Transcript Slide 1

Building your High Net Worth Business:
A Matter of Life and Death
Tom Junkin
Senior Vice President Personal Trust Services
Fiduciary Trust Company of Canada
BUILDING YOUR HIGH NET WORTH BUSINESS
About Fiduciary Trust Company of Canada
2004
Bissett Private Client
becomes Fiduciary Trust
Company of Canada, a
federally regulated trust
company
2000
Bissett acquired by
Franklin Templeton
Investments
1982
Bissett & Associates
founded
2001
Franklin Templeton
acquires Fiduciary
Trust Company
International
(founded 1931)
2006
Fiduciary Trust
Company of
Canada has $8.5
billion AUM
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BUILDING YOUR HIGH NET WORTH BUSINESS
Agenda

Understanding Canada’s High Net Worth market

Lessons learned from High Net Worth clients and advisors

How can you build your High Net Worth practice?

Questions and answers
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BUILDING YOUR HIGH NET WORTH BUSINESS
7.5% of the Population controls 93.9%
of investable assets in Canada
People
(000's)
% of
population
$ Billions
% of market
under $100K
5,265
17.0%
108
6.1%
Mass
Affluent
$100K - $1MM
1,897
6.1%
513
29.0%
High Net
Worth
$1MM - $20MM
444
1.4%
852
48.2%
over $20 MM
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0.0%
296
16.7%
Segment
Pre-Mass
Affluent
Ultra High
Net Worth
Total:
Definition
7,613
1,769
The top 1.5% control 65% of investable assets.
Source: Capgemini, The Canadian Wealth Management Market 2004/2005
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BUILDING YOUR HIGH NET WORTH BUSINESS
50% of HNW Canadians are over age 60.
They control 50% of total investable assets.
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Under 30
30 - 39
40 - 49
% of HNW People
50 - 59
60 - 69
Over 70
% of HNW assets
People over age 70 represent almost 1/3 of the HNW market.
Source: Capgemini, The Canadian Wealth Management Market 2004/2005
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BUILDING YOUR HIGH NET WORTH BUSINESS
Higher wealth segments will grow at the highest rate.
Growth in HNW Households (000's) 2003 - 2015
11.00%
3500
10.10%
3000
10.00%
8.10%
2500
12.00%
6.80%
8.00%
2000
6.00%
1500
4.00%
1000
500
2.00%
0
0.00%
Over $250,000
Over $500,000
2003
Over $1 Million
2015
Over $2 Million
CAGR
It’s true: the rich DO get richer, faster.
Source: Capgemini, The Canadian Wealth Management Market 2004/2005
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BUILDING YOUR HIGH NET WORTH BUSINESS
Understanding Canada’s High Net Worth Market

Between 1990 and 2004, household financial assets more than
doubled.


Between 1991 and 2001, Canadians over age 80 increased by
41% to 932,000.


46% of Canadian wealth is in non-financial assets.
2001 to 2011: 80 year old Canadians will increase again by
43% to 1.3 million
12.7% of high end assets under management are held in estates
and trusts.

$18.6 billion is currently held in wealth transfer structures.
Source: Statistics Canada; Investor Economics Fee-Based Report Summer 2003
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BUILDING YOUR HIGH NET WORTH BUSINESS
Understanding Canada’s High Net Worth Market

From 2001 to 2004, the Cost of Living Extremely Well rose 27%
versus 10% for the CPI.

The wealthy are feeling the crunch of rising costs.

From 1967 to 1989, marriages between previously-married
people quadrupled.

In 1973, 5.4% of divorces were not a first divorce. In 2003,
16.2% of divorces are second or higher.

Family relationships have never been as complicated as they
are today.
Source: Capgemini, The Canadian Wealth Management Market 2004/2005; Statistics Canada
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BUILDING YOUR HIGH NET WORTH BUSINESS
Lessons learned from High Net Worth
Clients and Advisors
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BUILDING YOUR HIGH NET WORTH BUSINESS
Democratization of Wealth Management
Investor Expectations
• more planning
• access to experts
• customized solutions
• product choice
• global choice
• my own CFO
Institutions
Ultra HNW
Supplier Product Push
• value added services
• sophisticated products
• leverage technology
• leverage distribution
HNW
Mass Affluent
Investors behave like the wealth segment above them.
HNW behaviours predict future Mass Affluent behaviours.
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BUILDING YOUR HIGH NET WORTH BUSINESS
Commoditization of Investment Management

Solutions that have already migrated from Institutions to the Mass Affluent:

efficient frontier analysis

index funds

product categorization (growth vs. value, small cap vs. large cap)

manager of managers

style diversification

hedge funds / alternative investments
Mass Affluent clients are already looking for “institutional”
services: Strategic Planning, Chief Financial Officers
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BUILDING YOUR HIGH NET WORTH BUSINESS
Lessons from the Ultra High Net Worth segment



62% have fired an Investment Manager in the last 18 months
Client: “I wish more advisors would...”
 #1 response: Listen (25%)
 #2 response: Be more honest and open (19%)
Advisor: “I wish more clients would...”
 #1 response: Educate themselves with our help (20%)
 #2 response: Be more honest and open (18%)
 #3 response: Communicate needs better (13%)
Lesson: HNW relationships are hard work. Superficial
relationships don’t last.
Source: Institute for Private Investors, IPI Report 2002
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BUILDING YOUR HIGH NET WORTH BUSINESS
Lessons from the Ultra High Net Worth segment

What, if any, transition is your family engaged in today?
Families in Transition
33%
Manager Changes
Family Governance
22%
Family Succession
22%
15%
Other
0%
5%
10% 15%
20%
25%
30% 35%
40%
Lesson: Families spend almost as much time worrying about
succession planning as they do about firing Advisors.
Source: Institute for Private Investors, IPI Report 2003
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BUILDING YOUR HIGH NET WORTH BUSINESS
Lessons from the Ultra High Net Worth segment

What Wealth Management services do you value the most?
Services most Valued
92%
78%
70%
59%
49%
Investment Advice
Portfolio Management
Tax Planning
Inheritance / Estate Plans
Trust Planning & Administration
26%
14%
Next Generation Mentoring
Succession Planning
0%
20%
40%
60%
80% 100%
Lesson: Investment management services are important, but they
are only part of the complete wealth management suite.
Source: Institute for Private Investors, IPI Report 2004
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BUILDING YOUR HIGH NET WORTH BUSINESS
Lessons from the Mass Millionaires
Percentage of Mass Millionaires who:

Rely on an Investment Advisor
73%

Use two or more Investment Advisors
25%

Say a formal financial plan is important to them 75%

Do NOT have a formal financial plan
??
75%
Lesson: Investors are looking for increased effort from Advisors
in establishing and periodically reviewing their Wealth Plans.
Lesson: Unmet needs are going to be met by someone.
Source: Taddingstone 2003 Mass Millionaires Report
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BUILDING YOUR HIGH NET WORTH BUSINESS
Lessons from the Courts

People in many circumstances die without a Will.
Percentage of Estates with no Will
68%
Leaving Minor children
40%
Advanced Degree
31%
Estates over $500,000
27%
Leaving Adult children
15%
Age 65 plus
0%
20%
40%
60%
80%
100%
Lesson: People procrastinate about making a Will.
Source: Alberta Law Reform Institute, Report for Discussion No. 16 (1996)
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BUILDING YOUR HIGH NET WORTH BUSINESS
Lessons from Professionals

Professionals, who should know better, often fail to plan ahead.
Percentage of People with no Will
30%
All Canadians
38%
Accountants
25%
Lawyers
26%
Doctors
0%
10%
20%
30%
40%
50%
Lesson: Intestacy is a great equalizer.
Source: Environics Research Wealth Poll II (1995)
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BUILDING YOUR HIGH NET WORTH BUSINESS
Lessons from Advisors to the Wealthy

How have HNW expectations changed in the last 12 months?
HNW expectations increased
Estate Planning and Wealth
Transfer Services
93%
90%
Income Generating Products
87%
Demand for Expert Advice
74%
Tax Efficiency Services
Discretionary Portfolio
Management
70%
Create and Review a Financial Plan
70%
0% 20% 40% 60% 80% 100
%
Lesson: Canadian HNW investors are challenging their
Advisors to deliver more than investment advice.
Source: Capgemini, The Canadian Wealth Management Market 2004/2005
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BUILDING YOUR HIGH NET WORTH BUSINESS
Lessons from the Advisors to the Wealthy

What reasons are cited most often for terminating your services?
Reasons for terminating Advisors
49%
Change in Strategy / Allocation
38%
Performance
35%
Change in Family Situation
24%
Other
0%
10% 20% 30% 40% 50% 60%
Lesson: Advisors should monitor family situations as
closely as they do investment performance.
Source: Institute for Private Investors, IPI Report 2003
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BUILDING YOUR HIGH NET WORTH BUSINESS
Emerging HNW Client Behaviours

Behave more like a corporation:

Long range strategic financial planning

Planning earlier for succession and wealth transfer

Review and update financial plans more frequently

Hire a Chief Financial Officer to handle the burden
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BUILDING YOUR HIGH NET WORTH BUSINESS
Building your High Net Worth Practice
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BUILDING YOUR HIGH NET WORTH BUSINESS
Challenges Advisors face in the HNW market

Deliver more service to HNW clients without significantly
increasing costs

Best practices:

Standardize your workflow

Take a holistic view of client relationships

Rigorously segment your client base

Practice continuous professional development

Perform your core competency and outsource the rest
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BUILDING YOUR HIGH NET WORTH BUSINESS
Challenges Advisors face in the HNW market

Meeting Multi-Generation Families expectations for longevity

Best practices:

Reach out to all generations of client families

Create robust succession plans for your practice

Create multi-generation service teams

Offer solutions tailored to each generation’s needs
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BUILDING YOUR HIGH NET WORTH BUSINESS
An Incomplete Wealth Plan –
Risks From Your Clients’ Perspective

Loss of life

Loss of legal capacity

Lost opportunities to reduce taxes

Possibility their wishes are not carried
out

Potential family conflict

Potential long and costly estate
administration
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BUILDING YOUR HIGH NET WORTH BUSINESS
An Incomplete Wealth Plan –
Risks From Your Perspective
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BUILDING YOUR HIGH NET WORTH BUSINESS
A Complete Wealth Plan –
Your Ultimate Goal
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BUILDING YOUR HIGH NET WORTH BUSINESS
The Missing Pieces: what you need to participate in
Wealth Transfer
Estate Planning Services
Including Legal Document Preparation
Estate Services
Trust Services
(Living / Testamentary Trusts)
Executor
Trustee
Co-Executor
Co Trustee
Agent for Executor
Agent for Trustee
Administrator
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BUILDING YOUR HIGH NET WORTH BUSINESS
Are you ready to add Wealth Transfer services to your
practice?

To expand your practice to include Wealth Transfer Services, you
can:

Build your own core competency

Build a broad network of experts and service suppliers

Outsource to a strategic partner
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BUILDING YOUR HIGH NET WORTH BUSINESS
Option 1: Buildyour own core competency

Learn to provide estate planning, executor, and trustee services directly

Advantages:


Independence
Disadvantages:

Training is expensive and time-consuming

Margins on estate and trust services are lower than investment services

Lack of permanence

Significant personal liability
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BUILDING YOUR HIGH NET WORTH BUSINESS
Option 2: Build a broad network

Network aggressively with estate lawyers, accountants, and trust
officers

Advantages:


Increased referral opportunities

Many experts available to suit individual needs
Disadvantages:

Time and effort to build reciprocal relationships

No economies of scale or negotiating power

Some experts could compete with your value proposition
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BUILDING YOUR HIGH NET WORTH BUSINESS
Option 3: Outsource to a Strategic Partner

Partner with a firm that integrates investment management with estate planning,
executor, and trustee services

Advantages:


Immediate access to trust and legal expertise

Seamless integration with your existing business

Economies of scale

Continuity and resources
Disadvantages:

Few suppliers of integrated wealth transfer services exist

Must meet program requirements
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BUILDING YOUR HIGH NET WORTH BUSINESS
Professional Executors and Trustees in Canada
Federally Regulated Trust
Companies in Canada
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Trust Companies focused on
Executor and Trustee services
Trust Companies delivering
Executor and Trustee services
through independent Advisors
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3
1
Trust Company delivering Executor
and Trustee services integrated with
Investment Management through
independent Advisors
Source: OSFI website “Who we Regulate”
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BUILDING YOUR HIGH NET WORTH BUSINESS
Qualifying Clients for this Program

Minimum Investment of $500,000 in any product or
solution within the Franklin Templeton Investments
platform
AND

Client agrees to appoint Fiduciary Trust as:

Executor, or

Trustee, or

Agent for Executor or Trustee
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BUILDING YOUR HIGH NET WORTH BUSINESS
What to look for in a Wealth Transfer partner
 Global, multi-manager, multi-style investment
management
PLUS
 Professional executor and trustee services
PLUS
 Specialized, independent legal advice by Canada’s
leading experts
Added Value:
 Expert consultation on will and estate planning
 Transparent and competitive fees
 Legal costs reimbursed to the client
 Backed by Franklin Templeton reputation and
resources
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BUILDING YOUR HIGH NET WORTH BUSINESS
Benefits of Incorporating Wealth Transfer services
into your business?
1)
For you






2)
Close out competitors
Increase client loyalty and retention
Increase AUM (use to consolidate and attract new assets)
Retain assets through generational transfers
Build HNW book of business
A solution to help you meet HNW clients leading expectation
For your clients


Majority of HNW clients have an incomplete wealth plan
93% of Advisors report Estate Planning as leading client expectation
in last 12 months
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BUILDING YOUR HIGH NET WORTH BUSINESS
Thank you.
Any Questions?
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BUILDING YOUR HIGH NET WORTH BUSINESS
Franklin Templeton Investments Private Client Group part of Fiduciary Trust Company of Canada, a wholly-owned subsidiary of Franklin Templeton Investments Corp.
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