2015 WEALTH MANAGEMENT REPORT: U.S.

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GLOBALLY, NUMBER & WEALTH OF MILLIONAIRES IS PROJECTED TO GROW

By 2018, McKinsey projects there will be 18MM millionaires globally, controlling USD $76 trillion in personal financial assets (+49% vs. today, more than double the post crisis trough).

As low interest rates continue (for now), and the market begins to show signs of volatility, effective, trusted information and advice is more important than ever.

Source: McKinsey Banking Practice, Global Wealth Management Survey October 2014

Over the past five years, millionaire wealth has grown by 9% annually

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STUDY OBJECTIVES Understand affluent investor’s attitudes towards money, investing, their financial advisers and financial brands–globally Affluent investors & their assets

•  Investors’ motivations and attitudes towards money, investing, their financial priorities and perceived barriers to reaching goals

•  Type of investments/assets currently held and financial services used

Affluent investors & their relationships to financial firms & financial advisers

•  Number of financial firms used, number of years with them, frequency of communication with advisor, etc.

•  Gap analysis of importance vs. performance of services/attributes

Brand evaluation of private/wealth firms & online brokers •  Evaluation of financial firms on key metrics: Familiarity, Reputation, Usage

Impact of marketing & advertising

•  Sources used for learning more about financial services

•  Impact of financial advertising

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METHODOLOGY & KEY METRICS

Biennial study conducted by WSJ. Insights for over 10 years, conducted globally for the first time in 2013 fielded globally. Due to change in methodology tracking from prior studies are not available.

Moved to an online study for 2015 and fielded July 16 – August 3, 2015 among WSJ Opinion Leaders (WSJ U.S. reader panel).

Key Brand Metrics Measured:

1. Familiarity % Very/Somewhat – Top 2 (out of 4) 2. Reputation % Excellent/Good – Top 2 (out of 4) 3. Current Provider(s) % Currently Use

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U.S. RESPONDENT PROFILES

HH Investments $500K+

WSJ U.S. Readers

U.S. Total

Conservative/ Maintain Assets

Take Risks for Greater

Rewards

Use Pro

Adviser

Self-Directed Investor

HH Investment

$5MM+

Total # of respondents

2,701 879 854 2,196 505 529

M/F 89/11 86/14 92/8 88/12 91/9 91/9

Average:

Age 61 63 59 61 61 62

HH Investments $4.0MM $4.0MM $4.5MM $4.1MM $3.4MM $12.1MM

Total HH Net Worth (Excludes primary residence)

$5.7MM $5.4MM $6.4MM $6.0MM $4.5MM $16.0MM

WSJ Readers=Read WSJ regularly (3-4 of 4 issues) or subscribe to print and/or digital WSJ properties

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; U.S. n=2,701 Q8. Thinking about your financial portfolio, how much do you agree or disagree with the following statements? Base: Strongly Agree, "I am conservative in my investments, it's more important to maintain my assets value, “I am willing to take calculated risks with my investments for potentially greater rewards” Q12. Which of the following does your household currently use to help manage your investments/assets?

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RESPONDENT PROFILE–INVESTMENT ATTITUDES AND STYLES

25%  

26%  

3%  

46%  

STRONGLY AGREE

APPROXIMATELY ¼ ARE RISK-TAKERS & ¼ CONSERVATIVE INVESTORS

RISKS-TAKERS CONSERVATIVE BOTH STATEMENTS IN THE MIDDLE

81%  

19%  

ALMOST ALL USE PROFESSIONAL ADVICE, BUT CLOSE TO 1 IN 5 ARE

COMPLETELY SELF-DIRECTED

USE PRO ADVISER SELF-DIRECTED

19%

61%

20%

HH  INVESTMENTS    

$500K - $999K $1MM - $4.9MM $5MM +

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RESPONDENT PROFILE– HH INVESTMENTS & NET WORTH

29%

42%

19%

10%

HH  NET  WORTH  

< $2MM $2MM - $4.9MM $5MM - $9.9MM $10MM +

WSJ. Insights 2015 Global Wealth Management Study; Bases HH Investments $500K+; U.S. n=2,701 Q30. What is the approximate total current market value (in U.S. dollars) of financial instruments/investments now held by you or other members of your household? Q31. What is your approximate total household net worth (in U.S. dollars)?

AFFLUENT INVESTORS: MONEY, INVESTMENTS

WSJ. Insights 2015 Global Wealth Management Study; Bases HH Investments $500K+; U.S. n=2,701 Q5. Money means different things to different people. Looking at the list below, please tell us what money means to you.

90% 83%

58%

33%

14% 12%

FINANCIAL SECURITY

FREEDOM OPPTY TO GIVE BACK

OPPTY TO SPEND ON LUXURIES

STATUS POWER

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PRIMARILY MONEY MEANS SECURITY & FREEDOM But more than half agree it represents the opportunity to give back

Bold numbers indicate statistical differences conservative vs. risk-taking WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; Base: Own any, excluding savings U.S. n=2,692, Conservative n=704 Risk-taking n=667 Q10. Which of the following types of investments and/or assets do you or your household currently hold?

% OWN

U.S. TOTAL CONSERVATIVE RISK-TAKING Mutual funds (equity, bond, index, emerging market, etc.) 85 83 86 Individual stocks 83 80 88 Money market funds 69 71 66 Exchange traded funds (ETFs) 47 40 55 Real estate (excluding primary residence) 43 39 47 Individual bonds 42 47 35 Real estate investment trusts (REITs) 34 32 36 Annuities (fixed or variable) 29 35 26 Fine art/antiques/collectables 24 22 26 Section 529 college savings plans 23 18 29 Master limited partnership 21 19 25 Alternative investments (venture capital, private placements/private equity funds) 15 11 22 Futures/options (stock, currency, commodity, etc.) 10 7 15 Hedge funds 6 5 8 Exchange traded notes (ETNs) 3 2 4

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WIDE RANGE OF INVESTMENTS HELD On average own 6 asset classes; those willing to take on more risk average 7

Bold numbers indicate statistical differences Self-directed vs. Pro Advised WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; Base: Own any, excluding savings U.S. n=2,692, Self-directed n=7502 Professionally Advised n=2,190 Q10. Which of the following types of investments and/or assets do you or your household currently hold?

% OWN

U.S. TOTAL SELF-DIRECTED

PRO ADVISED

Mutual funds (equity, bond, index, emerging market, etc.) 85 82 86 Individual stocks 83 80 84 Money market funds 69 68 69 Exchange traded funds (ETFs) 47 40 48 Real estate (excluding primary residence) 43 33 45 Individual bonds 42 27 45 Real estate investment trusts (REITs) 34 29 35 Annuities (fixed or variable) 29 20 32 Fine Art/Antiques/Collectables 24 19 26 Section 529 College Savings Plans 23 24 22 Master limited partnership 21 18 22 Alternative investments (venture capital, private placements/private equity funds) 15 9 16 Futures/options (stock, currency, commodity, etc.) 10 9 11 Hedge funds 6 1 7 Exchange traded notes (ETNs) 3 2 3

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WIDE RANGE OF INVESTMENTS HELD Those who use professional adviser own 6 asset classes; self-directed own 5

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; U.S. n=2,701 Q6. How important are each of the following financial goals to you and your household?

81% 64%

46% 32%

13%

15%  

28%  

45%  

41%  

45%  

RETIREMENT PLANNING

PLAN FOR FAMILY/LIFE EVENTS

MINIMIZING INCOME TAX

WEALTH TRANSFER PHILANTHROPIC PLANNING

VERY/SOMEWHAT  IMPORTANT    

VERY IMPORTANT SOMEWHAT IMPORTANT

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RETIREMENT PLANNING IS TOP PRIORITY Planning for family/life events is a close 2nd

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; U.S. n=2,701 Q7. What do you perceive as the main obstacle to reaching your financial goals? 13

GLOBAL ECONOMY IS PERCEIVED AS MAIN BARRIER TO REACHING FINANCIAL GOALS While planning for life events is important, it is not seen as a significant barrier to long term goals

65%  

14%  

10%  

11%  

MAIN OBSTACLE TO REACHING FINANCIAL GOALS

ECONOMIES (U.S., EUROPEAN, ASIAN) OVERSPENDING HEALTH OF FAMILY FAMILY OBLIGATIONS

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; Base: Among those who answered U.S. n=2,266 Q9. How often do you think about your personal investments/portfolio - e.g., checking the value of your investments?

14

ALMOST ALL THINK ABOUT/CHECK THEIR PORTFOLIO MONTHLY + Similar frequency for Self-directed & professionally advised

3% 10%   4%   84%  TOTAL U.S.

SEMI-ANNUALLY OR LESS OFTEN QUARTERLY EVERY OTHER MONTH MONTHLY +

RELATIONSHIP WITH FINANCIAL FIRMS & ADVISERS

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; U.S. n=2,196 Q13. Thinking about your total investment assets to date, what percentage of your overall investments are managed by ...? 16

A LITTLE LESS THAN HALF OF THEIR PORTFOLIO IS UNDER THE GUIDANCE OF A FINANCIAL PROFESSIONAL

46%  54%  

% OF PORTFOLIO MANAGED BY (AMONG THOSE WHO USE PRO ADVISER)

PROFESSIONAL FINANCIAL ADVISER SELF-DIRECTED

These affluent investors are an important communication target

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; U.S. n=2,196 Q12. Which of the following does your household currently use to help manage your investments/assets? 17

AMONG THOSE WHO WORK WITH PROFESSIONAL ADVISERS On average, work with 3 different advisers

65%

40% 37%

26% 23%

13%

FINANCIAL PLANNER/ADVISER

CPA/ACCOUNTANT STOCKBROKER ATTORNEY ONLINE BROKER PRIVATE BANKER

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; U.S. n=2,530 Base: HH Investments $5MM+ n=529 Q11. Which of the following financial services do you or your household currently use?

TOTAL U.S. %

HH INVESTMENTS $5MM+

Full Service/Online Broker (net) 74 75

Full Service Broker 46 50

Online Broker 44 44

Private Banking/Wealth Management (net) 59 70

Wealth Management 52 61

Private Banking 22 38

Tax Planning 40 55

Estate Planning 38 63

Retirement Planning 34 31

Philanthropic/Charitable Planning 8 18

Private Equity/Private Placement 7 20

Real Estate Advisory/Investments 5 9

Socially/Environmentally Responsible Investments 2 2

MULTIPLE FINANCIAL SERVICES USED–ESPECIALLY THOSE WITH INVESTMENTS OF $5MM+

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; U.S. n=2,701 Q15. How many financial firms do you currently have investments with? Q16. How long have you been working with your primary financial institution? - by primary, we mean the financial institution that holds the highest asset value.

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THEY HAVE INVESTMENTS WITH MULTIPLE FIRMS The relationship with their primary firm is a long-standing one

FIRMS IN WHICH THEY HAVE INVESTMENTS, ON AVERAGE 26% JUST ONE; 7% HAVE 6 + 3

16 YEARS ON AVERAGE WITH PRIMARY FIRM 25% HAVE BEEN WITH THEIR PRIMARY FIRM FOR 25+ YEARS

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+: U.S. n=2,196 Q20. How often does your primary financial adviser initiate communication with you? 20

ADVISER INITIATED COMMUNICATION COULD BE MORE FREQUENT On average, their adviser initiates communication 6x year; but over 80% think about/check their portfolio monthly

33%

16%

30%

11%

5% 6%

MONTHLY + EVERY OTHER MONTH

QUARTERLY SEMI-ANNUALLY ONCE A YEAR LESS OFTEN THAN 1X YEAR

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; U.S. n=2,701 Q19. If your financial adviser left their firm for another, which of the following would be your response?

50%  50%  

IF MY FINANCIAL ADVISER LEFT HIS/HER FIRM, I WOULD

MOVE FIRMS, TO STAY WITH MY ADVISER STAY WITH THE FIRM AND WORK WITH A NEW ADVISER

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LOYALTY IS SPLIT EVENLY BETWEEN ADVISER & FIRM

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; U.S. n=2,701 Q18. What would make you leave a financial institution with which you currently do business?

53%

51%

34%

21%

16%

12%

9%

MULTIPLE YEARS OF LOW RETURNS

ADVISER WASN'T PAYING ME ENOUGH ATTENTION

ADVISER MOVED FIRMS

CONSOLIDATING INTO FEWER FIRMS

LIFE-STAGE CHANGE (E.G. RELOCATION, DIVORCE, ETC.)

TRY NEW FIRM/ADVISER

LOW RETURNS THIS YEAR

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REASONS THEY WOULD LEAVE A FINANCIAL FIRM Customer service is virtually as important as returns, higher fees were also a strong “write-in” reason to leave

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; U.S. n=2,701 Q14. How important are the following when selecting a financial institution and/or adviser for your personal investments Q17. How would you rate your primary financial institution/company in the following areas? - by primary, we mean the one with the highest asset value. 23

GAP ANALYSIS–IMPORTANCE VS. PERFORMANCE

High ethical standards

Quality of service

Company's reputation

Knowledge/ expertise of Adviser Fees charged

My FA knows me

Provides customized financial

plan

Sells/recommends wide range of products

Info about what

differentiates firm Online/mobile

capabilities Access

to innovative financial instruments

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% P

ERFO

RM

AN

CE

(TO

P B

OX:

EXC

ELLE

NT)

% IMPORTANCE (TOP BOX: VERY IMPORTANT)

Very Important vs. Excellent Performance Shaded area, performance lower than importance

IMPACT OF MARKETING AND ADVERTISING

WSJ. Insights 2015 Global Wealth Management Study; Base: HH Investments $500K+, U.S. n=2,701, 25

THEY TRUST THE JOURNAL FOR FINANCIAL COMPANY NEWS 95% regularly read (three out of four issues) the print edition of The Wall Street Journal

98%

33%

33%

20%

17%

16%

14%

6%

5%

4%

THE WALL STREET JOURNAL FRANCHISE (WSJ PRINT+ WSJDN)

TV PROGRAMS

OTHER FINANCIAL NEWS (CNNMONEY.COM)

INVESTMENT FIRMS LITERATURE

OTHER NATIONAL NEWSPAPERS (FT, INYT)

OTHER PERSONAL FINANCE PUBLICATIONS (EUROMONEY)

BUSINESS MAGAZINES (FORBES, BLOOMBERG BUSINESSWEEK)

VIDEO/AUDIO PODCASTS

NEWSWEEKLIES (TIME)

SOCIAL SITES (LINKEDIN, FACEBOOK, TWITTER)

SOURCES RELIED ON FOR INFORMATION ABOUT FINANCIAL SERVICES COMPANIES

WSJ. Insights 2015 Global Wealth Management Study; HH Investments $500K+; U.S. n=2,701, 26

FINANCIAL ADS IN THE JOURNAL DRIVE ACTION Nearly three-quarters took some action upon seeing financial-related advertising in WSJ (72% )

72%

52%

51%

43%

37%

34%

32%

15%

6%

ANY ACTION (NET)

SAVED

VISITED ADV. WEBSITE

SHARED INFORMATION

CONTACTED FA

MORE FAVORABLE OPINION

ASKED FOR MORE INFO

CONTACTED ADV.

RECOMMENDED

ACTIONS TAKEN FROM FINANCIAL AD IN WSJ

THANK YOU.