Trends On The Advisor Landscape

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Trends on the Advisor
Landscape
9/26/2018
Sponsored by:

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Featured Speaker
Meredith Lloyd Rice
Vice President, Cogent Reports,
Market Strategies International

| Trends in the Advisor Landscape
Agenda
Research Methodology
• Advisor Brandscape®
• Advisor Touchpoints™
Advisor Trends
• The Growing Influence of RIAs and Fee-based Advisors
• Changes in Product Use
• Anticipated Changes in Asset Class Use
• Changes in Distribution Models
Advisor Touchpoints: Building an Optimal Communication Strategy
Firms Attracting RIA Interest
Summary Observations: Opportunities for Asset Managers
Q&A
2

Research Methodology

| Trends in the Advisor Landscape 5
Research Methodology: Advisor Brandscape®
and Advisor Touchpoints™
Cogent Reports has the industry’s most reliable sample source of financial advisors.
• Representative sample: Our advisors are truly representative of the entire advisor universe.
• Reliable data: We have curated a stable source of sample.
• Experience: We have been talking to advisors for 20 years.
• Knowledge: We have a team of analysts who know the wealth management space from all angles.
Advisor Brandscape®
Tracking brand perceptions and trends among financial advisors since 2009
• Annual online survey of a representative sample of 1,504 registered advisors,
~800 $100M+ producers
• Data collected January to March 2018
• Results reflect universe of advisors with $5M+ in AUM across five channels:
Advisor Touchpoints™
Best practices and benchmarking for advisor marketing and distribution efforts
• Annual online survey of a representative sample of 1,242 registered advisors
• Data collected April to June 2018
• Results reflect universe of advisors with $5M+ in AUM across five channels
• National wirehouse
• Regional
• Independent
• Bank
• RIA

Advisor Trends

Number of Advisors
While the total number of advisors is flat (excluding Insurance), the number of
“pure” RIAs has increased 7% since 2015
2015 2017 2018 Trend
Independent 93,000 90,000 85,000 
Insurance 41,000 38,000 65,000 
National 52,000 50,000 48,000 
Bank 45,000 40,000 34,000 
Regional 20,000 20,000 32,000 
RIA 44,000^ 46,000^ 47,000^ 
Other 5,000 5,000 4,000 
Total 300,000 289,000 315,000
Mean AUM: $360M
Median AUM: $118M
RIAs now control more than
half of advisor-managed
mutual fund and ETF dollars.
Source: Discovery Data Financial Services Industry database (now part of Ipreo); advisor estimates based on actual advisor counts
^ This segment of the RIA universe comprises those solely associated with an RIA and not with a B/D.

Total National Regional Independent Bank RIA
2012 2018 2012 2018 2012 2018 2012 2018 2012 2018 2012 2018
Mean: 56% 61% 58% 65% 42% 56% 51% 54% 42% 40% 84% 87%
37%
30% 30%
19%
56%
34%
43% 38%
58% 61%
11% 9%
27%
28%
37%
39%
24%
37%
26%
29%
27%
30%
9% 5%
36% 42%
33%
42%
20%
29% 31% 33%
16%
9%
80%
86%
8
Percentage of Compensation from Asset-based Fees
Commissionable vs. Fee-based
Advisors in the National wirehouse and Regional channels have shifted further
toward fee-based compensation
Base: All Advisors
▲/▼ = Significant change from stated year
75%+
fee-based
50%–<75%
fee-based
<50%
fee-basedq'12
p'12
q'12
p'12
p'12
q'12
p'12
q'12
p'12
p'12p'12p'12

Percentage of Assets Managed Actively
By Channel
Advisors are increasingly reliant on low-fee, passively managed investments
2013 2015 2016 2017 2018
Change
('13–'18)
Total 70% 69% 67% 64% 63%s'16 -7%
National 74% 73% 70% 67% 66%q'16 -8%
Regional 79% 79% 77% 73% 69%q'16 -10%
Independent 69% 70% 68% 66% 67% -2%
Bank 60% 58% 70% 66% 59%q'16 -1%
RIA 64% 56% 53% 47% 47% -17%
Base: All Advisors
/s = Significant change observed in 2017 sustained in 2018

35.8%
19.2%
16.6%
8.1%
5.8%
4.1%
2.7%
2.0%
1.9%
1.8%
1.3%
0.7%
Percentage change
2015 2016 2017 2018 2015–2018
Open-end mutual funds 11%
Individual securities -12%
ETFs 21%
SMAs -23%
VAs -12%
Cash/cash equivalents -6%
Closed-end funds -12%
Fixed annuities 34%
Life insurance -2%
Fixed/equity index annuities 96%
Hedge funds -24%
Other -26%
33.6%
19.6%
15.0%
9.7%
6.3%
4.5%
2.9%
2.1%
2.0%
1.7%
1.5%
1.0%
32.4%
21.7%
13.8%
10.5%
6.6%
4.4%
3.0%
1.5%
1.9%
0.9%
1.7%
1.0%
34.7%
18.9%
14.4%
9.4%
7.2%
4.5%
2.9%
1.9%
2.3%
1.2%
1.5%
1.2%
10
Percentage Total Advisor AUM Allocated to Each Product
Advisor allocations to ETFs are up 21% compared with 2015, while inflows into
index funds help buoy allocations to mutual funds
Base: Advisors with AUM of $5M–$5B

Open-end mutual funds
ETFs
Individual securities
SMAs
Cash/cash equivalents
Closed-end funds
VAs
Fixed index/equity index annuities
Hedge funds
Life insurance
Fixed annuities
Other
33%
26%
13%
11%
4%
3%
2%
2%
2%
2%
1%
1%
Percentage of New Dollars Allocated to Each Product Category
2020 Forecast
When considering how new dollars are invested, advisors expect to allocate nearly
as much to ETFs as they do to mutual funds
11
Base: Advisors with AUM of $5M–$5B

8.9
11.5 11.4 11.6
8.3
11.5 11.8 11.8
6.8
9.4 9.9 9.9
Number of Mutual Fund Relationships
By Channel and AUM
Advisors report working with fewer providers, expressing a growing preference for
low-fee providers
10.8
12.7 11.9
10.3 9.0
7.5
10.9
13.9
10.8 10.1 9.4
7.3
9.3
12.3
10.2 8.8 7.6 6.5
2012 2015 2018
By Channel
By AUM
<$25M $25M–<$50M $50M–<$100M $100M+
▼'15
▼'15
▼'15
▼'15
▼'15 ▼'15 ▼'15
12
Base: All Mutual Fund Producers

% of advisors
making a
change
Net
gain/loss
US public equities (active) 41% 13%
US public equities (passive) 33% 1%
Non-US public equities (active) 52% 39%
Non-US public equities (passive) 37% 17%
Emerging markets 53% 40%
Private equity 22% -5%
US fixed income (active) 43% 6%
US fixed income (passive) 34% -14%
Non-US fixed income (active) 41% 10%
Non-US fixed income (passive) 31% -8%
Cash/cash equivalents 36% 3%
Real assets/commodities 29% 3%
Real estate/REITs 34% -3%
Other alternatives 29% 5%
Other categories 9% -4%
13
Anticipated Changes in Asset Class Use Over the Next Six Months
Advisors reveal an appetite for active non-US equities, emerging markets and
active fixed income
14%
16%
6%
10%
6%
14%
19%
24%
15%
20%
16%
13%
19%
12%
7%
27%
17%
46%
27%
46%
8%
24%
10%
25%
12%
20%
16%
16%
17%
3%
Decrease Increase
Base: All Advisors

Multi-asset/multi-strategy
Long-short equity
Managed futures
Risk managed equity
Market neutral
Long-short commodities
Long-short currency
Long-short interest
Other
61%
48%
33%
31%
24%
12%
6%
5%
10%
s'16
▲'17'16
Alternative Strategies Planning to Increase
Multi-asset strategies are popular with advisors planning to increase alternatives,
while an uptick in other mentions is due to private equity
14
Base: Advisors Planning to Increase Their Use of Alternative Strategies

29%
45%
36%
23%
38%
13%
18%
5%
13%
26%
40%
11%
47% 44% 41% 46%
18%
69%
6% 6% 10% 6% 4% 6%
None of the above
Use models I build
myself
Use models offered by
third-party providers
Use models provided
by my home office
Advisor Approach to Portfolio Construction
The vast majority of advisors rely on model portfolios to some extent, signaling an
opportunity for managers to position solutions in this area
15
Base: All Advisors

Advisor Touchpoints

Total 2017-to-2018
change2018 2017 2016 2015
Emails 54.4q‘16 57.2 58.7 55.5 -2.8
Webinar invitations 11.9s‘16 12.8 14.4 13.3 -0.8
Internal sales phone calls 10.0s‘16 10.9 12.3 12.0 -0.9
Print mailings 9.9q‘17s‘16 11.0 13.9 14.3 -1.2
External wholesaler visits 3.7q‘16 4.0 4.3 5.0 -0.2
Social media outreach 3.2 2.9 3.5 3.5 +0.3
Road shows/conference invitations 2.5 2.2 3.0 2.7 +0.3
Total (monthly) 95.7s‘16 100.9 110.1 106.3 -5.3
17
Average Number of Touches across All Financial Services Providers
Per Month
Advisors report an average of 96 monthly touches across all financial service
providers, with emails representing the majority of communication
The overall volume is a sustained decrease (14.4 fewer touches on average) compared with the activity
reported in 2016, particularly for print mail.
AT101. In a typical month, how many of the following communications do you receive from all financial services providers via…?
Base: All advisors

Firm with
lowest reach
Firm with
highest reach
Email 4% 48%
News 1% 41%
Print 1% 41%
Website 1% 37%
External wholesaler <1% 26%
Internal wholesaler <1% 19%
Social media <1% 9%
Webinar <1% 8%
Road show/conference <1% 5%
Mobile app <1% 3%
18
Industry Norms: Firm-level Reach by Type of Touch
Email is the most common way advisors engage with financial providers, followed
by news coverage
18%
10%
7%
7%
4%
2%
2%
1%
1%
1%
AT1–8. Over the past month, which companies: have you seen or heard in the news / websites did you visit / sent you emails / mobile apps did you use / have
you read about or discussed in social media / webinars did you attend / road shows / conferences did you attend / sent you print materials?
Base: All advisors
Q25/Q37. Over the past month, did you interact with external wholesalers from any of the following firms regarding their mutual fund/ETF offerings?
Q27/Q39. Over the past month, did you interact with internal wholesalers from any of the following firms regarding their mutual fund/ETF offerings?
Base: Mutual fund/ETF producers
The firms with the highest reach obtain recall rates from over one-third of all advisors for their email,
news, print and website, while advisor engagement is weaker in emerging digital mediums such as
mobile apps, webinars and social media.

0%
60%
Emails
External wholesaler visits
Road shows
Provider websites
Webinars
Mail
Internal sales calls
Social media
Provider apps
2013 2014 2015 2016 2017 2018
41% 50% 42% 56% 56% 51%q’17’16
37% 25% 29% 21% 23% 23%
9% 5% 7% 5% 7% 6%
— 6% 6% 5% 4% 6%p’17
5% 1% 7% 4% 3% 4%p’17
3% 3% 3% 4% 3% 4%
5% 9% 6% 3% 3% 3%
<1% 1% <1% 2% 1% 2%p’17
— <1% <1% <1% <1% <1%
19
Most Effective Communication Method: Stated
Half of advisors cite email as the most effective way for providers to communicate
AT100. There are a variety of ways financial services providers attempt to keep advisors engaged with their companies, from email communications to wholesaler
visits and webinars (to name a few methods). In general, which method is the most effective means of communicating with you overall?
Base: All advisors
According to advisors’ stated preferences, emails remain the most important touchpoint; however, the
method has decreased in importance this year. Meanwhile, provider websites, webinars and social
media are gradually growing in importance.

Total
(A)
National
(B)
Regional
(C)
Independent
(D)
Bank
(E)
RIA
(F)
Emails 51%C 51% 43% 50% 52% 58%C
External wholesaler visits 23%F 32%ADEF 31%AF 24%F 22%F 5%
Road shows/conferences 6%B 2% 4% 7%B 7% 9%B
Provider websites 6% 4% 8%BD 4% 5% 13%ABDE
Webinars 4%BE 1% 3%B 5%BE 1% 10%ABCDE
Print mailings 4% 6% 6% 3% 4% 3%
Internal sales/wholesaler phone calls 3%BF 1% 3% 5%BF 6% 1%
Social media 2% 3%D 1% 1% 4% 1%
Provider apps <1% <1% — <1% — <1%
20
Most Effective Communication Method: Stated
By Channel
Providers can better target their advisor engagement by aligning their
communication and outreach to the unique preferences of each channel
AT100. There are a variety of ways financial services providers attempt to keep advisors engaged with their companies, from email communications to wholesaler
visits and webinars (to name a few methods). In general, which method is the most effective means of communicating with you overall?
Base: All advisors
A/B/C/D/E/F=Significant difference from stated segment
For example, RIAs are among the most digitally savvy producers and are more responsive to provider
websites and webinars. National and Regional advisors, meanwhile, are more amenable to external
wholesaler visits compared with their peers.

Brand Consideration Lift After Exposure: Derived
Regardless of advisors’ stated communication preferences, providers must be
cognizant that wholesaler interactions can spark the greatest lift in brand
consideration—over 60 percentage points, on average
Aside from wholesalers, a number of digital touchpoints including website visits offer strong potential to
move the consideration needle.
Q16/Q29. Assume you were considering investing new or existing client assets in each of the following product areas. What providers would you be most likely to
consider? (Type in the names of up to 5 companies in each column—one company name per box.)
AT1–8. Over the past month, which companies: have you seen or heard in the news / websites did you visit / sent you emails / mobile apps did you use / have you
read about or discussed in social media / webinars did you attend / road shows/conferences did you attend / sent you print materials?
AB54. Over the past month, for which of these companies—if any—have you seen or heard advertising?
Base: All advisors
Overall consideration levels among: Lift
(percentage points) CategoryNon-exposed Exposed
Internal wholesalers 11% 78% 67% Traditional
External wholesalers 10% 74% 63% Traditional
Mobile apps 17% 64% 47% Digital
Websites 13% 59% 46% Digital
Road shows/conferences 17% 61% 44% Traditional
Webinars 16% 59% 43% Digital
Print materials 14% 49% 35% Traditional
Social media 16% 49% 32% Digital
Emails 12% 38% 27% Digital
News 14% 37% 23% Media
Advertising 12% 30% 19% Media

In contrast, advisors are quick to distance themselves from wholesalers that come across as too sales-
orientated or push generic content not applicable to advisors’ unique business needs.
22
Advisor Perspective: New Ways Wholesalers Are Showing Customization
The best wholesalers are consultative, share value-add, and strive to recommend
ideas and investment options that complement advisors’ current books of business
AT111. Have you noticed wholesalers doing anything differently to show they understand your unique business needs? If so, what’s captured your attention?
Base: All advisors
“Many wholesalers now spend time
talking about business-building
ideas, seminars, etc., rather than just
product … they need to deliver more
value in a world in which we can get
the information online.” Bank, $52M
“Asking more questions about our
practice first, positioning themselves
as a consultant and not just a
salesperson, offering to run analytics
on our portfolios.” Independent, $30M
“Wholesalers are asking more
questions about my business and
how they can help grow it or partner
with it.” Independent, $98M
“The best ones give quick ideas on
how to harness technology and
provide simple nuggets on relaying
macro-market ideas to clients.”
National, $72M
“I’m seeing more and more
wholesalers sharing best practices
with other advisors they meet with,
especially when it comes to marketing
and growing our books.” RIA, $45M

Firms Attracting RIA Interest

Top 10 Mutual Fund Companies in Overall Consideration Among RIAs
Vanguard, Fidelity and PIMCO continue to earn the strongest purchase
consideration from RIAs
Source: Advisor Brandscape® June 2018.
However, despite a heightened industry focus on targeting this elite group, Charles Schwab Investment
Management is the only firm to achieve a significant increase in purchase consideration.
2018 2016 Firm
1 1 Vanguard
2 2 Fidelity Investments/Fidelity Advisor Solutions
3 3 PIMCO Funds
4 6 DFA (Dimensional Fund Advisors)
5 4 T. Rowe Price
6 5 American Funds
7 9 Charles Schwab Investment Management ▲‘16
8 7 BlackRock Funds
9 8 DoubleLine
10 10 Dodge & Cox Funds

> Advisors expect to increase their ETF use, however established players in the ETF
category still have a strong first mover advantage.
> Opportunities are ripe for active managers in particular asset classes including active non-
US equities, active fixed income and multi-asset strategies.
> Firms have an opportunity to serve advisors directly, and, increasingly through model
portfolios, either as model providers or within the lineup of funds.
> Strengthen advisor engagement through digital communications, particularly email and the
website, in addition to optimizing the wholesaling force for more strategic interactions.
> Strive to target the right advisors with the right content and delivery method; communication
and product preferences vary by channel.
Summary Observations: Opportunities for Asset Managers
25

Q&AQUESTIONS & ANSWERS SESSION
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Q&A
27
For nearly two decades, the world’s top firms have turned to Cogent Reports
for industry-leading advisor data and research, using the rich insights to boost
profitability, track competitors and maximize retention.
Contact us today to put our research to work for you.
Meredith Lloyd Rice
Vice President
P 617.715.7630
E meredith.rice@marketstrategies.com
Cogent Beat™ Advisor and
Advisor Brandscape®
Media Consumption™
Advisor
Advisor
Touchpoints™
Visit our website: www.cogent-reports.com
Read our blog: www.freshmr.com
Cutting Through the Digital
Marketing Clutter™

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