001 2002 2003 2004 2005 2006 2007

US Mutual Funds

Non-US Mutual Funds


$2 $3 $5 $6$10 $12

$20$25

$27$32

$43

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: 7/26/07 Fisher Investments Meeting (Ornani); 7/19/07 San Francisco Chronicle; 7/18/07 Fisher Investments Web Site; 7/18/07 Fisher Investment Email (Ornani); 7/18/07 Wikipedia Web Site; 7/16/07 San Francisco Chronicle; 7/15/07 Bob Veres Newsletter; 6/20/07 Wall Street Journal; 7/27/06 Fisher Investments Meeting (Ornani); 6/14/06 Fisher Investments Email (Ryan); 4/21/06 Fisher Investments Email (Fisher); Tiburon Research & Analysis

Fisher Investments Assets Under Management($ Billions)

#17: And for Financial Advisors, it is Worth Understanding the Model of the Fastest Growing Independent Financial Advisor


204 250 241289 335

802

681

809870

787

923996

1985 1986 1987 1988 1989 2001 2002 2003 2004 2005 2006 2007

Financial Services Industry Mergers & Acquisitions

#18: At an Institutional Level, Mergers & Acquisitions were Booming But Have Slowed Dramatically in 2008 Due to the Credit Crisis

Source: 1/20/08 Thomson Financial Analysis; 4/91 McKinsey Quarterly; Tiburon Research & Analysis



#19: Management Theories can Often be Applied at Various Levels throughout the Financial Services Industry

Tiburon Strategic Thoughts

Confusing % & $Target Marketing

• Full-service brokers versus RIAs

• Mutual funds versus separate accounts

• Hanson McClain Retirement Network

• CMS Companies• Clearly Gull• Rydex• Pro Funds• DFA

Bifurcation

• Retail banks• Full-service brokers• Mutual funds• Financial advisors


#20: Tiburon Summary Conclusions….


Tiburon Summary Conclusions

Context SettingInvestment &

Financial Advice

News Noise• Investment bank

write-offs• Ratings agencies• Bond insurers• Sovereign wealth

funds• Eliot Spitzer

Fundamental Trends• Savings crisis• Liquefaction• Long lives

Investment Advice• Mutual funds• Fee-accounts &

unified managed accounts (gatekeepers)

• Polarization

Wealth Management• Health care• Retirement

income• Estate planning• Charitable giving

Markets & Distribution Channels

• Fidelity & Schwab becoming #1 & #2

• International markets now surpass US markets

Financial Advisors

Fisher Investments• Advertising• Client retention• Asking for

incremental funds• Clear

accountability & metrics

Everyone Else• Should be…

segment marketing & asking for client referrals

• Actually…


Tiburon Q&A….


Q&A

Tiburon Q&A








Outline


Tiburon Value Proposition….


“Research-based strategy consulting for financial services

firms”

Tiburon Value Proposition



Tiburon Delivers Research & Strategy Consulting Services, Packaged in Three Primary Ways, Including Reports, Seminars, & Projects

Tiburon Core Business Services

Research Reports & Retainer

Market Seminars & Conference Speeches

Market Research &

Strategy Consulting

Projects

Core Research

Engine








Outline


Tiburon CEO Summit XIV Includes Nine Terrific Guest Speakers…


Tiburon CEO Summit XIV Speakers

• Michael Steinhardt (Chairman, Wisdom Tree Investments)

• John Murphy (CEO, Oppenheimer Funds & Chairman Investment Company Institute)

• Mike Byrum (President, Rydex Investments)

• John Hailer (CEO, Natixis Global Associates)

• Joe Deitch (CEO, Commonwealth Financial Network)

• Joe Moglia (CEO, TD Ameritrade)

• Walt Bettinger (President, The Charles Schwab Corporation)

• Ron Ryan (CEO, Ryan ALM)

• Bob Pozen (Chairman, MFS Investment Management)

Public Policy Products Management


We Also Have a Thoughtful Set of Three General Session Panel Discussions, Shining the Light on Clients…


Tiburon CEO Summit XIVGeneral Session Panel Discussions

Ask the Distributors(Tim Armour)

• Financial advisor product needs?

• Distributor access strategies?

• Financial advisor wholesaling strategies?

Ask the Consumers(Tif Joyce)

• Needs from financial advisors?

• Needs from financial institutions?

• Why so many self-serve consumers?

Ask the Advisors(Dennis Clark)

• Evolving product use (or not)?

• Sales & marketing strategies or lack thereof?

• Technology use or lack thereof?

• Views re succession planning?


And Finally, the Tiburon CEO Summit Schedule is Designed to Foster Discussion Time…


Tiburon CEO Summit XIV Discussion Time

Lunches & Dinners

• Last night• Today’s lunch• Tonight!• Tomorrow’s lunch• Tomorrow night

Thirty Minute BreaksFriday Afternoon

Break-Out Sessions

• Retirement Income Products

• Separately Managed Accounts

• Registered Investment Advisors

• Goal is to share views with other attendees

• Even disagree with me; that’s fine…



Tiburon Strategic Advisors

• Focus on corporate-level strategy- Serve senior executives only at financial

services companies- Key services: market seminars, market

research, & strategy consulting - Served over 300 corporate clients and

completed over 1,000 projects since 1998- Host semi-annual CEO Summits, offer free

weekly research releases, and offer free business benchmarking tools for all types of advisors

• Chip Roame background- McKinsey & Company- Charles Schwab & Company- Tiburon since 1998

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