1. Impact of regulation on the shape of IFA distribution and strategic opportunities pursued by Sanlam

2. Regulation will change significantly Prudential Regulation Authority Consumer Protection and Markets Authority - Earlier identification of risk - Sector wide intervention - Intensive supervision - Scrutiny of products and governance - Aggressive enforcement - Redress - EU and international engagement

3. Overview of RDR Implications RDR ImpactAdviser ImplicationsProvider Implications Market Structure  Higher threshold for independence  Minimum professional standards  Increased capital requirements  IFA exits?  Consolidation  Emergence of large advisory firms  Advisers switch to tied  Move upmarket to ‘independent’  Expand into manufacturing?  Need to secure market access in restricted landscape Proposition  Adviser must agree charges with customers  Charges must be transparent  Product and Advice charges separated  Setting the advice charge tariff – level and structure  Clarify proposition and target market to justify charge  Advice: one off or on-going?  Improve sales effectiveness (productivity, unit costs)  Invest in adviser support  Individual adviser remuneration  Compete without reliance on commission  Flexibility in how advice is charged for New business mix and value  IFAs “unbiased and unrestricted”  Extend beyond packaged products  Opportunity for banks to adopt simplified advice  More sophisticated product selection processes  Increased take-up of non- packaged investment products  Understand more acutely cash flows within their business  Respond to threat of reduced margins  Tax and capital impacts

4. How RDR affects Product Design RDR – the direct impacts:  Remove commission bias  Transparency and disclosure  Increase professionalism of advice AND Indirect impacts:  Capital and Value flow  Use and role of Platforms  New routes to market  From Products to Propositions CONSUMER AWARENESS & TRUST RE-ENGINEER THE MARKET

5. No adviceBasic advice Advice under ICOBS Simplified adviceRestricted advice Independent advice Regulatory position  Current today  Current today – very limited  Requires revision to be economically viable  In market today for protection sales  Model considered but not yet confirmed  Industry expected to propose workable solution  Exist post RDR Customer experience  Customer requests purchase / is provided information only  Customer is provided basic recommendation (but not premiums)  Customer is provided recommendation  Customer given recommendation  Customer given recommendation from restricted providers  Customer given recommendation from whole of market Adviser qualification  n/a  Any  ICOBs  Which QCF level 2/3/4?  QCF level 4 Customer charging/ remuneration  Potentially moving to intermediation charge  Commission  Separate charge for advice  Will customers pay in this segment?  Separate charge for advice Potential channels to be used  Online  Contact centre  Branch  Online  Contact centre  Branch  Online  Contact centre  Branch  Online  Contact centre  Branch  Online  Contact centre  F2F  Online  Contact centre  F2F Products  Any  Stakeholder  Protection only  Low risk investments/protec tion cover  Any, from restricted or tied panel  Any, true whole of market Product design must be tailored to the channel & the advice model Advice models and standards

6. Changing Business Models Value Chain Impact on ProductsOutcomes Distribution  How do I show the value-add to the client?  How do I generate recurrent fee streams  How do I ensure my costs fit with my charging envelope?  Work with providers whose products give value add to my services  Use products/investment ranges that support my risk approach  Use providers who help me to take costs out Manufacturing  What’s the basis of how my product competes?  How do I defend against margin pressure?  How can I ensure my product stays fit over its lifecycle?  Focus on wider proposition design  Investment content and performance  Which parts of the value chain am I in?  Returns and cash flow

7. Product to Proposition Product approach  Focus on acquisition  Distributor versus Customer needs  Only part of the value chain, focussed on product returns  Narrow definition  Leads on features and benefits  Products supplemented with commission and wider support to distributors Proposition  Focus on life cycle needs  Distributor and Customer needs  Whole value chain, how is the product generating its return and how is the distributor generating theirs?  ‘Marry’ the product with the advice  Stay focused on needs

8. Focus on acquisition Distributors remunerated by transactions Products re-broked for ‘improved’ value Life companies need sales volume Commission funding drives product design

9. What do IFAs want?  To deliver on promises to clients  Cost efficiency  Sustainability  Building value –Demonstrate assets under influence –High proportion of reoccurring income –Profitability  De-risking  Guarantees  Expertise  Training  Marketing  Business support  IT support

10. What will be the drivers moving forward?  Cost –Building the scale  Guarantees –At a sustainable cost –That are safe –Reduce risk not increase it –Post retirement market –With profits? Will the Pru win?

11. What will be the drivers moving forward?  Barriers to entry  Transparency  De-risking –Building process with IFAs –Managing funds to risk categories –Sharing risk  NMG Survey “The lack of ‘cost leader’ in the UK Wealth market demonstrates the difficulty of achieving cost efficiency with complex legacy books”

12. What will be the drivers moving forward?  Value –Recognising the shift in the value chain –Proctor and Gamble to Tesco –Effect of regulation  Distribution –Different channels –Value of independence  Specialisation –Tax planning –Differentiation

13. How Sanlam are positioned to respond  De-risking –Building process with advisers –Managing funds to risk categories

15. Recognising the shift in the value chain  Joint venture discretionary fund management businesses  Investment partnerships  Product design

16. Specialisation  Technical  Tax  Business consultancy

17. Cost  Lack of legacy  New entrants  Niche –Self select –Section 32

18. Brand

19. Ambitions  Partner with up to 50 FA businesses in the post RDR world  10 joint ventures building to £500m per relationship  40 investment partnerships  Niche products – app on iphone

20. The winners will be… …“Those that align closest to distribution”

21. Energising Together