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Evolution of Mutual Fund Wrap Account Programs

Explore the history, growth, and future predictions of Mutual Fund Wrap Account Programs, including leading sponsors and market segments.

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Evolution of Mutual Fund Wrap Account Programs

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  1. Mutual Fund Wrap Account Programs:Mass Market Managed Account Programs Tiburon Research October 30, 2019

  2. Outline • Mutual Fund Wrap Account Programs Market Evolution • Market History • Market Definition • Market Growth • Leading Mutual Fund Wrap Account Programs Sponsors • Mutual Fund Wrap Account Programs Market Segments • Discretionary Programs • Non-Discretionary Programs • Mutual Fund Wrap Account Programs Future Predictions • Substantial Growth for Mutual Fund Wrap Account Programs • Limited Manager Opportunities • Increasing Market Share for Index & Other Low Cost Mutual Funds

  3. Mutual Fund Wrap Account Programs was Founded in XXXX and Has Subsequently Evolved Through their Early, Middle, & Recent Phases Mutual Fund Wrap Account Programs History Mutual Fund Wrap Account Programs Founded Mutual Fund Wrap Account Programs Today Middle Phase Recent Phase Early Phase Approximate Dates: XXXX XXXX - XXXX XXXX - XXXX XXXX - 2020 2020 Key Steps: • XXXX : -- • XXXX: -- • XXXX: -- • XXXX: -- Source: Tiburon Research & Analysis

  4. The Second Type of Managed Account Program is Mutual Fund Wrap Account Programs Mutual Fund Wrap Account Programs Comments • -- Source: 6/16 Cerulli Associates Brochure; 12/1/10 My Vest Presentation (Cerulli Associates); 4/1/13 Envestnet Presentation (Crager) (Strategas); 10/31/10 Google News Alerts (Cerulli Associates); 2/17/07 Investment News (Cerulli Associates); 2/12/07 Investment News; 5/1/06 Financial Planning (Cerulli Associates); 6/7/05 Wachovia Conversation (McElhaney); 5/31/05 Morgan Stanley Email (Altman); Tiburon Research & Analysis 3

  5. Mutual Fund Wrap Account Programs Market Background Mutual Fund Wrap Account Programs Market Background Comments • -- Source: Tiburon Research & Analysis

  6. Mutual Fund Wrap Account Programs are Similar to Separately Managed Account (SMA) Programs, Except for that the Programs Select Mutual Funds Mutual Fund Wrap Accounts Programs Workflow Stock Mutual Funds Bond Mutual Funds Client Financial Advisor Mutual Fund Wrap Account Program Mutual Fund Managers • Sells the program • Recommends asset allocation • Completes paperwork • Conducts quarterly review meeting • Sets up accounts • Prices securities • Provides quarterly performance reports • Provides billing services • Supplies marketing materials • Select securities • Place trades Source: Tiburon Research & Analysis

  7. 300 150 150 X% Firm Y% Financial Advisor Maximum Client Fee Mutual Fund Manager Fee Advisory Fee The Economic Value Chain of a Mutual Fund Wrap Account Program Can be a Helpful Point of Context Another source said that mutual fund wrap account program sponsor fees generally include the costs of marketing, due diligence, account monitoring, reconciliation, and reporting Mutual Fund Wrap Accounts Programs Economic Value Chain Example (Basis Points) Source: Tiburon Research & Analysis

  8. Outline • Mutual Fund Wrap Account Programs Market Evolution • Market History • Market Definition • Market Growth • Leading Mutual Fund Wrap Account Programs Sponsors • Mutual Fund Wrap Account Programs Market Segments • Discretionary Programs • Non-Discretionary Programs • Mutual Fund Wrap Account Programs Future Predictions • Substantial Growth for Mutual Fund Wrap Account Programs • Limited Manager Opportunities • Increasing Market Share for Index & Other Low Cost Mutual Funds

  9. Mutual Fund Wrap Account Programs Market Definition Mutual Fund Wrap Account Market Definition Comments • -- Source: Tiburon Research & Analysis

  10. Mutual Fund Wrap Account Programs can be Defined to Include Discretionary & Non-Discretionary Mutual Fund Wrap Account Programs Market Definition Mutual Fund Wrap Account Programs Market Definition Discretionary Non-Discretionary Source: Tiburon Research & Analysis 9

  11. Mutual Fund Wrap Programs Includes 100 Sponsors, Including 50 Discretionary Programs Sponsors Needs real data Mutual Fund Wrap Programs Sponsors Source: Tiburon Research & Analysis 10

  12. Mutual Fund Wrap Programs Includes 200 Programs, Including 100 by Discretionary Programs Needs real data Mutual Fund Wrap Programs Source: Tiburon Research & Analysis 11

  13. Mutual Fund Wrap Programs Serve 20,000 Financial Advisor Clients, Including 10,000 by Discretionary Programs Needs real data Mutual Fund Wrap Programs Financial Advisor Clients Source: Tiburon Research & Analysis 12

  14. Mutual Fund Wrap Programs Serve 1.5 Million Clients, Including 75,000 by Discretionary Programs Needs real data Mutual Fund Wrap Programs Clients Source: Tiburon Research & Analysis 13

  15. Mutual Fund Wrap Programs Have Gathered 3.0 Million Accounts, Including 1.5 Million Discretionary Programs Needs real data Mutual Fund Wrap Programs Accounts (Millions) Source: Tiburon Research & Analysis 14

  16. Mutual Fund Wrap Programs Gather 300,000 Net New Accounts, Including 150,000 by Discretionary Programs Needs real data Mutual Fund Wrap Programs Net New Accounts Source: Tiburon Research & Analysis 15

  17. Mutual Fund Wrap Programs Have Gathered $1.4 Trillion Assets Under Management, Including $0.7 Trillion by Discretionary Programs Needs real data Needs real data Mutual Fund Wrap Programs Assets Under Management ($ Trillions) Source: 4/1/18 Vestmark Press Release (Money Management Institute (MMI)); 6/16 Cerulli Associates Brochure; 12/1/10 My Vest Presentation (Cerulli Associates); 10/31/10 Google News Alerts (Cerulli Associates); 2/17/07 Investment News (Cerulli Associates); 2/12/07 Investment News; 5/1/06 Financial Planning (Cerulli Associates); 6/7/05 Wachovia Conversation (McElhaney); 5/31/05 Morgan Stanley Email (Altman); Tiburon Research & Analysis 16

  18. Mutual Fund Wrap Programs Gather $30 Billion Net Flows, Including $15 by Billion by Discretionary Programs Needs real data Mutual Fund Wrap Programs Net Flows ($ Billions) Source: 4/1/13 Envestnet Presentation (Crager) (Strategas); 5/1/06 Financial Planning (Cerulli Associates); 12/15/03 Investment News (Cerulli Associates); 3/19/01 Investment News (Strategic Insight); Tiburon Research & Analysis 17

  19. Mutual Fund Wrap Programs Generate $2.0 Billion Revenues, Including $1.0 Billion by Discretionary Programs Needs real data Mutual Fund Wrap Programs Revenues ($ Billions) Source: Tiburon Research & Analysis 18

  20. Mutual Fund Wrap Programs Earn $1.0 Billion, Including $0.5 Billion by Discretionary Programs Needs real data Mutual Fund Wrap Programs Net Profits ($ Billions) Source: Tiburon Research & Analysis 19

  21. Outline • Mutual Fund Wrap Account Programs Market Evolution • Market History • Market Definition • Market Growth • Leading Mutual Fund Wrap Account Programs Sponsors • Mutual Fund Wrap Account Programs Market Segments • Discretionary Programs • Non-Discretionary Programs • Mutual Fund Wrap Account Programs Future Predictions • Substantial Growth for Mutual Fund Wrap Account Programs • Limited Manager Opportunities • Increasing Market Share for Index & Other Low Cost Mutual Funds

  22. Mutual Fund Wrap Account Programs Market Growth Mutual Fund Wrap Account Programs Market Growth Comments • -- Source: Tiburon Research & Analysis 21

  23. Mutual Fund Wrap Account Programs Market Growth can Specifically be Measured by the Number of Sponsors, and their Number of Programs, Financial Advisors, Clients, Accounts, Net New Accounts, Assets Under Management, Net Flows, Revenues, & Net Profits Sponsors Programs Financial Advisors Clients Accounts Net New Accounts Assets Under Management Net Flows Revenues Net Profits Mutual Fund Wrap Account Programs Market Growth Measures Mutual Fund Wrap Account Programs Market Growth Measures Source: Tiburon Research & Analysis

  24. There are 100 Mutual Fund Wrap Program Sponsors Mutual Fund Wrap Account Programs Sponsors Source: Tiburon Research & Analysis

  25. Mutual Fund Wrap Account Program Sponsors Offer 200 Programs, Up From One in 1991 But Down From 1,000 in 2006 1,000 is an estimate Mutual Fund Wrap Account Programs Source: 6/02 Ticker; 5/23/00 AssetMark Presentation (Steiny); 4/98 Registered Rep; 2/5/98 Newscan Email (Clark); 1/95 Cerulli Associates Research Report; Tiburon Research & Analysis

  26. Mutual Fund Wrap Account Programs Serve 20,000 Financial Advisors Mutual Fund Wrap Account Programs Financial Advisors Source: Tiburon Research & Analysis

  27. Mutual Fund Wrap Account Programs Serve 1.5 Million Clients Needs more complete data Mutual Fund Wrap Account Programs Clients (Millions) Source: Tiburon Research & Analysis

  28. Mutual Fund Wrap Account Programs Have Gathered 3.0 Million Accounts Needs more complete data Mutual Fund Wrap Account Programs Accounts (Millions) Source: Tiburon Research & Analysis

  29. Mutual Fund Wrap Account Programs Gather 300,000 Net New Accounts Needs more complete data Mutual Fund Wrap Account Programs Net New Accounts Source: Tiburon Research & Analysis

  30. Mutual Fund Wrap Account Programs Have Gathered $1.4 Trillion Assets Under Management, Up from $1 Billion in 1990 2018 = 4/1/18 Mutual Fund Wrap Account Programs Assets Under Management ($ Billions) Alternative Data ($ Billions): 1992 ($2); 1993 ($7); 1994 ($12); 1995 ($21); 1996 ($34); 1997 ($50); 1998 ($69); 1999 ($81); 2000 ($127); 2001 ($128); 2002 ($170); 2003 ($154) Source: 4/1/18 Vestmark Press Release (Money Management Institute (MMI)); 6/16 Cerulli Associates Brochure; 12/1/10 My Vest Presentation (Cerulli Associates); 10/31/10 Google News Alerts (Cerulli Associates); 2/17/07 Investment News (Cerulli Associates); 2/12/07 Investment News; 5/1/06 Financial Planning (Cerulli Associates); 6/7/05 Wachovia Conversation (McElhaney); 5/31/05 Morgan Stanley Email (Altman); Tiburon Research & Analysis

  31. Mutual Fund Wrap Account Programs Gather $30 Billion Net Flows, Down from $50 Billion in 2000 & its Peak of $74 Billion in 2012 Alternative data mutual funds wrap accounts net flows ($ billion): 2003 ($18); 2004 ($51); 2005 ($53); 2006 ($59) Mutual Fund Wrap Account Programs Net Flows ($ Billions) Source: 4/1/13 Envestnet Presentation (Crager) (Strategas); 5/1/06 Financial Planning (Cerulli Associates); 12/15/03 Investment News (Cerulli Associates); 3/19/01 Investment News (Strategic Insight); Tiburon Research & Analysis

  32. Mutual Fund Wrap Account Programs Generate $2.0 Billion Revenues Mutual Fund Wrap Account Programs Revenues ($ Billions) Source: Tiburon Research & Analysis

  33. Mutual Fund Wrap Account Programs Earn $1.0 Billion Mutual Fund Wrap Account Programs Net Profits ($ Billions) Source: Tiburon Research & Analysis

  34. Outline • Mutual Fund Wrap Account Programs Market Evolution • Market History • Market Definition • Market Growth • Leading Mutual Fund Wrap Account Programs Sponsors • Mutual Fund Wrap Account Programs Market Segments • Discretionary Programs • Non-Discretionary Programs • Mutual Fund Wrap Account Programs Future Predictions • Substantial Growth for Mutual Fund Wrap Account Programs • Limited Manager Opportunities • Increasing Market Share for Index & Other Low Cost Mutual Funds

  35. Mutual Fund Wrap Account Programs Leaders Mutual Fund Wrap Account Programs Leaders Comments Mutual fund wrap accounts were most popular outside of the wirehouses in the independent advisor and retail markets • -- Mutual fund wrap account leaders: mutual fund wrap account leaders include Ameriprise Financial, Fidelity Investments, and SEI Investments Source: 12/15/03 Investment News (Cerulli); 12/13/00 HD Vest Financial Services Meeting (Vest); 11/10/00 Financeware Email (Loeper);Tiburon Research & Analysis

  36. The Leading Mutual Fund Wrap Account Programs Sponsors can Specifically be Ranked by their Number of Programs, Financial Advisors, Clients, Accounts, Net New Accounts, Assets Under Management, Net Flows, Revenues, & Net Profits Programs Financial Advisors Clients Accounts Net New Accounts Assets Under Management Net Flows Revenues Net Profits Mutual Fund Wrap Account Programs Leading Sponsor Measures Mutual Fund Wrap Account Programs Leading Sponsor Measures Source: Tiburon Research & Analysis 35

  37. XXXX is the Leading Mutual Fund Wrap Account Program Sponsor Measured by its Number of Programs Mutual Fund Wrap Account Program Sponsors By Programs Source: Tiburon Research & Analysis 36

  38. XXXX is the Leading Mutual Fund Wrap Account Program Sponsor Measured by its Number of Financial Adivors Mutual Fund Wrap Account Program Sponsors By Financial Advisors Source: Tiburon Research & Analysis 37

  39. XXXX is the Leading Mutual Fund Wrap Account Program Sponsor Measured by its Number of Clients Mutual Fund Wrap Account Program Sponsors By Clients Source: Tiburon Research & Analysis 38

  40. XXXX is the Leading Mutual Fund Wrap Account Program Sponsor Measured by its Number of Accounts Mutual Fund Wrap Account Program Sponsors By Accounts Source: Tiburon Research & Analysis 39

  41. XXXX is the Leading Mutual Fund Wrap Account Program Sponsor Measured by its Number of Net New Accounts Mutual Fund Wrap Account Program Sponsors By Net New Accounts Source: Tiburon Research & Analysis 40

  42. FMR’s Fidelity Investments & Ameriprise Financial are the Leaders in Mutual Fund Wrap Accounts with $73 & $69 Billion Assets Under Management Respectively Other Firms: $85 billion Mutual Fund Wrap Account Programs By Assets Under Management ($ Billions) Amerprise Financial (13%); Fidelity Investments (12%); LPL Financial Holdings (10%); UBS Financial Services (9%); Wells Fargo Advisors (9%); SEI Investments (9%); Morgan Stanley (6%); Merrill Lynch (5%); Citigroup (5%); Other (22%) Source: 11/1/10 Wall Street Journal; 2/12/07 Investment News (Cerulli Associates); 5/1/06 Financial Planning (Cerulli Associates); 6/7/05 Wachovia Conversation (McElhaney); 5/31/05 Morgan Stanley Email (Altman); 5/31/05 Trivium Consulting Analysis (MacKillop); 5/23/05 UBS Web Site; 5/12/05 Merrill Lynch Web Site; 5/9/05 AG Edwards Web Site; 7/13/04 Morgan Stanley Web Site; 12/15/03 Investment News (Cerulli Associates); Tiburon Research & Analysis

  43. XXXX is the Leading Mutual Fund Wrap Account Program Sponsor Measured by its Net Flows Mutual Fund Wrap Account Program Sponsors By Net Flows ($ Billions) Source: Tiburon Research & Analysis 42

  44. XXXX is the Leading Mutual Fund Wrap Account Program Sponsor Measured by Revenues Mutual Fund Wrap Account Program Sponsors By Revenues ($ Billions) Source: Tiburon Research & Analysis 43

  45. XXXX is the Leading Mutual Fund Wrap Account Program Sponsor Measured by Net Profits Mutual Fund Wrap Account Program Sponsors By Net Profits Source: Tiburon Research & Analysis 44

  46. Outline • Mutual Fund Wrap Account Programs Market Evolution • Market History • Market Definition • Market Growth • Leading Mutual Fund Wrap Account Programs Sponsors • Mutual Fund Wrap Account Programs Market Segments • Discretionary Programs • Non-Discretionary Programs • Mutual Fund Wrap Account Programs Future Predictions • Substantial Growth for Mutual Fund Wrap Account Programs • Limited Manager Opportunities • Increasing Market Share for Index & Other Low Cost Mutual Funds

  47. Mutual Fund Wrap Account Programs Market Segments Mutual Fund Wrap Account Market Segments Comments • -- Source: Tiburon Research & Analysis

  48. Mutual Fund Wrap Account Programs Have Two Market Segments, Including Discretionary & Non-Discretionary Mutual Fund Wrap Account Programs Market Segments Mutual Fund Wrap Account Programs Market Segments Discretionary Non-Discretionary Source: Tiburon Research & Analysis 47

  49. Mutual Fund Wrap Account Programs by Product Type Needs data Mutual Fund Wrap Account Programs By Product Type Discretionary Non-Discretionary Source: Tiburon Research & Analysis

  50. Mutual Fund Wrap Account Programs Financial Advisor Clients by Product Type Needs data Mutual Fund Wrap Account Programs Financial Advisor Clients By Product Type Discretionary Non-Discretionary Source: Tiburon Research & Analysis

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