The Future of Dealers Presented by Chris Reynolds CEO & President Investment Planning Counsel Inc. April 27 to 29, 2010 Share the tools

An Industry in flux Share the tools

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 Share the tools

Regulation  National Regulator  IROC verses MFDA

Competition Share the tools

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 Share the tools

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 Share the tools

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 Share the tools

The Math  1% Paid to the Dealer  Dealer keeps.20% .80% paid to the Advisor  Responsibilities  Compliance 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.  Responsibilities  Finding 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? NicheMegazoid Mid 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