Building your High Net Worth Business: A Matter of Life and Death

1. Building your High Net Worth Business:A Matter of Life and Death Tom Junkin Senior Vice President Personal Trust Services Fiduciary Trust Company of Canada

2. About Fiduciary Trust Company of Canada 2004 Bissett Private Client becomes Fiduciary Trust Company of Canada, a federally regulated trust company 2000 Bissett acquired by Franklin Templeton Investments 2006 2001 1982 Fiduciary Trust Company of Canada has $8.5 billion AUM Franklin Templeton acquires Fiduciary Trust Company International (founded 1931) Bissett & Associates founded

3. Agenda • Understanding Canada’s High Net Worth market • Lessons learned from High Net Worth clients and advisors • How can you build your High Net Worth practice? • Questions and answers

4. 7.5% of the Population controls 93.9% of investable assets in Canada The top 1.5% control 65% of investable assets. Source: Capgemini, The Canadian Wealth Management Market 2004/2005

5. 50% of HNW Canadians are over age 60. They control 50% of total investable assets. People over age 70 represent almost 1/3 of the HNW market. Source: Capgemini, The Canadian Wealth Management Market 2004/2005

6. Higher wealth segments will grow at the highest rate. It’s true: the rich DO get richer, faster. Source: Capgemini, The Canadian Wealth Management Market 2004/2005

7. Understanding Canada’s High Net Worth Market • Between 1990 and 2004, household financial assets more than doubled. • 46% of Canadian wealth is in non-financial assets. • Between 1991 and 2001, Canadians over age 80 increased by 41% to 932,000. • 2001 to 2011: 80 year old Canadians will increase again by 43% to 1.3 million • 12.7% of high end assets under management are held in estates and trusts. • $18.6 billion is currently held in wealth transfer structures. Source: Statistics Canada; Investor Economics Fee-Based Report Summer 2003

8. Understanding Canada’s High Net Worth Market • From 2001 to 2004, the Cost of Living Extremely Well rose 27% versus 10% for the CPI. • The wealthy are feeling the crunch of rising costs. • From 1967 to 1989, marriages between previously-married people quadrupled. • In 1973, 5.4% of divorces were not a first divorce. In 2003, 16.2% of divorces are second or higher. • Family relationships have never been as complicated as they are today. Source: Capgemini, The Canadian Wealth Management Market 2004/2005; Statistics Canada

9. Lessons learned from High Net Worth Clients and Advisors

10. Institutions Ultra HNW HNW Mass Affluent Democratization of Wealth Management • Investor Expectations • more planning • access to experts • customized solutions • product choice • global choice • my own CFO • Supplier Product Push • value added services • sophisticated products • leverage technology • leverage distribution Investors behave like the wealth segment above them. HNW behaviours predict future Mass Affluent behaviours.

11. Commoditization of Investment Management • Solutions that have already migrated from Institutions to the Mass Affluent: • efficient frontier analysis • index funds • product categorization (growth vs. value, small cap vs. large cap) • manager of managers • style diversification • hedge funds / alternative investments Mass Affluent clients are already looking for “institutional” services: Strategic Planning, Chief Financial Officers

12. Lessons from the Ultra High Net Worth segment • 62% have fired an Investment Manager in the last 18 months • Client: “I wish more advisors would...” • #1 response: Listen (25%) • #2 response: Be more honest and open (19%) • Advisor: “I wish more clients would...” • #1 response: Educate themselves with our help (20%) • #2 response: Be more honest and open (18%) • #3 response: Communicate needs better (13%) Lesson: HNW relationships are hard work. Superficial relationships don’t last. Source: Institute for Private Investors, IPI Report 2002

13. Lessons from the Ultra High Net Worth segment • What, if any, transition is your family engaged in today? Lesson: Families spend almost as much time worrying about succession planning as they do about firing Advisors. Source: Institute for Private Investors, IPI Report 2003

14. Lessons from the Ultra High Net Worth segment • What Wealth Management services do you value the most? Lesson: Investment management services are important, but they are only part of the complete wealth management suite. Source: Institute for Private Investors, IPI Report 2004

15. Lessons from the Mass Millionaires Percentage of Mass Millionaires who: • Rely on an Investment Advisor 73% • Use two or more Investment Advisors 25% • Say a formal financial plan is important to them 75% • Do NOT have a formal financial plan 75% ?? Lesson: Investors are looking for increased effort from Advisors in establishing and periodically reviewing their Wealth Plans. Lesson: Unmet needs are going to be met by someone. Source: Taddingstone 2003 Mass Millionaires Report

16. Lessons from the Courts • People in many circumstances die without a Will. Lesson: People procrastinate about making a Will. Source: Alberta Law Reform Institute, Report for Discussion No. 16 (1996)

17. Lessons from Professionals • Professionals, who should know better, often fail to plan ahead. Lesson: Intestacy is a great equalizer. Source: Environics Research Wealth Poll II (1995)

18. Lessons from Advisors to the Wealthy • How have HNW expectations changed in the last 12 months? Lesson: Canadian HNW investors are challenging their Advisors to deliver more than investment advice. Source: Capgemini, The Canadian Wealth Management Market 2004/2005

19. Lessons from the Advisors to the Wealthy • What reasons are cited most often for terminating your services? Lesson: Advisors should monitor family situations as closely as they do investment performance. Source: Institute for Private Investors, IPI Report 2003

20. Emerging HNW Client Behaviours • Behave more like a corporation: • Long range strategic financial planning • Planning earlier for succession and wealth transfer • Review and update financial plans more frequently • Hire a Chief Financial Officer to handle the burden

21. Building your High Net Worth Practice

22. Challenges Advisors face in the HNW market • Deliver more service to HNW clients without significantly increasing costs • Best practices: • Standardize your workflow • Take a holistic view of client relationships • Rigorously segment your client base • Practice continuous professional development • Perform your core competency and outsource the rest

23. Challenges Advisors face in the HNW market • Meeting Multi-Generation Families expectations for longevity • Best practices: • Reach out to all generations of client families • Create robust succession plans for your practice • Create multi-generation service teams • Offer solutions tailored to each generation’s needs

24. Loss of life Loss of legal capacity Lost opportunities to reduce taxes Possibility their wishes are not carried out Potential family conflict Potential long and costly estate administration An Incomplete Wealth Plan – Risks From Your Clients’ Perspective

25. An Incomplete Wealth Plan – Risks From Your Perspective

26. A Complete Wealth Plan – Your Ultimate Goal

27. The Missing Pieces: what you need to participate in Wealth Transfer

28. Are you ready to add Wealth Transfer services to your practice? • To expand your practice to include Wealth Transfer Services, you can: • Build your own core competency • Build a broad network of experts and service suppliers • Outsource to a strategic partner

29. Option 1: Buildyour own core competency • Learn to provide estate planning, executor, and trustee services directly • Advantages: • Independence • Disadvantages: • Training is expensive and time-consuming • Margins on estate and trust services are lower than investment services • Lack of permanence • Significant personal liability

30. Option 2: Build a broad network • Network aggressively with estate lawyers, accountants, and trust officers • Advantages: • Increased referral opportunities • Many experts available to suit individual needs • Disadvantages: • Time and effort to build reciprocal relationships • No economies of scale or negotiating power • Some experts could compete with your value proposition

31. Option 3: Outsource to a Strategic Partner • Partner with a firm that integrates investment management with estate planning, executor, and trustee services • Advantages: • Immediate access to trust and legal expertise • Seamless integration with your existing business • Economies of scale • Continuity and resources • Disadvantages: • Few suppliers of integrated wealth transfer services exist • Must meet program requirements

32. Professional Executors and Trustees in Canada Source: OSFI website “Who we Regulate”

33. Qualifying Clients for this Program • Minimum Investment of $500,000 in any product or solution within the Franklin Templeton Investments platform AND • Client agrees to appoint Fiduciary Trust as: • Executor, or • Trustee, or • Agent for Executor or Trustee

34. Global, multi-manager, multi-style investment management PLUS Professional executor and trustee services PLUS Specialized, independent legal advice by Canada’s leading experts Added Value: Expert consultation on will and estate planning Transparent and competitive fees Legal costs reimbursed to the client Backed by Franklin Templeton reputation and resources What to look for in a Wealth Transfer partner

35. Benefits of Incorporating Wealth Transfer services into your business? 1) For you • Close out competitors • Increase client loyalty and retention • Increase AUM (use to consolidate and attract new assets) • Retain assets through generational transfers • Build HNW book of business • A solution to help you meet HNW clients leading expectation 2) For your clients • Majority of HNW clients have an incomplete wealth plan • 93% of Advisors report Estate Planning as leading client expectation in last 12 months

36. Thank you.Any Questions?

37. Franklin Templeton Investments Private Client Group part of Fiduciary Trust Company of Canada, a wholly-owned subsidiary of Franklin Templeton Investments Corp.