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©2018 Morningstar, Inc. All rights reserved. Elizabeth Brigham, Head of Product Marketing, Software December 5, 2018 Advisor Market & Wealth Management Trends Morningstar Perspective

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  • ©2018 Morningstar, Inc. All rights reserved.

    Elizabeth Brigham, Head of Product Marketing, SoftwareDecember 5, 2018

    Advisor Market &Wealth Management TrendsMorningstar Perspective

  • 12

    There’s never been a better—or more important—time for great advice.”

  • 3

    Wealth Management Market Trends

    Advisor Behavior

    Investor Behavior

    Rise of Technology

    Transformation

  • 4

    The US Retail Wealth Market Will Top $40T by Year 2020 in Client Assets. RIAs Experienced the Highest Growth In Assets.

    Source: Cerulli Associates Advisor Metrics 2017, Cerulli Intermediary Distribution

    0

    5

    10

    15

    20

    25

    2013 2016 2017E 2021E

    Wirehouse Regional BD Indy BD RIA Bank B/D Insurance B/D OtherBank TrustsPrivate BanksCAGR = 4%

    CAGR 19%

    CAGR 5%

    CAGR 8%

    CAGR 9%

    Total Client Assets Across Industry Segments: 2013 – 2021E ($ Billions)

    $23.3T$27.6T

    $40.1T

    $30.6T

    $5.8 $8.4

    $4.5

    $2.4$1.9

    $3.7

    $2.4

    $6.5

    $5.8

    $2.9

    $2.4

    $3.9

    $6.4

    $3.3

    $2.8

    $4.7

    $7.2

  • 5

    0

    50000

    100000

    150000

    200000

    250000

    300000

    350000

    2013 2016 2017E 2021E

    FINANCIAL ADVISORS BY SEGMENT

    Insurance BD IBD Wirehouse Regional RIA Hybrid RIA2 Retail Bank

    The US Advisor Segment – Representatives Growth rate (Brokerage and Fee-Based)

    Source: Cerulli Associates Advisor Metrics 2017

    While overall advisor populations are estimated to shrink by 2021, both RIAs and IBDs are estimated to add over 6,000 advisors combined vs. 2017.

  • 6

    Changing Advisor Behavior

    Transparency Scale Service & Value

  • 7

    “As technology puts more pressure on advisors to justify their fees in the first place, more and more advisors are starting to offer comprehensive financial planning, which is why (despite the lack of growth overall in the financial advisor headcount) a record number of people have been sitting for the CFP exam for the first time in recent years.”

    7

    Michael Kitces

    Financial Advisor Industry Influencer

  • 8

    Changing Investor Behavior

    Holistic Advice Ease & Convenience

    Transparency & Lower Fees

  • What Investors Value

    Advisors Think Investors Say

    Source: Morningstar Research

    Help reaching goals

    Understanding needs

    Skills and knowledge

    Focus on best interest

    Explains concepts well

    Approachable

    Good reputation

    Avoids common mistakes

    Clear fee structure

    Can maximize returns

    Knows tax consequences

    Low Value High Value

  • What Investors Value

    Advisors Think Investors Say

    Source: Morningstar Research

    Help reaching goals

    Understanding needs

    Skills and knowledge

    Focus on best interest

    Explains concepts well

    Approachable

    Good reputation

    Avoids common mistakes

    Clear fee structure

    Can maximize returns

    Knows tax consequences

    Low Value High Value

    Advisors Think

  • What Investors Value

    Advisors Think Investors Say

    Source: Morningstar Research

    Help reaching goals

    Understanding needs

    Skills and knowledge

    Focus on best interest

    Explains concepts well

    Approachable

    Good reputation

    Avoids common mistakes

    Clear fee structure

    Can maximize returns

    Knows tax consequences

    Low Value High Value

    Investors SayAdvisors Think

  • 12

    Rise of Technology

    AI & Machine Learning

    Integrations

    Mobility & On-Demand Service

  • 13

    Transformation

    Digital Client Experience

    Behavioral Finance

    Fully-integrated Platforms

  • 14

    On-Demand Expectations

  • 15

    Market Developments We’re Tracking

    Rep as PM ESG/Sustainability Generational Asset Growth

  • 16

    Rep as Portfolio Manager Programs Continue to Attract Assets; CAGR should stabilize around 15% in 2018 through 2021

    Sources: JPMorgan Asset Management, Cerulli Associates

    $70.3 $69.7 $62.3 $79.6 $108.3 $139.0 $193.0

    $258.6 $212.9 $309.9

    $397.2 $459.5

    $578.9

    $755.6

    $923.9 $982.4

    $1,150.4

    $1,492.6

    $1,721.1

    $1,982.4

    $2,281.8

    $2,624.8

    -0.8%

    -10.6%

    27.8%

    36.1%

    28.3%

    38.8%

    34.0%

    -17.7%

    45.5%

    28.1%

    15.7%

    26.0%

    30.5%

    22.3%

    6.3%

    17.1%

    29.7%

    15.3%15.2%

    15.1%15.0%

    -30%

    -20%

    -10%

    0%

    10%

    20%

    30%

    40%

    50%

    $0

    $200

    $400

    $600

    $800

    $1,000

    $1,200

    $1,400

    $1,600

    $1,800

    $2,000

    $2,200

    $2,400

    $2,600

    $2,800

    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E

    Rep-as-portfolio-manager program assets Growth rate

  • 17

    Steady Growth in ESG Interest and Evaluation within Morningstar Cloud

    ESG Data and analytics usage in Morningstar Cloud

  • 18

    Wealth Transfer across generations indicates growth with Baby Boomers and GenX in next decade

    Source: 4/4/18 Hearts & Wallets Presentation (Varas) (United States Census Bureau)

    Consumer Households, Investable Assets by Generation

  • 12

    There’s never been a better—or more important—time for great advice.”

  • ©2018 Morningstar. All Rights Reserved.

  • Appendix

  • 22

    What Morningstar Direct Users are Reading

    Active v. Passive

    Market Trends

    Asset Flows

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