The Future of Dealers

Presented by Chris ReynoldsCEO & President

Investment Planning Counsel Inc. April 27 to 29, 2010

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An Industry in flux

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Low Growth Market

Aging Advisor base

“It is not the strongest of the species that survives, nor the most intelligent that survives.

It is the one that is the most adaptable to change.”

Charles Darwin

Regulation

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Regulation

National Regulator

IROC verses MFDA

Competition

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Consumer Demand

Consumers want advice and a great client experience

What they are getting is products

Company who gets there act together by providing the best client experience around advice will be the winner

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Advisor Demand

What do Advisors want from the dealer?

Everything

What do they want to pay the dealer?

Nothing Need scale and expertise to compete for top

Advisors

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Branding

Joe’s Financial Services

VS.

Economics

The Dealer business model has not changed in 20 years

Dealers are competing on price not value

Dysfunctional business model that is bound for failure

Need a new profit model to survive

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The Math

1% Paid to the Dealer

Dealer keeps .20%

.80% paid to the Advisor

ResponsibilitiesCompliance and Oversight of all Advisor Activities, All technology, Recruiting, Training, Conferences, Processing, Advisor 411, Lawsuits,Dealing with Regulators, Accounting, Payroll, Marketing, Branding, Research, Book Financing, Estate Planning, Web Sites, E-Newsletters, Seminars, Business Coaching, etc, etc.

ResponsibilitiesFinding Clients, Servicing Clients, Reporting, Managing Staff, Paying Rent, Marketing, Client Communications, Client Events, Processing, Compliance, Branch Management, etc. etc.

Relationship- Dealer “takes” Advisor’s compensation- “I Pay YOU!!!”- Anything that goes wrong = Dealer’s fault

Relationship- Advisor is held responsible for all

recommendations including the performance of recommended Funds

- Anything that goes wrong = Advisor’s fault- According to Media – Advisors are over paid

Margin .03%

2.50% MER on a Mutual fund

Margin .40%

Question?

Where did the other 1.5% of the MER go?

To the Manufacturer!

Responsibilities:1. Manage money to stated mandate

and objectives

2. Administer the assets and hire a custodian

3. Send annual statement to client

4. Be your friend (wholesaler)

Relationship:• Wholesaler seen as investment

analyst and source of investment information (sometimes coach)

• As long as fund performance holds up they earn their fees

Margin .50% - 1%

Who will Survive?

Niche MegazoidMid Size

Conclusions

1. Moving to a new age in regulation

2. Product are commoditized – both Advisor and Consumer

3. Move to the client experience business

4. Need size and scale to compete

5. Must have manufacturing to survive