using market insights and sales data to optimize your distribution strategy

Using Market Insights and Sales Data To Optimize Using Market Insights and Sales Data To Optimize Your Distribution StrategyYour Distribution StrategygygyDan CwenarPresident and General ManagerAccess Data, a Broadridge Company

October 29, 2013

TodayToday

• Product Distribution Today• Product Distribution Today• Industry trends and challenges• Components of a data-driven solution

• Data Insights• Case Study 1: Distribution Channel Trends• Case Study 2: “Alternative Products” Distribution Trends

• Conclusions

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Significant expectation about Significant expectation about datadata

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Our path and perspectiveOur path and perspective

• We provide enterprise data management and business• We provide enterprise data management and business solutions supporting investment product distribution

• 1997: founded

• 2000: first SalesVision client

• 2009: a Broadridge Company

• Today:• +125 manufacturers and distributors as clients• +125 manufacturers and distributors as clients

• Data and business solutions covering 90% of all long-term fund assets and 95% of all ETF assets

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Product distribution is complex and Product distribution is complex and dynamicdynamic11

Manufacturers distribute products via intermediaries to investors

92.4 millionInvestors

290 million accounts,54 million households

38,160Sales & Distribution

Professionals

2 million Professionals,60,000 Firms

16,380Products

776 Fund Sponsors, $14.7 Trillion AUM

Manufacturers distribute products directly to investors

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1. Data based on 2013 ICI Fact Book and Broadridge proprietary research

Industry trends create unique data challengesIndustry trends create unique data challengesTypical Data Exchange

Intermediary 1

Intermediary 2

Mfg 1

Mfg 2

Typical Data Exchange Process

y

Intermediary 3

Intermediary 4

Intermediary 5

g

Mfg 3

Mfg 4

Mfg 5

• Omnibus accounting less transparency

Intermediary 5

Intermediary n

Mfg 5

Mfg n

• New products create data challenges (e.g., alternatives and ETFs)

• Sales channel dynamics increased need for better data (e.g., RIA and Banks)

• Regulatory environment fee scrutiny, held away assets, controls

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Regulatory environment fee scrutiny, held away assets, controls

• Lack of data exchange standards poor data quality and management

Components of a solution frameworkComponents of a solution framework

Manage data once use it across the enterprise

Sales Wholesaler Distributor 22c 2

Grow Revenue Manage Fund Expense

CRM Market Tax

ManageFund Risk

Manage data once use it across the enterprise

Reporting Compensation Compensation 22c-2

CSO, CMO, COO CFO CCO

Integration Intelligence Tax

Data Aggregation and Business Rules

Data Enhancement and Research

Asset Positions and Transactions + Context

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Intermediary 1 Intermediary 2 Intermediary 3 Intermediary n Reference Data

Data Data artifacts artifacts related related to distributionto distribution

Manufacturer(e.g., Dreyfus, Russell,

American Century, SSgA)

Intermediary(e.g., Morgan Stanley, Schwab,

TD Ameritrade)

InvestorExternalWholesaler

InternalWholesaler

Territory assignmentsProduct details DBRs Location• Territory assignments• Channel designations• LOB definitions• Sales activities

• Product details• Compliance rules• Selling agreement terms• Sales compensation terms• Industry data

• DBRs• FOPs• Transactions• Asset positions• Invoice details

• Location• Demographics

Intersection of disparatedata sets

Intersection of disparatedata sets

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[Rep Information] [Product Information] [Retirement Plan Information]

Case Study 1: Distribution Channel TrendsTraditional versus emerging channels

Data insights: roadmap for driving growthData insights: roadmap for driving growth

Traditional Distribution Emerging Distribution

Wirehouse Registered In estment Ad isors

New Brokerage Firms

Independent and Regional B/Ds

Investment Advisors

Bank Channel —Multi Dimensional

information for strategic

decision makingRegional B/Ds making

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Characteristics of traditional channelsCharacteristics of traditional channels

Wirehouse Independent / Regional

Examples Merrill Lynch, Morgan Stanley, Wells Fargo, UBS

• Self clearing: LPL, Raymond James, RBC, Edward Jones

• Via clearing platform: Pershing, National Financial

• Other: Regional B/Ds

AUM ~$5 trillion ~$2.5 trillion

Advisors 57,000 125,000

11Source: Aite Group Research Report, Tiburon Research and Analysis, June 2013

Characteristics of emerging channelsCharacteristics of emerging channels

RIA Bank

Examples Moneta Group, Plante Moran, GenSpring Family Offices, Hall

• Private Banks: JPM, Mellon Private Wealth• National Banks: Wells, Bank of America

Capital Partners,

• Trust Companies: SEI, State Street

AUM ~$2.5 trillion • Private Banks: ~$1.5 trillion• National Banks: ~$4 trillion• National Banks: ~$4 trillion• Trust Companies: ~$1 trillion

Firms 15,000 • Private Banks: 24 (881 offices)

N ti l B k 870• National Banks: 870• Trust Companies: 163

Advisors 55,000 125,000

12Source: Aite Group Research Report, Tiburon Research and Analysis, June 2013

Emerging channels outpacing traditional channelsEmerging channels outpacing traditional channels

ETF Assets by $512

$581

$634

ETF DistributionETF Assets by Channel:• Banks have twice the

ETF assets of any $301other channel

• RIA channel has second largest total of ETF assets

$222 $239$215

$245 $259 $274$261 $268$301

• RIA channel leads all channels with net flows of $7B into ETFs in Q2’13 Wirehouse Independent B/D RIA Bank Combined

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Q2 13 p

ETF AUM Q2 2012 ETF AUM Q4 2012 ETF AUM Q2 2013

Source: Access Data, a Broadridge Company, June 2013

Mutual Fund vs. ETF usage by channel Mutual Fund vs. ETF usage by channel

Asset market share %

87%81% 81%

74% 73%Asset market share % by channel as of April 2013: • Stock and Bond Funds

65%61%

39%versus ETFs

13%19% 19%

26% 27%

35%39%

Indep/Reg'l BD

RIA Wirehouse Bank Discount Private Bank

Trust Co.

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Mutual Funds ETFs

Source: Access Data, a Broadridge Company, June 2013

Mutual Fund vs. ETF usage Mutual Fund vs. ETF usage –– core US equitycore US equity

Core US Equity:40%

45%

35%Core US Equity: • ETF assets as percent

of combined Mutual Fund and ETF assets

33%

24% 23%

35%

25% 25%

[ ETF / (ETF + Mutual Fund) ] 15% 16%

Private Bank Bank & Trust RIA Wirehouse Indep/Reg'l BD

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p g

April 2012 April 2013

Source: Simfund Pro, 7.0 / Access Data, a Broadridge Company / Morningstar Categories

Mutual Fund vs. ETF usage Mutual Fund vs. ETF usage –– Taxable BondTaxable Bond

Taxable Bond:

15%16%

13%

16%15%

14%

Taxable Bond: • ETF assets as percent

of combined Mutual Fund and ETF assets

12%

10%

12%

10%

[ ETF / (ETF + Mutual Fund) ]

Private Bank Wirehouse Bank & Trust RIA Indep/Reg'l BD

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April 2012 April 2013

Source: Simfund Pro, 7.0 / Access Data, a Broadridge Company

Active management still dominant with Active management still dominant with RIAsRIAs

RIA T t l A t ($B) b F d T M h 2013RIA Total Assets ($B) by Fund Type – March 2013Active MF vs. Index MF vs. ETF

US Equity Int'l / Global Equity

Balanced / Allocation

Alternative Taxable Bond Municipal Bond

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Equity Allocation

Active Mutual Funds Index Mutual Funds ETF

Source: Simfund Pro, 7.0 / Access Data, a Broadridge Company

Case Study 2: Alternative Products Distribution TrendsSelect product categories including: Nontraditional Bond, Long Short Equity, Market Neutral

Select Liquid Alternative categoriesSelect Liquid Alternative categories

Long/Short Equity 29%Nontraditional

Bond

Market Neutral7%

64%

Liquid Alternatives

Category AUM as of 7/31/13 # of Products Percent

Nontraditional Bond $84,901,643,509 166 64%

Long/Short Equity $38,774,922,866 72 29%

Market Neutral $8,702,104,237 125 7%

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Source: Access Data, a Broadridge Company

Select categories: $132 billion AUM

AUMAUM rankings: Liquid Alternative Fundsrankings: Liquid Alternative FundsRank Management Compan AUMRank Management Company AUM

1 PIMCO $25,444,037,814

2 JPMorgan $20,337,360,281

$3 MainStay $12,214,381,242

4 BlackRock $10,378,879,389

5 Natixis Funds $9,802,630,852

6 Eaton Vance $9,274,324,933

7 Goldman Sachs $6,328,383,507

8 FPA $4,928,305,633

9 AQR Funds $2,890,286,933

10 Calamos $2,868,281,789

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Source: Access Data, a Broadridge Company / Morningstar Categories

Top 10 manage $104 billion in AUM

AUMAUM growth by categorygrowth by category$70

$50

$60

$70

$40

$50

$ B

illion

s

$20

$30

In $

$0

$10

12/31/2012 1/31/2013 2/28/2013 4/30/2013 7/31/2013

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Market Neutral 65% Long/Short Equity 89% Nontraditional Bond 51% Source: Access Data, a Broadridge Company

Channel segmentation of longChannel segmentation of long--short equityshort equityJuly 2013 Independent Fastest Growing Segment

Bank24%

Private Bank10%

Trust6%

Retirement0%

July 2013

$4.27$4.0

$4.5 In $ Billions

Independent Fastest Growing Segment

Dual Registered

18%Wirehouse

13%

RIA11% $3.33

$3.21

$2 29$2.5

$3.0

$3.5

Independent18%

L t G i S t

$1.76$2.01

$1 05

$2.29

$1 0

$1.5

$2.0

Largest Growing SegmentsJanuary ‘12 – July ‘13

Firm Type GrowthIndependent 145% $0.02

$1.05

$0.0

$0.5

$1.0

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Trust Company 135%Wirehouse 118%


Channel segmentation of Channel segmentation of market neutralmarket neutralJuly 2013 Independent Fastest Growing Segment

Bank

Dual Registered

6%

Private Bank5%

Trust 2%

July 2013

$1,194$1,200

$1,400


In $ Millions

Independent41%

RIA13%

Bank11%

$800

$1,000

Wirehouse22%

$652

$362$304

$400

$600

L t G i S t $304$185$152$59$0

$200Largest Growing Segments

January ‘12 – July ‘13Firm Type GrowthIndependent 178%

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Private Bank 76%RIA 38%

Channel segmentation of nontraditional bondChannel segmentation of nontraditional bondJuly 2013 Independent Fastest Growing Segment

Private Bank

Bank8%

Dual Registered

8%

Trust1%

Retirement0%

July 2013

$12.97$12

$14 In $ Billions


27%

Wirehouse20%

RIA18% $9.79

$8.82$8.47$8

$10

20%Independent

18%

L t G i S t$3.92$3 55

$4

$6

Largest Growing SegmentsJanuary ‘12 – July ‘13

Firm Type GrowthIndependent 80%

$3.55

$0.61$0.11$0

$2

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Dual Registered 76%Trust Company 57%


ConclusionsConclusions

• Data management program is essential• Data management program is essential• Data live everywhere• Data change daily• New products, new channels, new competitors

• “Data insights” support:• Territory management• Competitor analysis (region, product, and channel)• Compensation plans and management• Target your investments• Measure results / modify approach• New product development (e.g., alternatives, ETFs)

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