financial services observer sept 2013 - morningstar,...

Differing Strategies Will Contribute to the Evolution of Moats in Wealth Management Competitive shifts in the U.S. wealth management industry deepened in the wake of the financial crisis. We think that these shifts are likely to continue, as customer demands, regulation, and technology evolve. Already, we’re seeing significant advisor movement away from wirehouses to independent advisor networks, and a definitive shift away from transaction-based to fee-based revenue streams. We think that these trends, along with the increasing importance of scale and scope in certain customer segments, will shape competition in the wealth management space over the next decade. In this Financial Services Observer, we take a look at where the industry is headed, how firms are responding to changes in the competitive landscape, and which strategies are most likely to result in excess profits for shareholders.

Erin DavisSenior Analyst, Global Banks+1 312 [email protected]

Jim SinegalDirector, Financial Services+1 312 [email protected]

Contributing Analysts

Gaston F. CeronEquity Analyst, Financial Services+1 312 [email protected]

Vincent LuiEquity Analyst, Insurance+1 312 [email protected]

Dan WernerEquity Analyst, Banks+1 312 [email protected]

Michael WongEquity Analyst, Investment Banks+1 312 [email protected]

02 Feature ArticleBuilding and Sustaining Moats in Wealth Management

Competitive Review: Industry Remains Attractive

Wealth Management: A Survey of Business Models

Macro Outlook: The U.S. Will Remain the Epicenter of Global Wealth

Industry Evolution: Increasing Competition Post Crisis

Competition: More Pronounced Segmentation

Firm Spotlights

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Financial Services Observer Sept 2013

Morningstar Financial Services Observer September 2013 2

The Fight for Wealth Management Profits

Key TakeawaysWe find that the deepest moats in wealth management exist among firms that serve ultra-high-net-worth individuals. We think these firms offer comprehensive portfolios of sophisticated financial products, such as generational wealth planning, family office support, and international tax planning and compliance, that are difficult for other firms to replicate. Moreover, many of these firms have long records of sound risk management and long-standing, sometimes generational, relationships with their clients that create high client switching costs. These firms generally have the strongest intangible assets associated with their brands and may be able to enjoy economies of scope in providing wide-ranging services through a team approach. We expect firms like Northern Trust and Morgan Stanley to enjoy these benefits for years to come.

While many financial services firms are building up their wealth management operations, most are targeting the high-net-worth segment (investors with $1 million–$20 million of investable assets), and we think competition in this segment will intensify. We think these investors have largely homogenous needs and firms will find it difficult to differentiate themselves via their client offerings. Instead, they will be forced to compete primarily for advisors via unique business models or cultures (good) or higher payouts (bad). We think Raymond James’ ability to provide a mix of support and independence to advisors is an interesting approach to this segment, while the enormous scale of Bank of America/Merrill Lynch could result in a long-term cost advantage.

The race to serve the mass affluent is the most competitive because of the more standardized needs of clients, but we think the large amount of operating leverage inherent in serving the segment means that there is potential for a firm to build an economic moat through scale. We argue that it will be difficult for firms to otherwise differentiate themselves: To be cost-effective, advice offerings for investors with less than $1 million must be largely automated, and product offerings are easily copied. Firms with large, captive client bases of upwardly mobile investors such as Charles Schwab or Bank of America (through the former’s trading platform and the latter’s massive consumer bank) may be particularly likely to achieve the necessary scale to become a low-cost producer.

Erin DavisJim Sinegal


I. IntroductionWealth management is one of our favorite financial services businesses—it tends to be moaty, with sticky customers, economies of scale, and low capital requirements often leading to high returns for investors year after year. Still, we see important differences among firms, which markets they target, and how their moats are likely to evolve. In recent years, changes in the financial services industry, like rising capital requirements and low interest rates, have been increasing the relative attractiveness of wealth management to financial services firms, and competition in the industry is increasing. In this Financial Services Observer, we take a closer look at the U.S. wealth management industry, discuss how the competitive landscape is shifting, and assess which firms are likely to be the winners—and losers. We think the moatiest businesses in this industry serve ultra-high-net-worth individuals and benefit from deep reputational and capability advantages that are very difficult for other firms to match. We think the trends affecting the industry, such as the growing importance of scale and the rapid growth of wealth among ultra-high-net-worth individuals, will generally reinforce the moats of the firms successfully serving this niche. That said, those firms must carefully manage the costs of investors’ ever-increasing demands and expectations. In contrast, we think competition will intensify among firms serving high-net- worth individuals and the mass affluent. We think these firms face competition not only for clients but also for advisors, and it may be difficult for them to retain the most talented advisors while maintaining high returns for investors. Similarly, we think that the market serving investors with $500,000 of investable assets will be intensely competitive, as it is difficult for firms to offer personal advice at this asset level and packaged products are easily copied. However, technological advances are making this niche more affordable to service electronically, and there may be significant rewards available for firms that are able to differentiate themselves.

II. Why Wealth Management?Industry Dynamics Promote ProfitsA five-forces analysis explains the attractiveness of the wealth management industry and the desires of many financial services firms to expand their businesses in this area. An examination of each of the five forces shows that the industry is in a good position with respect to each of the factors supporting returns.

Threat of SubstitutesWe view the threat of substitutes as low, as there are a limited number of substitutes for financial advice, especially for large customers with complex needs. Some customers, especially in the mass affluent segment, are choosing do-it-yourself strategies in the aftermath of the 2008–09 stock market meltdown. For now, though, most advisory firms are choosing to let their smaller clients go, and we don’t yet see automated or self-directed offerings as disruptive for sophisticated clients.


Barriers to EntryIn our opinion, barriers to entry in the wealth management industry are moderate. Although it does not take much capital to open up shop as a wealth manager, a fairly large level of assets under management is required to stay in business for very long. As the industry moves toward providing total solutions and clients expect more advanced technology, barriers to entry have risen. New regulatory and compliance standards may also make life more difficult for new entrants, and economies of scale exist in the portfolio management and back-office portions of the wealth management value chain. On the other hand, barriers to exit are low (few specialized assets are employed), reducing the potential for irrational competition.

CompetitionWe view the degree of rivalry as low. Advisory businesses generally compete on the basis of quality and customer service, rather than price. The industry is experiencing modest fee compression, concentrated in the largest accounts. However, this may also be a result of the industry actively managing its clients, as advisors focus on deepening relationships with their largest customers and shedding smaller clients. In fact, the move toward fee-based advisory programs has resulted in higher revenue yields on assets managed. Furthermore, customers often do not even know how they are paying for financial advice. Other factors also contribute to a rational level of competition. For example, the wealth management industry in the United States is still growing at a reasonable pace.

Bargaining Power of SuppliersWe think suppliers to the industry possess moderate bargaining power. Employees, who provide the human capital, are the largest individual cost for wealth management firms. Employees possess both valuable client relationships and intellectual property. However, each individual employee represents only a small percentage of costs, limiting bargaining power. Additionally, personnel costs have come down in the wake of the financial crisis, and firms have managed to create incentives to lock in personnel, increasing switching costs for employees. Other suppliers to the wealth management industry have lost bargaining power as a result of several trends, including a move to fee-based compensation, the increased use of open-architecture platforms, and the rise of passive (rather than active) management strategies. This has lowered the cost of the investment products and solutions provided to clients.

Bargaining Power of CustomersCustomers of wealth management firms are typically small (in comparison with the firm’s total asset base) and fragmented but have many choices among both firms and individual advisors. Bargaining power of customers increases with their wealth, as clients with sizable asset balances demand more in the way of service and technology and also command some leverage over pricing, but this typically does not result in intense price competition. Instead, firms compete to provide more sophisticated services, increasing the relative bargaining power of employees. Finally, customers experience switching costs in changing providers, if only psychological.


III. Who Are the Players?Size and Affiliation Characterize Business ModelsMany different kinds of financial services firms offer wealth management services; the services they offer, and the customers they serve, can vary widely.

Wirehouses. About 40% of U.S. wealth management AUM is controlled by wirehouses, which typically serve only wealthy clients. Wirehouses are typically U.S.-based national or international businesses, offer investment and corporate banking services, and see cross-selling between these businesses as a natural fit. Advisors are employees of the wirehouses and typically receive payouts of 30–50% of the revenue they generate. In the U.S., there are four major wirehouses: Merrill Lynch (part of Bank of America), Morgan Stanley Wealth Management, UBS, and Wells Fargo Advisors.

Independent Investment Advisors. Independent investment advisors—called registered investment advisors in the U.S.—are the fastest-growing part of the wealth management industry. They control about 17% of U.S. AUM (including dually registered advisors, which are also affiliated with a broker/dealer). Unlike wirehouse and regional broker/dealer advisors, independent investment advisors are not the employees of the firms they represent, and they (or their firms) therefore receive higher payouts— of as much as 100% of the revenue that they generate. They tend to work in solo practices or in small offices with as many as 20 advisors, though some larger practices have emerged in recent years, like HighTower Advisors, that have 200 or more advisors. Independent advisors tend to target the mass affluent and the lower end of the high-net-worth spectrum. These smaller shops typically partner with firms like Charles Schwab or Edward Jones, which provide trading and product platforms, technology, and other types of support.

Regional broker/dealers. Like wirehouses, regional broker/dealers typically offer investment banking services, but are smaller and more regionally focused. This channel controls about 16% of AUM in the U.S. As with wirehouses, advisors are employees of the firm and typically receive payouts of 40–60%. Examples of regional broker/dealers include Raymond James, which has a split regional broker/dealer and independent broker/dealer business model, and Stifel Financial.

Independent broker/dealers. Like regional broker/dealers, independent broker/dealers typically offer investment banking services alongside retail financial advice, but unlike regional broker/dealers, independent broker/dealers typically have national reach and its advisors are independent contractors rather than employees. Some firms, like Raymond James, have a split business model—about 40% of its advisors are employees and about 60% are independent. Independent advisors receive payouts of 70–100% of revenue. While this is the largest channel in the U.S. by number of advisors, as shown in Exhibit 1, it controls only about 17% of AUM. Examples of independent broker/dealers include Raymond James and LPL Financial Holdings.


Bank Broker/Dealers. Bank broker/dealers are similar to wirehouses and regional broker/dealers except that they are affiliated with a retail bank. They often rely on packaged offerings (rather than bespoke investment plans) that target affluent investors. Advisors are bank employees and generally receive payouts of 30–50% of revenue. Bank broker/dealers can range widely in size, and at the high end, the line between bank broker/dealers and wirehouses can be unclear. Examples of bank broker/dealers include the private banks of J.P. Morgan Chase and Fifth Third, as well as advisors affiliated with local banks and credit unions. They manage about 5% of AUM in the U.S. In other countries, where the universal banking model is more common, bank broker/dealers serve a much larger portion of the market. Examples include BNP Paribas, Credit Suisse, and HSBC.

Insurance Broker/Dealers. Insurance broker/dealers distribute investment products through their insurance networks with a strong emphasis on insurance products and prepackaged offerings. While the number of advisors in this segment is high, selling financial investments is typically not a strong focus for the firm as a whole, and the channel controls only about 4% of U.S. AUM. Examples include AON and The Hartford.

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RegisteredInvestmentAdvisor

Regional Broker/Dealer

Bank Broker/Dealer InsuranceBroker/Dealer

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IndependentBroker/Dealer

Wirehouse

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Exhibit 1 While Independent Broker/Dealers Have the Most Advisors, Wirehouses Have a Dominant Share of Assets Under Management

Advisors by ChannelAUM by Channel

Source: Morningstar, Cerulli Associates: The State of U.S. Retail and Institutional Asset Management 2012.

Data as of 2011.

IDB and RIA channels include dually-registered advisors


IV. Where Is the Money?The U.S. Remains the Epicenter of Global WealthDespite growing income inequality globally, wealth in the U.S. is not concentrated only in the hands of ultra-high-net-worth households. As Exhibit 2 shows, ultra-high-net-worth households—those with more than $20 million in investable assets—hold only 8% of U.S. household assets. Households with $500,000 –$2 million of investable assets hold the largest share, with 30%. Households with $100,000–$500,000 of investable assets control 17% of U.S. household investable assets, more than the holdings of households with more than the holdings of all households with $10 million or more.

The growth outlook for wealth management firms varies significantly by geography and strategy. This seems initially to favor firms focused in developing markets—the growth of wealth management will be driven by economic growth, which has been, and almost certainly will continue to be, faster in developing markets than developed markets. As shown in Exhibit 3, the International Monetary Fund expects growth in China and developing Asia to be 7% annually or higher in 2014, several times higher than the growth expected for the U.S., Europe, or Japan.

<$100K $100K-$500K $500K-$2m $2m-$5m $5m-$10, $10m-$20m >$20m All Households

Average Investable Assets $17,975 $231,847 $996,948 $3,222,567 $7,132,590 $14,069,967 $43,204,579 $231,113

Number of Households 88,044,014 19,825,154 8,392,251 1,783,292 437,399 150,301 49,853 118,682,264

Total Investable Assets ($bn) $1,583 $4,596 $8,115 $5,747 $3,120 $2,115 $2,154 $27,430

Percentage of Total Investable Assets 6% 17% 30% 21% 11% 8% 8% —

Exhibit 2 The Wealthy Control the Bulk of Household Investable Assets in the U.S.

Source: Cerulli Associates: The State of U.S. Retail and Institutional Asset Management 2012; Morningstar. Data as of 2011. Figures may not add up to 100% because of rounding.

9%GDP growth

–1

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UnitedStates

EuropeanUnion

Japan Central andEastern Europe

Latin Americaand the Caribbean

Middle East and North Africa

India Developing Asia

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1

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China

201220132014

Source: IMF World Economic Outlook Update, July 9, 2013.

Exhibit 3 Emerging Markets Will Drive Global Economic Growth


However, while wealth growth in developing markets grabs the most headlines, developed markets remain, by far, the largest wealth management markets. Exhibit 4 shows the high-net-worth individual population by geography and shows that the U.S. alone holds almost 40% of the high-net-worth investors in the twelve wealthiest countries. We argue that the trends affecting developed markets, and the U.S. in particular, will be the driving force behind investor returns in the industry.

4,000

0U.S. Japan Germany China U.K. France Canada Switzerland

500

1,000

1,500

2,000

2,500

3,000

3,500

Australia Italy Brazil S. Korea

High-Net-Worth Population

Source: Capgemini World Wealth Report, 2013.

Data as of 2012.

Exhibit 4 Developed Markets Still Control Most Wealth

20172012

Source: Boston Consulting Group Global Wealth 2013: Maintaining Momentum in a Complex World

0Private financial wealth ($ trillions)

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France

Switzerland

Hong Kong

South Korea

Taiwan

Russia

India

Canada

Italy

United Kingdom

Germany

Japan

China

United States

Australia

Exhibit 5 China Will Rise, but U.S. Will Stay on Top


1. http://www.bls.gov/ooh/business-and-financial/personal-financial-advisors.htm

We expect this dominance to remain largely unchallenged in the medium term. The notable exception to this is China, which is expected to double its holdings of private wealth between 2012 and 2017 to $28 trillion, making it the second-wealthiest nation in the world. Exhibit 5 shows that the U.S. is expected to hold the largest share of the world’s private financial wealth through 2017, with a projected 30%, but China will make a great deal of progress at closing the gap. China’s share of private wealth is expected to grow from 12% to 19% by 2017.

V. What’s Happening Now?The Industry Is Changing as It MaturesWhile developing-market growth will continue to grab headlines, the data shows that developed markets, and the competitive forces shaping them, will remain the driving force behind wealth manage-ment revenue in the medium term for most firms.

Investors Want To Receive More and Better Advice . . .We expect wealth growth in these markets to be largely determined by market returns rather than new wealth creation. We also foresee a growing need for financial advice, as baby boomers retire and try to live on their savings. In the U.S., the Bureau of Labor Statistics1 expects the number of financial advisors to grow 32% between 2010 and 2020. We think much of this growing demand will come from individuals with investable asset portfolios that are smaller than the minimums historically required by financial advisors, which may fuel the creation of more technological and prepackaged solutions and open up opportunities for firms to hire financial advisors with lower levels of expertise.

. . . But Pay Less in CommissionsAcross developed markets, whether driven by regulations, consumer demand, or provider preferences, firms have been transitioning from commission-driven revenue to fee-driven pricing. At Morgan Stanley, for example, management reports that while 32% of clients were in fee-based accounts at the end of 2012, 90% of new clients are fee-based. This trend is especially important for higher-net-worth individuals. Cerulli reports that 58% of advisor compensation was from fee-based or fee-only clients in 2012. This trend is especially important as client assets increase, as shown in Exhibit 6: For accounts with $10 million or more, 91% of compensation was from fee-based or fee-only accounts, compared with 45% for accounts of $500,000 or less.

Advisor Compensation <$500,000 (%) $500,000–$2 mil (%) $2 mil–$10 mil (%) ≥$10 mil (%) All Advisors (%)

Commission Only (<10 From Fees) 22.0 5.6 5.1 1.5 15.4

Fee-and-Commission Mix (10–49 From Fees) 32.9 18.1 14.2 8.0 26.6

Fee-Based (50–90 From Fees) 31.8 42.4 35.5 30.5 35.3

Fee Only (≥90 From Fees) 13.3 33.9 45.2 60.1 22.8

Exhibit 6 Advisor Compensation Is Largely Driven by Fees, Especially at Higher AUM Levels

Source: Cerulli Associates: The State of U.S. Retail and Institutional Asset Management 2012. Figures may not add up to 100% due to rounding.


This trend is driven in part by the mistrust of financial services providers created by the financial crisis, and it has allowed the incentives of advisors and their clients to become more closely aligned. It has also increased advisors’ ability to profitably offer more complex services, such as financial, tax, and estate planning, and has probably contributed to the growth of the independent advisor channel.

Advisors Are Changing Jobs . . .In the U.S., wirehouses have gradually been losing share to independent advisors. At the beginning of the financial crisis, this was largely due to cutbacks at wirehouses, which were culling their lowest-performing advisors as measured by their ability to attract assets under management and generate revenue. In more recent years, however, we believe this trend has also been driven by high-performing advisors who prefer the independence and alternative business models available to them from working as independent advisors. As a result, we expect this trend to continue, even as the U.S. economy recovers. In Exhibit 7, we show how the distribution of advisors by channel has changed over time in the U.S. We note a clear movement away from wirehouses in favor of registered investment advisors, especially dually registered advisors. Exhibit 7 also shows the impact of consolidation on independent broker/dealers, whose share fell nearly 14% in 2011 as misselling scandals and concerns about scale caused consolidation in the channel.

Channel 2004 2005 2006 2007 2008 2009 2010 20111-year

CAGR %7-year

CAGR %

Independent Broker/Dealer 102,313 102,323 94,084 95,093 93,299 94,195 92,757 79,802 –13.9 –3.5

Including Dually Registered 106,516 110,234 106,081 108,589 109,418 109,703 109,997 98,259 –10.7 –1.1

Insurance Broker/Dealer 98,416 93,593 88,196 95,963 93,893 90,956 85,185 88,524 3.9 –1.5

Wirehouse 60,960 64,058 59,696 56,901 54,865 50,204 50,742 51,450 1.4 –2.4

Regional Broker/Dealer 36,691 33,581 32,814 33,029 34,598 38,249 34,359 33,368 –2.9 –1.3

Registered Investment Advisor 20,851 21,837 21,875 22,495 26,089 27,834 27,931 28,714 2.8 4.7

Including Dually Registered 20,055 29,748 33,871 35,991 42,208 43,342 45,201 47,171 4.4 9.5

Bank Broker Dealer 16,016 16,617 16,434 16,932 17,226 16,308 15,352 15,793 2.9 –0.2

Dually Registered 4,203 7,911 11,996 13,496 16,119 15,508 17,270 18,457 6.9 23.5

Total 339,450 339,920 325,096 333,909 336,088 333,254 323,596 316,108 –2.3 –1.0

Exhibit 7 Wirehouses Have Lost Share to Registered Investment Advisors

Source: Cerulli Associates: The State of U.S. Retail and Institutional Asset Management 2012.

Number of Advisors


. . . And Getting OlderAnother important trend in developed markets is the aging of financial advisors. For a combination of reasons, including cutbacks in training programs during the financial crisis, the Do Not Call List making it harder for new advisors to build books of business, and client preferences, the average age of financial advisors has increased from 48 to 53 over the past decade, and about one fifth of advisors are 60 or older, according to Cerulli Associates. Many financial advisors are likely to retire themselves, or cut back on their workload, just as the retirement of baby boomers creates increased demand for advice. At the same time, clients strongly prefer to work with advisors with years of experience. Attracting and training a deep bench of advisors will be a key challenge for firms, which may favor larger firms with more resources.

Regulation Is Increasing Costs and CompetitionChanges in regulation are affecting wealth management firms both directly and indirectly. Perhaps most significantly for large firms, the increasing strength and enforcement of anti-money-laundering, tax reporting, and know-your-customer laws, like the Foreign Account Tax Compliance Act, are causing firms to look much more carefully into who their customers are and where their money comes from. This is especially important for firms with cross-border operations and has required firms to make significant investments in technology and compliance systems. It has caused some firms to withdraw from the U.S. market; Julius Baer has not accepted new U.S. clients since late 2008. It has also caused some U.S.-focused firms to exit noncore foreign markets. For example, Bank of America Merrill Lynch inked a deal to sell its non-U.S. wealth management operations in 2012.

Despite some withdrawal from the U.S. market, we think that changes in bank regulation more gener-ally are increasing competition in wealth management. An important reason for this is that now-higher regulatory capital requirements have increased the relative attractiveness of capital-light businesses like private banking. A variety of financial services firms, including Morgan Stanley, Bank of New York Mellon, and U.S. Bancorp, have all announced plans to expand their wealth management practices in the coming years, for both capital and strategic reasons.

Regulatory changes are affecting advisors’ relationships with their clients as well. Outside the U.S., this change is taking place much more explicitly. In the United Kingdom, for example, the new Retail Distribution Review program requires advisors to set a transparent fee schedule, charging by the hour or a fixed rate, for example, and does not allow advisors to earn commissions on selling investment products. Similar regulations have been implemented or are being considered elsewhere in Europe.

In the U.S., where this shift has been more driven by market forces than by regulations, there is some indication that regulations governing the relationships between advisors and their clients may weaken. As the laws stand now, two separate sets of standards govern the behavior of brokers and registered investment advisors. Brokers are required to offer investment products that are “suitable” for their clients, while RIAs are held to a higher standard—they are held to a fiduciary standard and must offer investment products that are in the best interests of their clients. This is a key difference that may not


always be obvious to retail clients. Brokers are allowed to promote an investment to a client that pays a particularly high commission, for example, even if that product is not the best of its kind, as long as it is generally suitable; RIAs are not. This may be changing. The Dodd-Frank Act gave the Securities and Exchange Commission the authority to enact a universal fiduciary standard that would hold brokers and RIAs to a similar standard, and the commission is exploring doing so. It recently put out a request for data, and the comment period closed in July. While any proposal is far from finalized, many industry observers think the SEC is likely to create a uniform standard, not by also holding brokers to a fiduciary standard, but by creating a new standard somewhere between the two existing standards and thereby weakening the regulations governing RIAs.

VI. How Are Firms Competing?Increased Segmentation and Competition Are Driving StrategiesCompetition is increasing in the U.S. wealth management industry, and we think that how firms are positioned in relationship to the trends is a driving factor behind the strength of their economic moats and how well they will fare over the next decade, as they compete not only for retail clients but also for the best advisory talent.

Firms Now Serve Millionaires, Billionaires, and the Upper Middle ClassWe see a movement toward increasing segmentation in the U.S. wealth management industry, which we think is caused by the intersection of a growing market, especially at the low end, and increasing client demands, especially at the high end. As a result, firms are increasingly moving away from one-size-fits-all business models and gearing their business toward the type of client that they can best serve. We saw this trend accelerate in the wake of the financial crisis, when falling asset levels and client risk aversion made it increasingly difficult to serve less wealthy individuals profitably, at least in traditional business models. Wirehouses and other large wealth managers responded by cutting their less-productive advisors, which shows up in the steep drop in wirehouse advisors between 2006 and 2009, as shown in Exhibit 7.

Brand, Scope, and Switching Costs Rule at Firms Serving the Jet SetFor firms that can credibly do so, we think this focus on high-net-worth and ultra-high-net-worth individuals makes sense. One reason for this is growth. The number of high-net-worth individuals in the U.S. grew 12% between 2011 and 2012, and wealth controlled by high-net-worth individuals in North America is expected to grow at a compound annual rate of 7.3% through 2015.2 Another reason is that these customers tend to be especially profitable, as the sheer bulk of their assets more than offsets both the cost of serving them and their increasing cost-consciousness. UBS, for example, estimates that its profit margin on ultra-high-net-worth clients in its global wealth management business is 10 percentage points higher than on its other clients.

2. Capgemini and RBS Wealth Management, World Wealth Report 2013.


However, these investors tend to be very difficult for firms to service, which we think makes the segment especially moaty. These investors tend to be concentrated among only a few firms. For example, Northern Trust claims to serve 20% of the 400 richest Americans, as measured by Forbes magazine. In our opinion, the importance of reputation is one factor driving this concentration, as these households tend to be especially sophisticated and in many cases have relationships with wealth management firms stretching back generations. Perhaps more important, though, is the complexity of serving these clients. Many have international holdings, which increases the complexity of compliance with anti-money laundering, know-your-customer, tax reporting, and other regulations. Moreover, ultra-high-net-worth investors have needs that are almost as complex as those of institutional investors. They may require access to corporate and/or investment banking services. They also tend to have much more complex portfolios, often including family businesses, real estate, hedge fund, and other illiquid assets. These issues are typically outside the expertise of advisors at lower-tier firms. Hiring professionals to address these issues is not cheap, and only a relative handful of companies have enough ultra-rich clients to make the cost worth their while.

Unique Strategies Are the Key to Success in Traditional Wealth ManagementMany of the financial services firms that we cover have said that they plan to increase their focus on wealth management in the coming years, and we think that given the difficulty of serving ultra-high-net-worth investors, competition for high-net-worth clients is likely to increase significantly. This is an attractive segment—households with between $500,000 and $5 million of investable assets control more than half of U.S. investable assets, as shown in Exhibit 2. Moreover, this segment is easier to serve than ultra-high-net-worth clients, as portfolios tend to be less complex and less geographically diverse. We think competition for these clients and the advisors that serve them is likely to be increasingly intense in the medium term, which will make it harder for firms to fortify their moats or reliably earn excess returns. For that reason, we believe it will be increasingly important for firms to distinguish themselves through unique offerings or lower-cost business models. With more competitors targeting this segment by the day, we’re concerned that profits will be more difficult to come by than in the past.

Differentiation Is Difficult at the Mass Affluent LevelMany wealth management firms, and especially wirehouses, are concentrating their resources on serving high-net-worth and ultra-high-net-worth clients and are raising minimums and moving away from serving clients with $500,000 or less. We also see evidence of this in the growth of RIAs, as shown in Exhibit 7. However, some firms, like Charles Schwab, are targeting the mass affluent with proprietary offerings and a network of registered investment advisors. We think this niche will prove attractive for firms that find ways to serve it well and differentiate themselves, but this will not be an easy task. Instead, the cost of serving customers may be the distinguishing factor.


As shown in Exhibit 2, investors with between $500,000 and $2 million of investable assets hold 30% of household investable assets in the U.S. At this level of assets, many firms find it difficult to profitably offer personal financial advice. Instead, they offer a variety of levels of service, with more packaged and automated solutions for investors with lower levels of investable assets and more customized offerings for customers with higher levels. Still, we think this comes with risks. First, relying on technology tends to increase the commodification of the industry—the lack of a personal relationship with an advisor reduces clients’ stickiness. Moreover, the emphasis on technology increases the importance of scale, which may leave some companies unable to profitably serve customers without much money to spend on advice.

Stuck in the Middle With . . . No CustomersThe impact of scale on the wealth management industry has been particularly interesting. On one hand, high technology and compliance costs have increased the importance of scale and contributed to consolidation among midsize firms like independent broker/dealers. Strong technological and compliance platforms are highly scalable costs and can cost millions, which can be difficult for subscale broker/ dealers to absorb. This, in turn, limits their ability to attract and retain advisors, as it limits payouts. On the other hand, technological changes have increased the sophistication of the platforms available to small-scale registered investment advisors and contributed to the growth of this channel by allowing advisors to have the professional freedom of an independent office and attractive platforms to offer to their clients.

We think these trends are contributing to an increasingly barbell-shaped wealth management industry, with midsize firms finding it increasingly difficult to compete. As shown in Exhibit 7, the number of independent broker/dealer advisors has been declining since 2007 and fell nearly 14% in 2011 as the industry consolidated. The consolidation continued in 2012, as Raymond James acquired Morgan Keegan. We expect this trend toward consolidation to continue; a recent survey found that 63% of respondents do not believe the independent broker/dealer channel is sustainable.3 The data in Exhibit 7 also show the other side of this coin: The number of dually registered independent advisors has increased an average of 9.5% annually since 2005.

Cost-Conscious and Service-Hungry Customers Will Pressure ProfitabilityAs we’ve seen, the wealth management industry is increasingly moving from a revenue model built on commissions to one built on fees. So far, this transition has gone fairly smoothly, and our research shows that fees tend to be fairly comparable across wealth managers. However, much of this transition has taken place amid a rising stock market, and we think increased pricing pressures are likely to limit margins in the future. In the past, we think opaque pricing structures helped to keep prices high; now we expect that investors’ increasing focus on costs, combined with increased transparency, will inevitably lead to some margin compression, especially at firms without especially strong moats. We think this will be a particularly important issue for firms serving high-net-worth and mass affluent clients, where we expect increased competition and where offerings, even while personalized, may be difficult to differentiate across firms.

3. https://www.scfsecurities.com/newsroom/138-scfs-independent-brokerdealer-model-defying-the-odds


VII. Firm SpotlightsDiffering Target Markets Demand Divergent Approaches to Wealth ManagementOverall, we believe firms can distinguish themselves in several ways—by the types of clients they target and how they manage the costs of their most important suppliers: the advisors. The companies we cover have chosen different strategies to address these challenges. Some are operating in segments occupied by other strong competitors, while others occupy more unique niches.

We see the strategies of the companies we cover as broadly spanning two dimensions: the net worth of the clients targeted and the relationship of advisors (key suppliers) to the firm. We think the needs of do-it-yourself and mass affluent clients are commodified, making low-cost production and economies of scale valuable sources of advantage when serving these customers. In the ultra-high-net-worth segment, we see intangibles like long-standing client relationships and the ability to offer a variety of services (economies of scope) as sources of advantage.

Secondarily, we think a firm’s business model can provide a source of advantage by lowering certain costs associated with employees. However, firms must choose which costs to reduce. Companies working with independent advisors can reduce the costs of support and training, while providing advisors a more entrepreneurial environment and potentially higher payouts. Firms employing their own advisors offer support and a valuable brand asset to their employees, while possibly paying out less and increasing switching costs for personnel. Finally, some firms straddle the extremes and employ a mixed business model. K

UHNW: Ultra-High Net WorthHNW: High Net WorthMA: Mass AffluentDIY: DIY Investors

Source: Morningstar.

Exhibit 8 How We View Competition in the U.S. Wealth Management Industry

IndependentLower support costs/Higher payout

Mixed EmployeeLower payout/Higher support costs

UHNW

HNW

MA

DIY

RJF

AMP

Business Model

SCHW, AMTD

SCHW, AMTD

BAC, PNC, USB, WFC

MS, JPM, NTRS

Economiesof scale

Economiesof scope,

intangibles

ClientSegment

DIY

MA

HNW

UHNW


Ameriprise Financial AMPSummaryAlthough it has roots in the insurance business, Ameriprise Financial has transformed—with the help of acquisitions—into a wealth management powerhouse that boasts one of the largest networks of financial advisors in the industry. Since its spin-off from American Express in 2005, Ameriprise has gradually moved up the value chain to provide more customized services and planning solutions to mass affluent and affluent clients. The move has allowed the company to position itself as a one-stop shop for the baby boomers who need help planning for lives after retirement. Recently, as more experienced advisors join the company, Ameriprise has been stepping up its offerings in private wealth solutions to high-net-worth clients. The company’s AUM, which currently stands at approximately $136 billion, has been growing at a steady and healthy pace.

Ameriprise employs approximately 9,800 financial advisors; one fourth are employee advisors, with the rest franchise advisors. Employee advisors get a salary and receive benefits from the company, whereas franchise advisors are independent contractor franchisees who have the right to use the Ameriprise brand. Franchise advisors do not receive any salary or benefits from the company and are responsible for all the office expenses. In exchange, they get a higher payout ratio, in the realm of 80%. Employee advisors get support and training from the company, and for that, they get a payout ratio of less than 50%. Both types of advisors are allowed to sell products other than those offered by Ameriprise. They are also allowed to market insurance and annuity products from other insurance providers. Ameriprise offers a range of personalized services to its clients from retirement to estate planning. With an Ameriprise managed account, a client can choose the level of service from professional investment managers in terms of asset allocation, investment selection, and portfolio construction. Ameriprise employs an open architecture, offering mutual funds from more than 250 fund families, including its own Columbia funds.

Moat ImplicationsAmeriprise’s move into wealth management has been aided by the ability to deepen relationships with its insurance and annuity customers. Ameriprise’s insurance and annuity products are primarily sold through financial advisors; only home insurance and auto insurance are sold through partnership arrange-ments with places like Costco or directly through automakers. The firm’s existing clients represent the best new clients for the insurer, because they are already familiar with the company, and therefore acquisition costs are significantly lower relative to brand-new clients. Ameriprise has also succeeded by targeting a lower-end client than peers and employing a franchise model, eliminating a certain percentage of fixed costs. Its base of captive insurance customers and its institutional knowledge of the mass affluent market should give the company a modest advantage in expanding this type of business. That said, we don’t see Ameriprise’s model as a particularly effective way to serve more-sophisticated clients.

Vincent Lui


Summary Bank of America’s 2008 acquisition of Merrill Lynch vastly expanded the company’s wealth management business, and it is now the largest wealth manager in the U.S., though it sold its international business to Julius Baer. Bank of America’s global wealth and investment management segment received fees and commissions on about $975 billion in brokerage assets at the end of 2012, with an additional $698 billion under the discretion of the firm’s advisors.

The Merrill Lynch private banking group offers investment management, tax strategies, trust and estate planning, philanthropic, and family office services. In contrast to peers, Merrill was an early and essentially complete adopter of open-architecture platforms. Bank of America’s offering for do-it- yourself investors, Merrill Edge, offers low-cost trading ($6.95 per trade) and research from Bank of America/Merrill Lynch as well as Morningstar and S&P. Its Merrill Edge Select managed portfolios require a minimum investment of $20,000.

Moat ImplicationsThe size and scope of Bank of America’s operations could lead to an increasing competitive advantage with both high-net-worth and mass affluent clients, as the firm may be able to use its scale to provide numerous functions at a lower average cost than peers. Bank of America/Merrill Lynch’s size and its use of open architecture could also allow the firm to squeeze asset managers and achieve economies in back-office operations, freeing up more of the wealth management value chain for advisors and the firm. As is the case for Wells Fargo, Bank of America’s ability to cross-sell banking and wealth management products to its customers will also contribute to its success. That said, we view Bank of America’s strategy as dependent on low-cost production in addition to building the Merrill brand through relatively independent yet sophisticated advice, an interesting alternative in the increasingly competitive wealth management sector.

Bank of America BACJim Sinegal


SummaryCharles Schwab’s origins as an industry disruptor stretch back to the 1970s, when its founder and pitchman, Charles R. Schwab, seized on the deregulation of brokerage-firm commissions to dive deep into the discount-brokerage business. Over the decades, Schwab’s journey included lowlights, such as its ill-fated acquisition of U.S. Trust, and highlights like its accumulation of more than $2 trillion in client assets. We like Schwab’s blend of banking and investment services and think the firm has an opportunity to win assets from the more-traditional wealth managers. This will not be easy and it is likely to take time, as we view those rivals as entrenched and experienced players. But over time, we expect that even gradual success in Schwab’s advice offerings will make its assets stickier, binding clients more closely to the firm. We think the result should be an enhanced economic moat. In the fight for investing assets, we view Schwab as better positioned to compete for mass affluent investors than for very high-end individuals. Schwab’s efforts to compete in the market for advice and guidance include the firm’s own in-house advice offerings as well as independent registered investment advisors. The various choices in Schwab’s advice and guidance menu vary, but for instance the Schwab Advisor Network and Schwab’s own Schwab Private Client offering both require $500,000 as a minimum investment. Other options include offerings based on more scalable solutions. About 17% of Schwab’s retail client assets are receiving a fee-based advice offering, a proportion that management thinks has an opportunity to grow significantly. Schwab’s offerings include its do-it-yourself online investing platform as well as several advice and guid-ance products. These include managed portfolio and account solutions with smaller investment minimums (around $25,000-$100,000), as well as a dividend-growth strategy run by ThomasPartners, an asset manager acquired by Schwab in 2012. At the higher end, we place the firm’s Schwab Private Client offer-ing, which is operated by Schwab professionals, and the Schwab Advisor Network, composed of independent investment advisory firms where Schwab can refer clients. One distinction is that in Schwab Private Client the investor makes the final call on a recommendation issued by a Schwab consultant, whereas the Advisor Network typically attracts investors interested in turning over management duties to an advisor. Moat Implications In our view, Schwab’s investment-advice efforts can help sustain and possibly broaden the San Francisco company’s narrow economic moat. Historically, one of the weaknesses in the discount-brokerage business model, from our vantage point, is that by definition it encourages a commoditized version of the relationship between a firm and its clients. If low trading fees are all that binds them together, it stands to reason that even lower fees offered by a rival can tear them apart. To be sure, firms are aware of this and surround their low prices with investing tools, features, and service to help retain clients.

Charles Schwab SCHWGaston F. Ceron


But we view advice relationships as having the potential to be sticky and lucrative while leveraging valuable intangible assets such as manager connections, brand, reputation and skill. Furthermore, while price will always be a consideration, as investors look to maximize value, we regard advice-driven relationships as likely to be less vulnerable to brute-force price competition. The need for sound advice is there, in our opinion, underscored by the upheaval that the financial crisis wrought upon the investing public. A recent Schwab client survey showed that a majority of clients polled preferred to receive assistance from an advisor at least periodically. Moreover, we believe that Schwab’s promotion of advice offerings has an offensive as well as a defensive component. Although we think there is an opportunity—albeit a challenging one—to take assets away from wirehouse-type firms, it is also important for Schwab that it be able to retain any home-reared assets that outgrow a do-it-yourself approach to investing. Sometimes broader relationships blossom from more modest beginnings. This year, Schwab is on track to host around 100,000 in-branch financial-planning conversations with investors, compared with about 55,000 in 2012 and 11,000 in 2011. Rodney Prezeau, Schwab’s Senior Vice President of Client Experience for Investor Services, told Morningstar that he has seen these encounters lead directly to more investing dollars coming in the door. “They become stickier, and consolidate more assets with Schwab,” he said. With RIAs, Schwab often steers clients to investment professionals who are part of Schwab’s network of advisors (about 200 out of the 7,000 RIAs that Schwab services). These advisors work for themselves, but Schwab offers them custodial, trading and other services. Their presence gives Schwab a ready solution for clients who need more sophisticated and tailored advice. That helps prevent those clients from jumping ship to Schwab’s rivals among the traditional providers of wealth management and advice, such as major Wall Street firms. In order to keep its RIA network humming and vibrant, Schwab also provides support to advisor firms on matters such as strategic practice planning, according to Bernard Clark, executive vice president and head of Advisor Services at Schwab. In Schwab Private Client, Schwab deploys its own personnel to make recommendations to clients. Schwab’s journey up the food chain of the advice world won’t be easy. Speaking to investors and analysts in July, CEO Walter Bettinger said that Schwab’s growth is “going to need to occur from where the money is today, which means a lot of acquisition from the wirehouse firms that have a significant amount of the assets today.” These are entrenched competitors that won’t be quickly dislodged, in our view. We think that Schwab will have an easier time competing for the mass affluent set than for the upper reaches of the high-net-worth segment.


SummaryMorgan Stanley doubled down on wealth management with the purchase of Citigroup’s Smith Barney, bringing wealth management as a percentage of net revenue to more than 40% in recent quarters from less than 25% before 2008. Morgan Stanley’s wealth management division has more than 16,000 global representatives in nearly 700 offices.

The company’s global wealth management group provides brokerage and investment advisory services to individual investors; financial and wealth planning services; annuity and other insurance products; credit and other lending products; cash management services; retirement services; and trust and fiduciary services to clients of its advisors as well as its private bank.

Moat ImplicationsMorgan Stanley is trying to increase the synergy between wealth management and its other business segments. The largest push has been in increasing loans to wealth management clients to use the more than $130 billion of deposits the company has in its bank. This is one of the key initiatives for the company to bridge its operating margin gap with peers, as more of the income from loans accrues to the company than is paid out as compensation to the advisor.

Increasing fee-based assets is clearly a priority. In the first quarter of 2012, the company stopped reporting global retail net new assets and started only reporting global fee-based asset flows. Advisors also appear to have gotten on board with this management decision, as fee-based assets have grown to 35% of total client assets in the most recent quarter from 23% when Smith Barney was consolidated.

At the same time, Morgan Stanley is cutting costs, continuing to shed lower-performing advisors and nonadvisor employees, and reducing other expenses. The company has also invested heavily in a new technology platform. We think Morgan Stanley’s strategy—boosting the number of products sold to customers while lowering costs—is correct but not unique and illustrates the increasingly competitive environment in wealth management.

Morgan Stanley MSMichael Wong


SummaryNorthern Trust had private client assets under management of $198 billion at the end of 2012, plus $446 billion of assets under custody. It has a business model that is very focused on providing wealth management to the U.S.’s wealthiest individuals and families. It provides a comprehensive array of sophisticated services ranging from financial planning and investment management to trust and estate services, philanthropy planning, and custody for family offices. It serves more than 20% of the 400 wealthiest families in the U.S., as named by Forbes. It also serves 400 ultra-wealthy individuals and families through family offices in 25 countries. While Northern Trust sells proprietary investment products, it offers an open-architecture platform and focuses much more on providing comprehensive planning and risk management than on cross-selling.

Moat ImplicationsNorthern Trust’s wide moat will benefit from the continued growth of the ultra-wealthy and from the increasing importance of scale in the wealth management industry. We think the company’s premium reputation and risk-averse culture will help to attract and retain many of the country’s wealthiest clients. We also think that Northern’s intense focus on its niche—the wealthy and ultra-wealthy—helps to maintain its strong bargaining power vis-a-vis advisors. There are only a handful other firms that advisors could move to that would offer similarly sophisticated capabilities for their clients, and many clients, whose relationships can go back generations, have stronger ties to Northern than to their advisor individually. We think the challenge for Northern Trust will be growing internationally with its clients. Northern Trust’s client base is predominantly based in the U.S., but as business and wealth creation becomes increasingly global, we think the firm will be compelled to offer more international services or lose business to more-global competitors, like UBS. Northern Trust has already begun to expand its international operations—personal financial services also has offices in London and Guernsey— but it does not have the global scale necessary to replicate the strong risk management and compliance programs it has in its home markets, in our opinion.

Northern Trust NTRSErin Davis


SummaryPNC Financial Services Group’s wealth management segment is contained within the asset management group. In providing wealth management services, the business competes broadly with investment management firms, other large banks, brokerage firms, mutual fund complexes, and insurance companies. While the asset management group’s contribution to PNC’s overall operations and results is small, it has become a focus in light of the bank’s recent expansion into new markets, especially the U.S. Southeast following the acquisition of RBC Bank USA from Royal Bank of Canada in 2012. The asset management group contributed 6.3% of PNC’s total revenue and 3.7% of profits in the first half of 2013.

As with most wealth management operations, segmentation of the client base by investable assets largely determines product offerings and the level of advisor engagement. PNC has segmented the wealth management business into mass market (assets under management of less than $100,000), affluent (AUM between $100,000 and $1 million), high net worth (AUM greater than $1 million), and institutional. PNC applies differing levels of service to those customer segments, from a lower-cost online investment platform for mass-market customers to high-touch personal service with an investment professional for high-net-worth and institutional clients. For example, the mass market is provided with do-it-yourself online tools for clients to manage their narrower investment options. For institutional asset management, PNC provides investment management, custody and retirement administration services, and turnkey advisory services. Institutional clients include corporations, unions, municipalities, nonprofits, foundations, and endowments, primarily located in PNC’s geographic footprint.

The primary growth strategies for the business continue to include investing in higher-growth geographies, including the Southeast, increasing internal referral sales, and adding new front-line sales staff throughout its footprint. PNC has had some success with these strategies in increasing assets under administration/management. Assets under administration equaled $224 billion at year-end 2012 with positive net flows of $2.5 billion. Discretionary assets under management increased to $112 billion at year-end 2012 from $107 billion the year before.

PNC Financial Services Group PNCDan Werner


For 2013, the opportunity remains utilizing the company’s distribution system via the branch network to cross-sell newly acquired clients across all geographies. Over the past two years, PNC has added 350 new employees (70% in client-facing roles) to build out its wealth management presence, particularly in the Southeast. As a result, PNC is experiencing strong sales production, up 32% over the prior year, including a 37% increase in the acquisition of new primary clients. Furthermore, it continues to see a significant increase in referrals (39% over 2011) from other lines of businesses. As with many bank-run wealth management businesses, however, the company is not forthcoming in disclosing which segment is realizing the most growth.

Moat ImplicationsWe don’t think the wealth management business is likely to move the needle on PNC’s moat. While we think the bank’s scale and ability to reach its customers through its branch network lend some advantages, we don’t think PNC’s wealth management business has enough scale to give it material pricing advantages for attracting advisors or clients relative to competitors. Moreover, we think PNC’s target market is mass affluent and high-net-worth investors, which we see as the most competitive segment. We see little reason to expect that PNC will be able to lure many of these clients away from firms with longer records of serving the moatier ultra-high-net-worth client segment.


SummaryRaymond James Financial increased its private client and capital markets businesses with the acquisition of Regions Financial’s Morgan Keegan unit. The number of total financial advisors and private client group revenue both increased approximately 20% from the acquisition, to 5,500 advisors and annual revenue of nearly $3 billion.

Moat ImplicationsThe acquisition of Morgan Keegan increased the company’s scale and should lead to operating margin expansion once integration costs subside. In contrast to banks attempting to cross-sell wealth management products, Raymond James is leveraging the wealth management business to expand its bank. Raymond James is also shifting its advisor mix to approximately 40% employee advisors from 30%. This mix shift is material, as employee advisors have a compensation payout ratio that can be 25% lower than the payout ratio for the independent advisors on Raymond James’ platform.

More important, Raymond James is competing for advisor talent by positioning itself at the intersection between wirehouses and independent firms. It offers advisors freedom to operate “as a traditional employee, an independent employee, an independent contractor, or an independent RIA.” As Raymond James has gained scale, it is able to offer infrastructure and resources comparable to a larger firm, while offering advisors a larger degree of independence and entrepreneurial opportunity. In our view, firms able to straddle this line will be uniquely positioned in terms of their offerings to both clients and advisors.

Raymond James Financial RJFMichael Wong


SummaryTD Ameritrade is another financial services firm with discounting roots that offers advice options for investors. In addition to its own self-directed investing business, TD Ameritrade also refers interested clients to a network of registered investment advisors, AdvisorDirect, and deploys Amerivest, an online advisory product. We think that TD Ameritrade’s advice efforts can sustain the firm’s narrow economic moat by increasing the stickiness of client assets, although a broader array of investing options would provide greater benefits.

Moat ImplicationsWhile we view Schwab as better positioned to compete for advice clients, we think that TD Ameritrade can preserve its narrow economic moat through its own RIA network and Amerivest. Like Schwab, Omaha-based TD Ameritrade sees a need for guidance and advice among investors. As TD Ameritrade’s clients accumulate wealth and require more sophisticated planning and help, the firm can hold on to those individuals and families that qualify by passing them along to a preferred RIA. We see those relationships as more likely to be sticky and lucrative, helped by TD Ameritrade’s ability to attract and retain talented RIAs and benefiting the company through its share of the advisor’s fee.

Investors also may see more value in a relationship with an independent RIA than in one with a traditional Wall Street firm. Tom Nally, president of TD Ameritrade Institutional, told Morningstar that investors have grown savvier in managing their relationships with their financial services providers, asking questions about payment arrangements and product incentives. He noted that TD Ameritrade’s business servicing RIAs is seeing growth both organically at existing firms as well as from brokers breaking away from traditional Wall Street firms.

We think TD Ameritrade’s Amerivest managed portfolios offering also can help sustain its economic moat by fostering longer-term and more durable relationships between the firm and its guidance-seeking clients with smaller balances. But in general, we believe that TD Ameritrade would benefit from developing a broader advice platform with even more options for clients. While such an investment wouldn’t be cheap, we think if executed right it could bind clients more closely to the firm and provide even greater moat benefits. However, CEO Fred Tomczyk recently emphasized the advantages of keeping things simple and indicated that the firm is satisfied with its present offering.

TD Ameritrade AMTDGaston F. Ceron


SummaryThe wealth management business is only one portion of U.S. Bancorp’s wealth management and securi-ties services segment. Revenue from wealth management constitutes approximately 40% of this operating segment’s revenue, with corporate trust and fund services making up most of the remainder. The wealth management services business is segmented into three categories largely based on the level of investable assets. The wealth management and securities services segment contributed 8.1% of U.S. Bancorp’s total revenue and 3.3% of profits for the second quarter of 2013.

As with other bank providers of wealth management services, segmentation of the client base by investable assets largely determines the level of service and advisor engagement. In ascending order of investable assets, U.S. Bancorp’s three segments are Private Client Group, Private Client Reserve for high-net-worth individuals and families, and Ascent Private Capital Management for ultra-high-net-worth clients with complex needs. Private Client Group offers a dedicated relationship manager that provides solutions, products, and services by phone, online, or in person. Private Client Reserve provides compre-hensive financial planning, private banking, investments, and personal trust strategies for high-net-worth individuals and families. Ascent Private Capital Management offers ultra-high-net-worth clients complex and more comprehensive services, including investment consulting, financial administration, information management, private banking, and wealth impact planning.

The opportunity for U.S. Bancorp remains in utilizing its current distribution system via the branch network and tailoring plans to meet the needs of the clients. While growth will primarily be internally focused, U.S. Bancorp has not been averse to making strategic acquisitions to add to its wealth management operations.

Moat ImplicationsWe think U.S. Bancorp has the potential to build a narrow moat in its growing wealth management business, which is targeting the moatiest segment: ultra-high-net-worth investors. While most retail and commercial banks have little hope of credibly serving this attractive segment, we think U.S. Bancorp has one unique advantage—its large scale in Western states like Idaho, Montana, and Washington, which are not well served by traditional wealth managers. And unlike most other banks in these markets, except Wells Fargo, it has the scale necessary to invest in building up the sophisticated capabilities that serving these investors requires. While big-city wealth managers may eventually move in if this niche proves attractive enough, we think U.S. Bancorp’s hometown advantage and sticky relationships with its clients could allow the firm to remain competitive even against bigger players.

U.S. Bancorp USBDan Werner


SummaryWells Fargo entered wealth management in a big way with its 2008 acquisition of Wachovia and the former A.G. Edwards. The bank earned fees and commissions on $1.2 trillion in brokerage client assets at the end of 2012. The Wells Fargo private banking model employs a team approach, with a relationship manager coordinating various professionals handling financial planning, investment management, banking services, trust solutions, insurance, and specialized types of advice such as philanthropy. Its recently launched Abbot Downing division serves ultra-high-net-worth clients with more than $50 million in investable assets. On the other end of the spectrum, Wells Fargo’s WellsTrade platform offers online trades for $8.95, in addition to market commentary from the company’s internal advisors and Standard & Poor’s.

Moat ImplicationsIt will be difficult for Wells Fargo’s new high-net-worth offerings to compete with established players, many of which have relationships with the wealthy going back more than 100 years. Similarly, the Wells Fargo brand—at least in wealth management—is somewhat weaker than its white-shoe peers’, as evidenced by the use of the Abbot Downing brand. Wells Fargo’s well-known success at cross-selling must continue if it is to widen its moat in wealth management, as it is now competing with much larger peers for more-sophisticated clientele. In our view, Wells Fargo’s strategy rests on generating more revenue per unit of cost than peers.

Wells Fargo WFC

i. https://www.scfsecurities.com/newsroom/138-scfs-independent-brokerdealer-model-defying-the-odds ii. http://online.wsj.com/article/SB10001424127887323741004578418611242496832.html iii. http://www.pricemetrix.com/cms/wp-content/uploads/PriceMetrix-Insights_The-State-of-Retail-Wealth-Management-2012_English.pdf?t=1375111604 iv. http://www.pricemetrix.com/cms/wp-content/uploads/PriceMetrix-Insights_Transitioning-To-Fee_English.pdf?t=1375112365 v. http://online.wsj.com/article/SB10001424127887324281004578356643899073064.html vi. http://www.booz.com/media/file/US_Wealth_Management_Survey.pdf vii. http://www.pricemetrix.com/cms/wp-content/uploads/PriceMetrix-Insights_Big-Fish_English.pdf?t=1375118204 viii. http://online.barrons.com/public/resources/documents/BARRONS_TOP_40_WEALTH_MANAGERS.pdf

Jim Sinegal


Name Ticker

Assets Under Management

BusinessModel

Number of Advisors

% of Operating Income From Wealth Mgt

Factors Differentiating Strategy or Challenges

Target Mkt (DIY Wealthy, Mass Affluent, High Net Worth, Ultra-High Net Worth)

Ameriprise AMP $136 billion Insurance Broker/Dealer, Independent Advisors

9,800 27% Focusing on retiring baby boomers by offering annuities and other retirement- planning products. Extensive advisor network.

MA

Bank of America BAC $975 billion in brokerage assets, $698 billion managed by advisors

Wirehouse, Bank Broker/Dealer

21,000 23% Leveraging scale and expanding Merrill brand

MA, HNW, UHNW

Charles Schwab SCHW $2 trillion in total client assets

Independent Broker/Dealer, Independent Investment Advisor

About 1,100 financial consultants in branches, plus phone representatives. Schwab also services around 7,000 RIAs.

N/A Opportunity to win business from traditional firms and keep assets from homegrown clients via advice/guidance offerings. Challenge is to dislodge entrenched firms. Also must remain competitive with solutions for smaller clients.

DIY, DIY Wealthy, MA

JPMorgan Chase JPM $877 billion Bank Broker/Dealer

2,800 8% Emphasis on proprietary products and performance.

HNW, UHNW

Morgan Stanley MS $1.778 trillion in AUM

Wirehouse 16,321 40% One of the two largest wealth management firms in the U.S. Focusing on increasing synergies between wealth management and other offerings, like investment banking. Moving to a more fee-based business model.

Very High

Northern Trust NTRS $198 billion in AUM, $446 billion in AUC

Bank Broker/Dealer, Trust Bank

N/A 54% Focuses on serving the complex needs of wealthy and ultra-wealthy clients, with a focus on risk management and preserving wealth.

HNW, UHNW

PNC Financial Services Group

PNC $234 billion AUA, $117 billion AUM

Bank Broker/Dealer

893 3% Selling wealth manaement to retail banking clients. Offers a spectrum of packaged and personalized solutions, depending on asset levels.

DIY Wealthy, MA, HNW

Overview of Firms’ Strategies


Name Ticker

Assets Under Management

BusinessModel

Number of Advisors

% of Operating Income From Wealth Mgt

Factors Differentiating Strategy or Challenges

Target Mkt (DIY Wealthy, Mass Affluent, High Net Worth, Ultra-High Net Worth)

Raymond James RJF $206 billion in AUM Regional Broker/Dealer, Independent Broker/Dealer

6,301 70% Building scale through 2012 Morgan Keegan acquisition and organic growth. Increased proportion of employee advisors may signal an attempt to move brand image more upscale.

HNW

TD Ameritrade AMTD $523.5 billion in client assets

Independent Brokerage Firm; Largest Investor Is TD Bank

About 800 retail investment consultants; also services about 5,000 RIAs

N/A Opportunity to win business from traditional firms and keep assets from homegrown clients via advice/guidance offerings. Challenge is to dislodge entrenched firms. Also must remain competitive with solutions for smaller clients.

DIY, DIY Wealthy, MA

U.S. Bancorp USB $95.1 billion Bank Broker/Dealer

730 3% Serves HNW and UHNW investors in smaller markets where wirehouses don't typically have offices.

MA, HNW, UHNW

Wells Fargo WFC $1.2 trillion in brokerage client assets

Wirehouse, Bank Broker/Dealer

15,000 7% Cross-selling to bank customers. MA, HNW, UHNW

Overview of Firms’ Strategies (continued)

Sources: Morningstar, company filings, Barrons. Figures as of mid year 2013 or most recent available.


Company TickerPrice Currency Active Analyst

MorningstarRating Market Cap Price

Fair Value

Price/FV Moat

Uncertainty Rating

Aegon NV AEG USD Vincent Lui QQQQ 14,608.85 7.65 11 0.70 None Very High

Aegon NV AGN EUR Vincent Lui QQQQ 10,984.33 5.75 8 0.72 None Very High

Aflac Inc AFL USD Vincent Lui QQQ 28,156.69 60.54 60 1.01 Narrow Very High

Alliance Data Systems Corporation ADS USD Gaston Ceron QQ 9872.85 202.55 151 1.34 Narrow Very High

Allianz SE ALV EUR Vincent Lui QQ 52,707.82 115.60 94 1.23 None High

Allianz SE AZSEY USD Vincent Lui QQ 70,307.49 15.42 12 1.29 None High

American Express Co AXP USD Jim Sinegal QQ 81,098.17 75.17 66 1.14 Wide Medium

Ameriprise Financial Inc AMP USD Vincent Lui QQ 17,456.32 88.23 60 1.47 None High

Aon plc AON USD Vincent Lui QQ 21,027.27 68.39 54 1.27 Narrow Medium

Assicurazioni Generali G EUR Vincent Lui QQQ 24,380.64 15.66 13 1.20 None Very High

Aviva PLC AV USD Vincent Lui QQQ 18,625.04 12.64 10.5 1.20 None Very High

Aviva PLC AV. GBX Vincent Lui QQQ 11,849.89 402.10 350 1.15 None Very High

AXA SA AXAHY USD Vincent Lui QQQ 57,541.64 24.09 20 1.20 None Very High

AXA SA CS EUR Vincent Lui QQQ 43,377.18 18.16 15 1.21 None Very High

Banco Bilbao Vizcaya Argentaria SA BBVA EUR Erin Davis QQQ 41,721.84 7.65 7 1.09 None Extreme

Banco Bilbao Vizcaya Argentaria SA BBVA USD Erin Davis QQQ 55,741.73 10.23 9 1.14 None Extreme

Banco Popular Español S.A. POP EUR Erin Davis QQQQQ 30,048.04 4.08 3 1.36 None Extreme

Banco Santander Brasil SA/Brazil BSBR USD Gaston Ceron QQQQQ 22,136.29 5.84 11 0.53 Narrow High

Banco Santander Chile BSAC USD Gaston Ceron QQQQ 10,892.18 23.12 31 0.75 Narrow High

Banco Santander SA BNC GBX Erin Davis QQQ 53,480.50 494.75 600 0.82 Narrow Very High

Banco Santander SA SAN EUR Erin Davis QQQ 62,911.88 5.82 7 0.83 Narrow Very High

Banco Santander SA SAN USD Erin Davis QQQ 84,098.69 7.78 9 0.86 Narrow Very High

Banco Santander SA SANT EUR Erin Davis QQQ 62,695.68 5.80 7 0.83 Narrow Very High

Bank Bradesco BBD USD Gaston Ceron QQQQ 50,487.29 12.00 17 0.71 Narrow High

Bank of America Corporation BAC USD Jim Sinegal QQQ 154,915.90 14.42 13 1.11 Narrow High

Bank of Hawaii Corporation BOH USD Erin Davis QQQ 2447.64 54.89 51 1.08 Narrow Medium

Bank of Montreal BMO USD Dan Werner QQQ 40,239.58 62.31 61 1.02 Narrow High

Bank of Montreal BMO CAD Dan Werner QQQ 41,602.21 64.42 63 1.02 Narrow High

Bank of New York Mellon Corp BK USD Erin Davis QQQ 35,170.07 30.57 35 0.87 Wide High

Bank of Nova Scotia BNS USD Dan Werner QQQ 67,581.72 56.39 61 0.92 Narrow High

Bank of Nova Scotia BNS CAD Dan Werner QQQ 69,798.89 58.24 62 0.94 Narrow High

Barclays PLC BARC GBX Erin Davis QQQ 37,062.14 288.05 320 0.90 None Very High

Barclays PLC BCS USD Erin Davis QQQ 57,963.88 18.02 20 0.90 None Very High

BB&T Corp BBT USD Gaston Ceron QQQ 25,008.45 35.53 33 1.08 Narrow Medium

BGC Partners, Inc. BGCP USD Michael Wong QQQ 1020.92 5.94 5.5 1.08 None Very High

BNP Paribas BNP EUR Erin Davis QQQ 63,179.31 50.91 55 0.93 Narrow Very High

Canadian Imperial Bank of Commerce CM USD Dan Werner QQQ 30,503.86 76.26 85 0.90 Narrow High

Canadian Imperial Bank of Commerce CM CAD Dan Werner QQQ 31,519.86 78.80 87 0.91 Narrow High

Capital One Financial Corp COF USD Dan Werner QQQQ 39,311.49 67.16 81 0.83 Narrow High

Company Datapoints




Fair Value

Price/FV Moat

Uncertainty Rating

CBOE Holdings, Inc. CBOE USD Gaston Ceron QQ 4197.37 47.86 35 1.37 Narrow High

Charles Schwab Corp SCHW USD Gaston Ceron QQQ 27,702.65 21.56 23 0.94 Narrow High

Citigroup Inc C USD Jim Sinegal QQQ 153,115.68 50.35 45 1.12 Narrow High

City National Corp CYN USD Gaston Ceron QQ 3739.88 68.79 59 1.17 Narrow Medium

CME Group, Inc. CME USD Gaston Ceron QQQ 24,520.67 73.35 71 1.03 Wide High

Commerce Bancshares, Inc. CBSH USD Dan Werner QQ 4073.22 44.91 37 1.21 Narrow Medium

Commerzbank AG CBK EUR Erin Davis QQQ 9383.57 8.24 9 0.92 None Very High

Crédit Agricole ACA EUR Erin Davis QQ 20,928.42 8.37 6.3 1.33 Narrow Very High

Credit Suisse Group CS USD Erin Davis QQQ 49,876.34 31.33 30 1.04 Narrow Very High

Credit Suisse Group CSGN CHF Erin Davis QQQ 46,151.13 28.99 28 1.04 Narrow Very High

Danske Bank AS DANSKE DKK Dan Werner QQQ 117,954.88 117.90 119 0.99 Narrow Very High

Deutsche Bank AG DB USD Erin Davis QQQ 46,287.52 45.42 50 0.91 Narrow Very High

Deutsche Bank AG DBK EUR Erin Davis QQQ 34,812.46 34.16 38 0.90 Narrow Very High

Deutsche Boerse AG DB1 EUR Gaston Ceron QQQ 9947.98 54.05 50 1.08 Narrow High

Discover Financial Services DFS USD Jim Sinegal QQQ 24,082.95 49.78 44 1.13 Narrow High

Evercore Partners Inc EVR USD Michael Wong QQ 1453.45 46.34 39 1.19 Narrow High

Fifth Third Bancorp FITB USD Dan Werner QQQ 16,314.24 19.16 18 1.06 Narrow High

Firstmerit Corp FMER USD Dan Werner QQ 3751.43 22.73 20 1.14 Narrow Medium

Fulton Financial Corp FULT USD Jim Sinegal QQQ 2420.75 12.49 12 1.04 Narrow Medium

GFI Group, Inc. GFIG USD Michael Wong QQQ 470.44 3.90 3.8 1.03 None Very High

Global Payments, Inc. GPN USD Gaston Ceron QQQ 3626.29 47.98 51 0.94 Narrow High

Goldman Sachs Group Inc GS USD Michael Wong QQQ 72,152.99 160.66 153 1.05 Narrow High

Great-West Lifeco Inc. GWO CAD Vincent Lui QQ 29,695.87 31.20 25 1.25 Narrow High

Greenhill & Co, Inc. GHL USD Michael Wong QQQ 1400.13 50.46 53 0.95 Narrow High

HSBC Holdings PLC HBC USD Erin Davis QQQ 205,248.87 55.35 55 1.01 Narrow High

HSBC Holdings PLC HSBA GBX Erin Davis QQQ 131,474.23 709.10 740 0.96 Narrow High

ICAP PLC IAP GBX Michael Wong QQQ 2449.30 378.30 427 0.89 None Very High

Indus Alliance Insur and Finan Srvc, Inc. IAG CAD Vincent Lui QQ 4211.40 42.93 33 1.30 None High

ING Groep N.V. ING USD Vincent Lui QQQ 43,481.85 11.35 13 0.87 None Very High

ING Groep N.V. INGA EUR Vincent Lui QQQ 32,628.63 8.51 10 0.85 None Very High

IntercontinentalExchange, Inc. ICE USD Gaston Ceron QQ 13,242.40 181.79 146 1.25 Wide High

Intesa Sanpaolo ISP EUR Erin Davis QQQ 24,740.41 1.59 1.4 1.14 None Very High

Itau Unibanco Holding SA ITUB USD Gaston Ceron QQQQ 60,701.54 12.22 17 0.72 Narrow High

JPMorgan Chase & Co JPM USD Jim Sinegal QQQ 200,594.11 53.29 53 1.01 Narrow High

Julius Baer Gruppe AG BAER CHF Erin Davis QQQ 9454.93 43.63 43 1.01 Wide High

KBC Group SA/NV KBC EUR Erin Davis QQQ 14,933.68 35.81 36 0.99 None Very High

Company Datapoints (continued)




Fair Value

Price/FV Moat

Uncertainty Rating

Knight Capital Group, Inc. KCG USD Michael Wong QQQ 1285.93 3.59 3.7 0.97 None Very High

Lazard Ltd LAZ USD Michael Wong QQQ 4433.76 36.36 35 1.04 Narrow High

Lloyds Banking Group PLC LLOY GBX Erin Davis QQ 54,497.55 76.40 60 1.27 None Very High

Lloyds Banking Group PLC LYG USD Erin Davis QQ 84,884.93 4.76 3.75 1.27 None Very High

M&T Bank Corp MTB USD Jim Sinegal QQ 15,184.47 116.77 100 1.17 Narrow Medium

Manulife Financial Corporation MFC USD Vincent Lui QQQ 31,393.04 17.08 15 1.14 None High

Manulife Financial Corporation MFC CAD Vincent Lui QQ 32,459.08 17.66 15 1.18 None High

MarketAxess Holdings, Inc. MKTX USD Michael Wong QQ 1944.58 51.77 39 1.33 Narrow Very High

Marsh & McLennan Companies, Inc. MMC USD Vincent Lui QQ 22,929.81 41.72 35 1.19 Narrow Medium

MasterCard Incorporated MA USD Jim Sinegal QQQ 74,571.06 618.21 620 1.00 Wide High

MetLife Inc MET USD Vincent Lui QQQ 52,970.18 48.28 47 1.03 None Very High

Mitsubishi UFJ Financial Group, Inc. 8306 JPY Jim Sinegal QQQ 8,451,868.86 597.00 571 1.05 None Very High

Mitsubishi UFJ Financial Group, Inc. MTU USD Jim Sinegal QQQ 86,925.42 6.14 5.5 1.12 None Very High

Mizuho Financial Group Inc 8411 JPY Jim Sinegal QQQ 4,979,917.80 206.00 190 1.08 None Very High

Mizuho Financial Group Inc MFG USD Jim Sinegal QQQ 50,766.15 4.20 4 1.05 None Very High

Morgan Stanley MS USD Michael Wong QQQ 51,842.53 26.47 26 1.02 Narrow High

NASDAQ OMX Group, Inc. NDAQ USD Gaston Ceron QQQ 5152.17 30.79 32 0.96 Narrow High

National Bank of Canada NA CAD Dan Werner QQQ 12,720.95 78.31 86 0.91 Narrow High

National Bank of Greece NBG USD Gaston Ceron QQQ 510.27 4.16 4.69 0.89 None Extreme

Nomura Holdings, Inc. 8604 JPY Jim Sinegal QQ 2,676,266.39 723.00 435 1.66 None Very High

Nomura Holdings, Inc. NMR USD Jim Sinegal Q 27,502.99 7.43 4 1.86 None Very High

Nordea Bank AB NDA SEK Dan Werner QQQ 340,402.50 84.05 76 1.11 Narrow High

Northern Trust Corporation NTRS USD Erin Davis QQQ 13,596.59 56.62 58 0.98 Wide High

NYSE Euronext, Inc. NYX USD Gaston Ceron QQ 10,220.58 42.06 29 1.45 Narrow High

People's United Financial, Inc. PBCT USD Dan Werner QQQ 4794.17 14.93 14 1.07 Narrow Medium

Piper Jaffray Cos PJC USD Michael Wong QQQ 536.62 33.25 36 0.92 None High

PNC Financial Services Group Inc PNC USD Dan Werner QQQ 39,815.56 74.91 82 0.91 Narrow Medium

Power Corporation Of Canada POW CAD Vincent Lui QQQ 12,367.72 30.07 29 1.04 Narrow High

Power Financial Corp PWF CAD Vincent Lui QQQ 23,433.17 32.95 30 1.10 Narrow High

Principal Financial Group PFG USD Vincent Lui QQQ 12,503.96 42.48 38 1.12 Narrow Very High

Prudential Financial Inc PRU USD Vincent Lui QQQ 37,018.65 79.61 72 1.11 None Very High

Prudential PLC PRU GBX Vincent Lui Q 30,685.75 1199.00 680 1.76 None Very High

Prudential PLC PUK USD Vincent Lui Q 48,050.46 37.55 21 1.79 None Very High

Raymond James Financial Inc RJF USD Michael Wong QQQ 5968.66 42.68 41 1.04 None High

Regions Financial Corporation RF USD Gaston Ceron QQ 13,735.10 9.84 7 1.41 None Very High

Royal Bank Of Canada RY USD Dan Werner QQQ 89,890.97 62.38 56 1.11 Narrow High





Fair Value

Price/FV Moat

Uncertainty Rating

Royal Bank Of Canada RY CAD Dan Werner QQQ 92,744.19 64.36 57 1.13 Narrow High

Royal Bank of Scotland Group (The) PLC RBS GBX Erin Davis QQQ 20,758.36 343.00 400 0.86 None Very High

Royal Bank of Scotland Group (The) PLC RBS USD Erin Davis QQQ 32,529.50 10.75 13 0.83 None Very High

Skandinaviska Enskilda Banken AB SEBA SEK Dan Werner QQQ 159,845.42 72.85 59 1.23 None Very High

Societe Generale SA GLE EUR Erin Davis QQQ 28,059.20 35.92 34 1.06 Narrow Very High

Standard Chartered PLC STAN GBX Erin Davis QQQ 37,614.08 1552.00 1,620 0.96 Narrow High

State Street Corp STT USD Erin Davis QQ 30,259.22 67.85 50 1.36 Wide High

Stifel Financial Corp. SF USD Michael Wong QQQ 2499.70 39.32 36 1.09 None High

Sun Life Financial Inc SLF USD Vincent Lui QQ 19,810.14 32.69 24 1.36 None High

Sun Life Financial Inc SLF CAD Vincent Lui QQ 20,488.86 33.81 25 1.35 None High

SunTrust Banks Inc STI USD Gaston Ceron QQ 18,598.48 34.60 26 1.33 None High

Susquehanna Bancshares Inc SUSQ USD Jim Sinegal QQQ 2066.00 11.08 12 0.92 None High

SVB Financial Group SIVB USD Gaston Ceron QQ 3986.64 87.52 73 1.20 Narrow High

Svenska Handelsbanken SHBA SEK Dan Werner QQ 196,712.45 303.70 256 1.19 Narrow High

TCF Financial Corporation TCB USD Dan Werner QQQ 2378.72 14.46 16 0.90 Narrow High

TD Ameritrade Holding Corporation AMTD USD Gaston Ceron QQ 14,736.01 26.78 23 1.16 Narrow High

Torchmark Corporation TMK USD Vincent Lui QQ 6496.00 70.93 60 1.18 Narrow Medium

Toronto-Dominion Bank TD USD Dan Werner QQQ 78,065.26 84.58 89 0.95 Narrow High

Toronto-Dominion Bank TD CAD Dan Werner QQQ 80,677.28 87.41 92 0.95 Narrow High

Total System Services, Inc. TSS USD Gaston Ceron QQ 5316.94 28.07 22 1.28 Narrow High

Trustmark Corporation TRMK USD Gaston Ceron QQ 1763.51 26.25 25 1.05 Narrow High

U.S. Bancorp USB USD Dan Werner QQQ 67,905.70 36.92 39 0.95 Narrow Medium

UBS AG UBS USD Erin Davis QQQ 79,551.93 20.72 18 1.15 Narrow Very High

UBS AG UBSN CHF Erin Davis QQQ 73,908.04 19.25 17 1.13 Narrow Very High

UniCredit SpA UCG EUR Erin Davis QQQ 27,697.34 4.78 3.9 1.23 Narrow Very High

United Bankshares, Inc. UBSI USD Dan Werner QQ 1436.97 28.53 24 1.19 Narrow Medium

Valley National Bancorp VLY USD Dan Werner QQ 2104.19 10.55 9 1.17 Narrow Medium

Visa, Inc. V USD Jim Sinegal QQQ 136,339.20 173.13 153 1.13 Wide High

Washington Federal Inc. WAFD USD Gaston Ceron QQ 2273.95 21.97 19 1.16 Narrow High

Webster Financial Corp WBS USD Dan Werner QQ 2436.51 26.99 23 1.17 None High

Wells Fargo & Co WFC USD Jim Sinegal QQQ 226,993.19 42.75 46 0.93 Narrow Medium

Westamerica Bancorporation WABC USD Gaston Ceron QQ 1312.34 49.02 39 1.26 Narrow Medium

Zions Bancorporation ZION USD Gaston Ceron QQQ 5325.32 28.86 25 1.15 Narrow High



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©2013 Morningstar. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and (4) does not constitute advice of any kind. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Any statements that are nonfactual in nature constitute opinions only, are subject to change without notice and may not be consistent across Morningstar. Morningstar and its affiliates may do business with firms mentioned in this report. Past performance is no guarantee of future results.

financial services observer sept 2013 - morningstar,...

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