National Conference on Children and Youth Savings: Market Development Plenary Session June 15, 2009

1. National Conference on Children and Youth Savings: Market Development Plenary Session June 15, 2009 Hosted by CFED, Brooklyn, NY June 14-16, 2009

2. Introduction- Lisa Mensah • Session Panelists: • Bill Ray, CEO Bank Plus, Jackson, MS (video message). • Dr. Lew Mandell, Kermit O. Hanson Visiting Professor of Finance and Business Economics at the University of Washington. • Michael Johnston, Executive Vice President of The Capital Group Companies, New York, NY. • David White, Chief Executive of The Children’s Mutual, United Kingdom.

3. Introduction – Lisa Mensah • Market Development • Exploring how the private sector can rise to the challenge of building a system of accounts for every child in America. • Balancing the roles of Government and the private financial sector to deliver a national child accounts policy. • Benefits of partnering with the private sector • Moment is ripe to “Add the Kids”!

4. BankPlus Video- Bill Ray and Max Yates

5. The Importance of Utilizing the Private Sector - Dr. Lew Mandell • The Investment Gap: • Equities are the only way to build significant wealth. • Initial $500 grant invested at 2% (after fees) in a fixed income account would equal just $714 after 18 years. At 8% (after fees) in an equity account this would be nearly $2,000. If families contributed $50/month in addition would reach $13,703 and equity would be $26,105 after 18 years or nearly twice as much.

6. The Importance of Utilizing the Private Sector • The Private Sector Advantage: • The private sector has the motivation to drive account contributions: • Fee generation from more mature accounts (remember that everything won’t be withdrawn at age 18). • Developing customers for life. With nationwide banking and ATM’s, there is little reason to switch away from first account relationship. • Ability to cross-sell other products over the life cycle including investment, loan, and risk-management products. • The private sector has the scale and experience to invest and manage the funds at low cost. • The simplicity of the product helps reduce marketing costs.

7. The Importance of Utilizing the Private Sector • Impact of child accounts on school age children and economic education in our nation’s schools: • Financial education seems to work best with younger children. • Good habits are easier to form when children are less subject to peer-generated consumption patterns. • Having an account gives a child both “ownership” and relevant experience.

8. Child Accounts and the Private Financial Sector - Michael Johnston • The significance of the Child Account opportunity • The perspective of the mutual fund industry. • What it would take for industry to rise to the challenge of delivering child accounts • $500 starter account contribution • Simplified and protected investment products • Appropriate fee cap • Restricted, efficient system of withdrawals at age 18 • How the industry CAN run the market to reach all American kids • System of players works now, but doesn’t include the kids. • Potential roles and interactions of different industry players.

9. “2020 Vision” David White Chief Executive Officer

10. 2020 Vision Imagine a world where - • Opportunity, choice, control (not compromised) • 18 years: lowest income family: $ 3,500 • 18 years: minimum: $ 1,700 • 45-50%: $16,000 Imagine no more!

11. UK Government Policy • Thomas Paine, Michael Sherraden • IPPR • Tony Blair and Gordon Brown • An asset • Savings habit • Financial education The Child Trust Fund • Introduced January 2005 • All children born since September 1, 2002 • Today 4.5 million open accounts

12. Child Trust Fund – How it works • Register child’s birth • Apply for Child Benefit • Government issues information and certificate for £250 / $400

13. Child Trust Fund – How it works • Parents/Guardians choose provider (default after 1 year) • 40 Providers, 100 distributors

14. Child Trust Fund – How it works • Low income family (below $25,000) – another $400 • $400 / $800 again at age 7 • Family, anyone can add up to $2000pa • Consumer protection (universal) • Price cap, 1.5% pa • Invest in stocks and shares (tax-free) • Lifestyle

15. So does it work? YES!!

16. The Children’s Mutual • Market leader • 25% share • 70 primary schools in May • Web, post, telephone • 75% share of voice • Data

17. The Children’s Mutual Data • (75% Opening rate) • Lump sums: 5.6% @ $670 • 47%-50% open direct deposit transfer • Direct deposit average: $40 per month • Year on year increases • Recession proof (ish!) • $16,000 at 18

18. Success and Improving • 200% increase in savers • 60% increase in savings • 30% of low income families save • Christmas, birthdays, baptisms • Grandparents • 10 x £10

19. What happens at 18? • Freedom of use, tax free • Potential for incentives • Automatic rollover into ‘ISA’ • Financial education • Government initiative • “My Money” in schools

20. Private Sector • Universal – can you ignore it? • Live or Die! • Competition • Escalator • Pocket money • Child friendly statements • Cross-sell • Wills • Life Assurance • More • 25%, 30% of new adults with money!

21. Give Every Child Every Chance • ….. To fulfil their dreams and aspirations • To have opportunity and choice • To avoid economic crisis • A stake in corporate America

22. Ask 100 Senators • Would you like to change the savings habits of the nation in less than a generation? • What would it cost?