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Representative of Middle Market nationwide

Nationally Representative

Study

2016 Insights Method2016 RESEARCH METHOD

2

1,740 INTERVIEWS

BUSINESSES WITH 1-999

EMPLOYEES

OWNERS, C-SUITE, KEY

DECISION MAKERS

PHONE INTERNET INTERVIEWS

FIELDED THROUGH JANUARY ‘16

3

EXECUTIVE SUMMARY

1. Even though there has been recent stock market volatility, economic indicators continue to be solid, and SMB owners’ investment portfolios are holding steady.

2. SMB owners with 5-499 employees account for $1.6 trillion in personal investment dollars, a level comparable to the GDP’s of Canada ($1.57T) and Brazil ($1.8T).

3. The wealthiest SMBs, with $1 million or more in personal investments, account for 19% of business owners, and control more than half (52%) of all SMB investment dollars.

4. Persona: Self-made, wealthy, highly educated men in their late 50’s. All run successful businesses that generate the bulk of sales locally.

5. The wealthier SMB owners are ….… the greater their optimism about their financial futures.

… the less inclined they are to retire (‘ever’).

… the more reliant they are on seeking professional financial help.

… the more satisfied they are with their financial planner.

6. Leading financial advisors include independent financial planners, full service brokerage companies, and wealth management firms.

7. Wealthy SMBs are invested in traditional, conservative vehicles, such as real estate, savings accounts, stocks, mutual funds, life insurance, 401(k)s.

8. Awareness, trial and usage across investment brands varies dramatically, and is influenced by SMB owners’ degree of wealth.

4

Economic Indicators &

SMB Affluence

Sources: U.S. GDP -- Bureau of Economic Analysis, National Economic accounts: chart on %change from proceeding years based on chained 2009

dollars (www.BEA.gov/national/index.htm; U.S. Budget Deficit -- www.usgovernmentspending.com

$236$127

-$158

-$374 -$413-$318

-$248-$161

-$458

-$1,413

-$1,294 -$1,300

-$1,087

-$608

-$466 -$439

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

U.S. BUDGET DEFICIT(IN BILLIONS)

4.1%

1.0%

1.8%

2.8%

3.8%3.4%

2.7%

1.8%

-0.3%

-2.8%

2.5%1.8%

2.8%

2.2%

2.4%

2.4%

U.S. GDP ANNUAL CHANGE

THE GDP UP 2%; THE BUDGET DEFICIT

IS AT A SEVEN YEAR LOW

5

Source: U.S. Dept of Labor/Labor Force Statistics

4.0%4.7%

5.8% 6.0% 5.5% 5.1% 4.6% 4.6%5.8%

9.3% 9.6% 8.9%8.1%

7.4%6.2%

5.3% 4.9%

U.S. UNEMPLOYMENT RATE

THE UNEMPLOYMENT RATE IS BACK AT

PRE-RECESSION LEVELS

6

THE STOCK MARKET HAS RECENTLY BEEN VOLATILE

7Sources: Google Finance, Closing of the DJIA at the end of December for each year indicated

DOW JONES INDUSTRIAL AVERAGE:

ANNUAL YEAR END & RECENT CLOSINGS

10787

10022

8342

1045410783 10717

12463

13265

8776

10428

11577

12217

13104

16577

18053

17425

15882

16620

5000

7000

9000

11000

13000

15000

17000

19000

MARKET VALUE OF PERSONAL

INVESTMENT PORTFOLIO (AVERAGE IN THOUSANDS)

NONETHELESS, SMB OWNERS’

PERSONAL INVESTMENT VALUATIONS

REMAIN RELATIVELY UNCHANGED

8

“Which of the following best describes the total market value of your investment portfolio (excluding real estate, retirement accounts &

529/College savings plans)?” “Which of the following best describes your total net worth?”

$265.4$217.7 $237.4

$350.8 $334.6

$413.2$448.2 $460.3

2008 2009 2010 2011 2012 2013 2014 2015

$1.41

$1.27 $1.22 $1.27 $1.20

$1.40$1.53 $1.52

2008 2009 2010 2011 2012 2013 2014 2015

TOTAL NET WORTH (AVERAGE IN MILLIONS)

Actual

Year

23% 23% 24% 22% 22% 20% 16%

52% 50% 46% 49%41%

38% 41%

25% 27%21% 21%

26%28% 27%

9% 8% 11% 14% 16%

2009 2010 2011 2012 2013 2014 2015

$1M or More

$250K-$999K

Under $250K

No Answer

SMBs HAVE SUBSTANTIAL WEALTH;

43% HAVE INVESTMENTS VALUED AT

$250K+

9

DISTRIBUTION OF SMB PERSONAL

INVESTMENT PORTFOLIO VALUATIONS

NOTE: $1M+ portfolio size not broken out for 2009 and 2010

“Which of the following best describes the total market value of your investment portfolio (excluding real estate, retirement accounts & 529/college

savings plans)?”

Market Value of

Portfolio:

Actual Year

43%

TOTAL INVESTMENT VALUATIONS

Total SMB

Owners

Less than $250K

Portfolio

Affluent

($250K-$999K

Portfolios)

Super Affluents

($1M or More

Portfolios)

# of Businesses 3.44 Million 1.72 Million 1.07 Million 652,828

% of 5-499 Businesses* 100% 50% 31% 19%

Investment Portfolio Size $460.3K $94.3K $545.3K $1.25MM

TOTAL INVESTMENTS** $1.6 Trillion $162 Billion $581 Billion $816 Billion

SMBs REPRESENT $1.6 TRILLION

OVERALL IN PERSONAL INVESTMENTS

10

“Which of the following best describes the total value of your investment portfolio (excluding real estate, retirement account investments & 529

plans/college savings plans?”

*Re-percentaged to eliminate ‘no answers;’ **Number of businesses X average investment portfolio size

INVESTING POWER OF AFFLUENT SMB OWNERS

50%

31%

19%

10%

38%

52%

Less than $250K $250K-$999K $1M or More

% of SMB Owners* % of Total Investments

THE SUPER AFFLUENT ($1M+) CONTROL

OVER HALF OF ALL SMB PERSONAL

INVESTMENTS

11

“Which of the following best describes the total value of your investment portfolio (excluding real estate, retirement account investments & 529

plans/college savings plans)?”

*Re-percentaged to eliminate ‘no answers’

SIZE OF PERSONAL

INVESTMENT

PORTFOLIO

THE WEALTHIEST SMBs PLAN TO

INVEST TWICE THE AMOUNT OF OTHER

AFFLUENTS

12

$20.1

$47.1

$100.5

Under $250K $250K-$999K $1M+

“Approximately how much do you personally plan to invest in the next 12 months?”

AMOUNT PLAN TO INVEST IN THE UPCOMING YEAR(IN THOUSANDS)

SIZE OF PERSONAL

INVESTMENT

PORTFOLIO

13

Profiles of Affluent and

Super Affluent Investors

AFFLUENT SMB OWNERS ARE WELL-

EDUCATED, WEALTHY MEN IN THEIR

LATE 50’S

14

AFFLUENT SMBs RUN SUCCESSFUL

COMPANIES WITH HIGH SALES

GROWTH; LOCAL SALES PRE-DOMINATE

15

THE GREATER SMBs’ WEALTH, THE

MORE OPTIMISTIC THEY ARE ABOUT

THEIR FINANCIAL FUTURES

16“How much do you agree/disagree with the following statements about your personal finances and investments?”

ATTITUDES ABOUT INVESTING

94%

93%

81%

81%

66%

74%

I feel confident that I will be able to maintainmy current lifestyle throughout my retirement

I am optimistic about my financial future

Under $250K $250-$999 $1M+SIZE OF PERSONAL

INVESTMENT PORTFOLIO

% Agree

Completely/Mostly

FOR SMBs, HAVING A LARGE NEST EGG

DOES NOT NECESSARILY TRANSLATE TO

TAKING EARLY RETIREMENT

17

33%30%

28%

14% 13%

7%

42%

47%45%

11% 10%

20%

Under $250K $250K-$999K $1M+

Before 65 At 65 66 or Older Never

PLANNED RETIREMENT AGE

SIZE OF PERSONAL

INVESTMENT

PORTFOLIO

65% Will retire

after age 65 or

never

MOST ACQUIRED THEIR WEALTH VIA

THEIR OWN HARD WORK

18

73%

65% 63%

19%

28% 30%

8% 7% 7%

Under $250K $250K-$999K $1M+

Money Earned By Working Via Investments Inheritance

SHARE OF HOW WEALTH WAS ACCUMULATED

SIZE OF PERSONAL

INVESTMENT

PORTFOLIO

19

Wealth Management &

Investment Choices

WEALTHY SMBs HAVE POSITIVE

IMPRESSIONS OF THE BANKING &

FINANCIAL SERVICES INDUSTRIES

20

AFFLUENTS $250K+ PORTFOLIO

INDUSTRY OUTLOOK% VERY/SOMEWHAT POSITIVE

“We would like to get your overall impressions of several major industries in the U.S. For each, please give your overall view of it.”

Actual

Year

41%

19%

29%32% 31%

35%

49% 49%

37%

21% 22%

28%25%

35%

40%

46%

2007 2008 2009 2010 2011 2012 2013 2015

Financial/Investment Services Banking

38%42%

53%55%

29%33%

41%

49%

2011 2012 2013 2015

Financial/Investment Services Banking

SUPER AFFLUENTS $1M+ PORTFOLIO

INDUSTRY OUTLOOK% VERY/SOMEWHAT POSITIVE

WEALTHIER SMBS ($1M+) ARE MORE

INCLINED TO USE FINANCIAL

PLANNERS

21“How much do you agree/disagree with the following statements about your personal finances and investments?”

ATTITUDES ABOUT INVESTING

67%

43%

59%

53%

56%

62%

I use a financial planner to help memanage my wealth

I don’t feel I know enough about investing to manage my own portfolio

Under $250K $250-$999 $1M+SIZE OF PERSONAL


% Agree

Completely/Mostly

WEALTHY SMB INVESTORS RELY ON FINANCIAL PLANNERS TO PLACE THE MAJORITY OF THEIR TRADES

22

Financial Planner or Investment Company

53%Personally via online trading

28%

Other Means19%

Financial Planner or Investment Company

58%

Personally via online trading

23%

Other Means19%

AFFLUENT $250K-$999K PORTFOLIO SUPER AFFLUENT $1M+ PORTFOLIO

“What percentage of your personal investment portfolio consists of investments purchased for you by a financial planner of investment company? Purchased by you

via online trading? By other means?”

SHARE DISTRIBUTION OF HOW TRADES ARE MADE

POOR CUSTOMER SERVICE &

INVESTMENT PERFORMANCE ARE KEY

DRIVERS TO SWITCHING ADVISORS

23

TOP REASON TO CHANGE FINANCIAL PLANNERS/HIRE A NEW

COMPANY FOR FINANCIAL ADVICE

“To what extent might each of the following factors drive you to consider changing financial planners or to focus in more

closely on your personal financial planning?”

% Rating Critical

Factor/Contributes A Lot

11%

26%

34%

26%

28%

37%

29%

56%

69%

16%

28%

29%

29%

33%

39%

43%

54%

60%

Significant birthday or milestone

Receive advice from credible source (invest pub, analyst)

Current financial planner changes firms

Recommendation from a trusted friend or colleague

Volatility of the stock market

Higher federal, state and local taxes

Receipt of a monetary windfall (bonus, inheritance)

Poor portfolio performance

Inadequate customer service

$250K-$999K

$1M+

SIZE OF PERSONAL


24

AFFLUENT SMB OWNERS

($250K-$999K)

Financial Providers &

Types of Investments

INDEPENDENT ADVISORS &

BROKERAGE FIRMS LEAD AS PRIMARY

INVESTMENT ADVISORS

25

PRIMARY INVESTMENT ADVISOR(AMONG AFFLUENTS WITH $250K-$999K PORTFOLIOS)

“Which of the following financial providers for investments do you currently use?” “Which of these providers is your primary advisor for you personal

finances?”

32%

28% 27%

23% 23%

19% 18%16%

13%14%

10%

20%17%

11%9% 8% 7% 8%

Currently Use Primary Provider

AFFLUENT SMB OWNERS ARE LESS

SATISFIED WITH THEIR ADVISORS THAN

THE WEALTHIEST SMBs

26

7% 6%

60%

39%

33%

55%

$250K-$999K $1M+

Extremely Satisfied

Somewhat Satisfied

Not Very/Not At All

SATISFACTION WITH PRIMARY INVESTMENT ADVISOR(AMONG AFFLUENTS WITH $250K+ PORTFOLIOS)

“How satisfied are you with your primary financial advisor?”

SIZE OF PERSONAL


AFFLUENTS’ LEAD INVESTMENTS ARE

REAL ESTATE & SAVINGS ACCOUNTS

27

INVESTMENTS OWNED / PLAN TO INVEST IN(AMONG AFFLUENTS WITH $250K-$999K PORTFOLIOS)

“Please click all of the following types of investments that you currently own.” “In the next year, what types of investments are you planning to invest in?”

67%65%

62%58%

52%50%

44% 44%

21% 20% 20% 18% 17% 15% 15% 13% 11% 8% 7%4%

21%

29%

39%

32%

11%

23%17% 18%

8%10%

6%9%

6%4%

10%6% 8%

4% 3% 2%

Currently Own Plan to Invest in Next Year

28

Financial Providers &

Types of InvestmentsSUPER AFFLUENTS

SMB OWNERS ($1M+)

EMPLOYEE PLANS, WEALTH

MANAGEMENT & BROKERAGE FIRMS

LEAD AS PRIMARY ADVISORS

29

“Which of the following financial providers for investments do you currently use?” “Which of these providers is your primary advisor for you personal

finances?”

PRIMARY INVESTMENT ADVISOR(AMONG SUPER AFFLUENTS WITH $1M+ PORTFOLIOS)

39%

34%30% 29%

27%25%

22%20%

18%

10%

23%

17%

5%

18%

8%6%

10%7%

Currently Use Primary Provider

THE WEALTHIEST SMB OWNERS ARE

HIGHLY SATISFIED WITH THEIR

PRIMARY ADVISORS

30

7% 6%

60%

39%

33%

55%

$250K-$999K $1M+

Extremely Satisfied

Somewhat Satisfied

Not Very/Not At All

SATISFACTION WITH PRIMARY INVESTMENT ADVISOR(AMONG AFFLUENTS WITH $250K+ PORTFOLIOS)

“How satisfied are you with your primary financial advisor?”

SIZE OF PERSONAL


STOCKS & REAL ESTATE ARE LEAD

INVESTMENTS

31

“Please click all of the following types of investments that you currently own.” “In the next year, what types of investments are you planning to invest in?”

INVESTMENTS OWNED / PLAN TO INVEST IN(AMONG SUPER AFFLUENT WITH $1M+ PORTFOLIOS)

73% 71%68%

64%

58%54% 53%

37% 36%31% 30%

26% 25% 25%21% 20% 20%

14%11% 11%

49%

22%27%

41%

11%

25%22%

13%15%

11%10% 8% 7%

13% 11%9%

5% 7% 5%3%

Currently Own Plan to Invest in Next Year

32

Investment Brand

Awareness and Usage

103

113

107

121

106

98

105 106

112

107

116 115

110 111

124

104 107

111

101

113

108 108 106

139141 142

120

125

135133

116

120

128

110112

125

106

112 113 109113

123

116

103

114 113

14% 15%20% 20% 22%

22% 23%

25% 25% 27%32%

37% 38% 39% 41%42% 45%

50% 50%53% 55% 56%

57%

-70%

-50%

-30%

-10%

10%

30%

50%

70%

80

100

120

140

160

$250K-$999K (Index v. Total SMBs) $1M+ (Index v. Total SMBS) Familiarity Total SMBs

WEALTHIER SMB OWNERS HAVE

HEIGHTENED AWARENESS OF FINANCIAL

INVESTMENT BRANDS

33

FAMILIARY OF FINANCIAL/INVESTMENT BRANDS(AFFLUENTS & SUPER AFFLUENTS INDEXED VERSUS TOTAL SMB OWNERS)

132 125 128

110 118

106

124

112 105

127

112 119

134

124 123

111

123

150

121 126 124

129

110

121

127 133138

103

127

149

123

158

146 143

162

134 145 139

158

119126 124

137

155

166

123

8%9% 9%

22%20%

17%

29%

9%11%

8%

23%

15%12%

9%13%

10%12% 12%

19% 19%

7%10%

18%

0%

10%

20%

30%

40%

50%

60%

0

20

40

60

80

100

120

140

160

180

200

$250K-$999K (Index v. Total SMBs) $1M+ (Index v. Total SMBS) Ever Used Among Total SMBs

MOST INVESTMENT COMPANIES HAVE

EXPERIENCED HIGHER TRIAL AMONG

WEALTHIER SMB OWNERS

34

EVER USAGE OF FINANCIAL/INVESTMENT BRANDS(AFFLUENTS & SUPER AFFLUENTS INDEXED VERSUS TOTAL SMB OWNERS)

158

135

149

110 117

112

131

103

91

132

107 112

126 130

164

117

127

153

114

133 126

158

115

7671

129138

111 110

146

71

104

85

147

196

103

154

101

152

80

102

116 113

168

193

97

1%4% 3%

11%9%

9%

17%

3% 3%2%

10%6%

5%2%

5%3%

5% 4%

10% 11%

2%4%

9%

0%

10%

20%

30%

40%

50%

60%

0

20

40

60

80

100

120

140

160

180

200

$250K-$999K (Index v. Total SMBs) $1M+ (Index v. Total SMBS) Past Year Usage Total SMBs

WEALTHY SMB OWNERS ARE USING A

HOST OF DIFFERENT INVESTMENT

FIRMS

35

PAST YEAR USAGE OF FINANCIAL/INVESTMENT BRANDS(AFFLUENTS & SUPER AFFLUENTS INDEXED VERSUS TOTAL SMB OWNERS)

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