Dawn of the Digital Age in Financial ServicesDawn of the Digital Age in Financial Services 2 A Critical Turning Point Advancements in technology, the push to simplify and reduce fees,

©2014 Morningstar, Inc. All rights reserved.

Scott Burns Global Head of Asset Management Solutions

Dawn of the Digital Age in Financial Services

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A Critical Turning Point

Advancements in technology, the push to simplify and reduce fees, and growing demand to support the disengaged and underserved investor are driving rapid change in the financial industry and are driving an unprecedented level of innovation.

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Different Needs and Risks through Every Life Stage

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The Robo Advice Landscape

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Incumbent Players Currently Dwarf the Entire Robo-Advisor Industry (Client Assets $Trillions)

Source: Company filings, Corporate Insight

For Financial Professional Use Only. Not for Public Distribution

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1.0

1.5

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2.5

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BAC SCHW MS AMTD RJF ETFC ENV SF FNGN WETF Robo

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Robo-Advisors have been and remain a niche, despite the hype

$6,800

$26,700

-

5,000

10,000

15,000

20,000

25,000

30,000

DC IRA & Other

Total Retail Investable Assets ($B) DC Account Robots $173 (2.5%) IRA, Taxable, Rollover Robots $25 (0.1%)

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B2B2C Record keeper/Plan Sponsor

B2C B2B2C Advisor (1)

Whi

te L

abel

Br

ande

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(1) Represent firms that sell products which have both an advisor facing and consumer facing UX. As such, Morningstar Managed Portfolios and related competitors, which do not offer a consumer facing UX are not included in this graphic.

Segmenting the current players

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The Wealth Manager Value Proposition Must Align With Client Needs

Source: Morningstar. For Illustrative Purposes Only.

For Financial Professional Use Only. Not for Public Distribution

Discount Brokerage Robo-Advisor Cyborg-Advisor Full-Service Wealth Manager

Client DIY Trader & DIY Long-term Investor

Mass Affluent

Mass Affluent

High-Net-Worth & Ultra HNW

Service Low Cost Trade Execution Trading Tools Investment Information

Low Cost Asset Allocation

Low Cost Asset Allocation Electronic Communication Basic Financial Plan

Personalized Asset Allocation Human Relationship Holistic Goal & Financial Planning Product Access (IPOs, Alternatives) Loans Insurance Tax Optimization Investment Alpha

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Delivering Automated Advice

A range of capabilities are required

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Delivering Advice Automation

Account Aggregation Portfolio Analysis Risk Assessment

Goal Modeling Budgeting Saving for key purchases

Debt-Management Model Based Solutions

Glide Paths

Personalized Investments Solutions

Back-office/ Execution

Performance Reporting

Rebalancing Personalized Education

Client Portal Client Communication Account Opening

http://www.morningstar.com

Initial Engagement

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Make the initial engagement easy and attractive

Client Portal Client Communication Account Opening

Initial Engagement: Client Portal and Client Communication

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Client Assessment

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The more you know about the client, the better the advice you can deliver.

Account Aggregation Portfolio Analysis Risk Assessment Goal Modeling

Client Assessment: Account Aggregation

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Household Investor Profile Framework Total Wealth Approach

Risk Profile

Investment Attitudes

Risk Tolerance

Inve

stin

g Ex

perie

nce

Risk

Pre

fere

nce

Savi

ng P

refe

renc

e Risk Capacity

Time Horizon

Current Spending

Inco

me

Expe

nses

Future Spending

Goal

s

Prio

ritie

s

“Total Wealth”

Liquid Illiquid

Fina

ncia

l Cap

ital

Hous

ing

Capi

tal

Pens

ion

Capi

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Hum

an C

apita

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Financial Wellness/Budgeting

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Some customer aren’t ready to invest, but they do have a need for financial advice.

Budgeting Saving for key purchases

Debt-Management

Financial Wellness/Budgeting: Budgeting, Saving & Debt Managment

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Investment Advice

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A range of outcome-based investment options exist based on your desired level of personalization.

Model Based Solutions

Glide Paths Personalized Investment solutions

Service/Support

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Automating proactive service is critically important in delivering cost effective advice.

Back-office/Execution Performance Reporting Rebalancing Personalized Education

Key considerations for planning your approach

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Get started now so that you have your cost structure in line as the market develops

gBuild vs. Buy

gConnect to Existing Assets and Processes

gDetermine your target market

gRoll-out/Learn/Adapt

gMinimize your cost of acquisition and cost of support

Time

Cost to Acquire/Serve

“Robo Assets”

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Technology for Financial Services Goes Beyond Robo-Advice

The market leaders in Asset Management are organizing themselves in a way that allows them to embrace modern technology to better serve investors of all types, streamline operations and use data in a meaningful way

Today’s Team: Undefined Processes and Inconsistent Sales Materials

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The Sales Team of Tomorrow

For many firms, the sales team gets materials from people scattered across the firm’s product, portfolio, and marketing teams. This leads to inconsistent messages, organizational disarray, and compliance headaches.

Tomorrow’s Team: Defined Processes and Consistent, Compliant Materials

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The sales team of tomorrow has one point of contact for content strategy, creation, and distribution, while compliance has oversight into the entire process. Morningstar DirectSM, combines solutions and aligns teams firm-wide.

Morningstar DirectSM

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Morningstar Direct is an investment analysis platform that delivers the best of everything from Morningstar, including our high-quality data, research, and analytics.

× Morningstar® Essentials™ provides licensing rights to use Morningstar’s proprietary statistics in marketing materials.

× Presentation Studio helps create customized fact sheets and presentation template for customer / investor communication

× Report Portal is used to distribute materials to all sales team members

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The website is the hub of digital marketing. However, as they exist today many are not emblematic of best practices.

Wikiwand. Best User Experience, Webby Award Winner, 2015

NASA GENELAB. Best Navigation/Structure, Webby Award Winner, 2015

TED. Best Practices, Webby Award Winner, 2015

Engaging Client Experience

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Why:

I own a fund and want to check on it.

I have a portfolio and a need (underperformer, new allocation, new money).

I am here for a thematic or marketing pull.

How:

Quick and easy to navigate and understand

Tools to help them fit your solutions into their portfolio

Tell the story that matches

Responsive design

Consistent Content (insights, thought leadership, blogs)

Data and Tools Automation (data feeds, components, dynamic widgets)

PDF Documents (FPO, insert description here)

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Enhance your website with everything from trusted Morningstar data to components that illuminate important financial concepts and provide value to your clients.

Ready-to-Use Components × Seamless integration × Promote your distinct identity × Swiftly evolving toolset

Smart Engines and Powerful Data × Independent Research × Quality Data × Proprietary Methodology

Tell Your Story Through a Full Spectrum of Solutions

Meaningful Workflows × Stitch components together × Cohesive, engaging, intuitive online experience × Support your unique strategic objectives

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Our cross-functional team lends its web expertise and industry perspective, from discovery through deployment, and beyond the site launch to keep you informed of the movements we are watching in the industry.

A Consultative Approach × Brainstorm sessions × One-to-one discussions × Build a distinct plan

Award-winning design × Brand integration × Clear data visualization × Unparalleled web presence

Client-Driven Testing × Ease of implementation × Mobile-compatible services

Total Care × Specialized product support team × Dedicated call-in number

Benefit From Our Collaborative, Consultative Process