Trends in the U.S. Industry – and Their Implications

Theresa Hamacher, CFA

President

September 23, 2014

1900

1925

1950

1974ERISA signed into

lawIRAs created

1978401(k) added to tax

code

1981Universal IRA

401(k) proposed regulations

2000

2014

2035

The Millennial Frame of Reference

New Models for Financial Advice

Millennials and Financial Advice

Financial Firms Don’t Connect with Millennials, Study Finds

Millennials Most Likely to Seek Financial Advice from

Parents

50s Average Age of Advisor

Regulators and Financial Advice

Retail Distribution

Review

Future of Financial AdviceMarkets in

Financial Instruments Directive II

Packaged Retail Investment Products SEC fiduciary

standard for brokers

Department of Labor fiduciary standard for

retirement plans

Changing Product Set

StockBond StockMoney Market

Changing Product Set

Target Date

NonTraditional

Bond

Long-ShortStock

Multi Strategy Alternative

Retail Money Mkt

StockBond StockInstitutionalMoney Mkt

Off the Wall Prediction #1

The convergence between traditional and hedge fund managers will be faster than expected

Explosive Growth in ETFs

Stock

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013$0

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

$1.7 trillion in ETF assets

10% of total

Source: Investment Company Institute

Off the Wall Prediction #2

Product evolution will go beyond ETFs

Explosive Growth in Index Funds

Stock

Open-End Funds

Source: Investment Company Institute

Explosive Growth in Index Funds

Stock

Including ETFs

Source: Investment Company Institute

Explosive Growth in Index Funds

Stock

Domestic Equity Only

Source: Investment Company Institute

Off the Wall Prediction #3

Active vs. passive discussion will focus on balance

Do ETFs Increase Volatility?

How Index Trading Increases Market Vulnerability

Active vs. Passive Investing and the Efficiency of Individual Stock

Prices

Defining the Brand

Stock

Source: kasina and Horsesmouth

The Challenge

Stock

Operating ModelDistribution

Product