Separately Managed (Fee-based) Accounts - US - June 2006

TABLE OF CONTENTS

• Introduction and Abbreviations
• Introduction
• Scope of this report
• Definitions
• Abbreviations and terms
• Abbreviations
• Executive Summary
• State of the market
• Key developments
• Implications for the industry
• What SMA investors think
• Market Drivers
• Increase in HNW and mass affluent households
  • Figure 1: Mean net worth of U.S. families, by income percentile, 1989-2004
  • Figure 2: Net worth of U.S. households, by number of households, 1995-2004
  • Figure 3: Net worth of U.S. households, by percentage of households, 1995-2004
• Distribution channels
• Consumer desire for customization drives retail banking growth
  • Figure 4: Importance of "individually customized portfolio" for respondents with advisors, by household income, February 2006
• Regional and community banks
• SMAs attractive to advisors
  • Figure 5: Percentage sales from separately managed accounts, 2004
• Banking channel at a crossroads
• Impediments to widespread banking adoption
• Infrastructure issues
• Open architecture lags
• Confusion abounds
• Evolving toward the UMA
• Model-based multi-manager accounts
  • Figure 6: Model-based multi-manager account
• UMAs
• Market Size
• SMA assets under management
  • Figure 7: SMA assets under management, at current and constant prices, 2000-05
  • Figure 8: Graph: SMA assets under management, at current and constant prices, 2000-05
  • Figure 9: SMA assets, accounts, and average account balances, 2001-05
  • Figure 10: Comparison of growth in SMA assets and performance of the S&P 500, at current prices, 2000-05
• Market Segmentation and Distribution
• Types of investments made with SMA assets
  • Figure 11: Market segmentation of SMA assets, year-end 2005
• Wirehouses dominate distribution
  • Figure 12: Primary distribution channels of SMA assets, year-end 2005
• Managed accounts and defined contribution retirement plans
  • Figure 13: Defined contribution plan managed account providers, June 2005
• Competitive Landscape
  • Figure 14: Top ten separate account program sponsors, market share and assets, Q3 2005
  • Figure 15: Top ten separate account investment managers, assets under management, 2005
• Managed account providers
• Bank of America
• Citigroup
• Fidelity Investments
• Financial Engines, Inc.
• JPMorgan Chase
• Lockwood Advisors
• Merrill Lynch
• Morgan Stanley
• Schwab
• Wachovia
• Technology providers
• Bisys Fund Services, Inc.
• CheckFree Corp.
• Curian Capital
• FundQuest
• Placemark
• SEI Investments Co.
• SunGard
• Vestmark
• Advertising and Promotion
• Introduction
• Genworth Financial
  • Figure 16: Genworth Financial direct mail advertisement, March 2006
• Fidelity
  • Figure 17: Fidelity advertisement for CAN SLIM SMA management, March 2006
• Nationwide
  • Figure 18: Nationwide direct mail advertisement, April 2006
  • Figure 19: Nationwide direct mail advertisement, September 2005
  • Figure 20: Nationwide direct mail advertisement (continued), September 2005
• Schwab
  • Figure 21: Schwab print advertisement, November 2005
  • Figure 22: Schwab print advertisement, December 2005
• The Consumer
• Introduction
• Summary highlights of consumer survey
• Reasons for investing
  • Figure 23: Reasons for investing in an SMA, by income, March 2006
  • Figure 24: Reasons for investing in a SMA, by age, March 2006
• Concerns about separately managed accounts
  • Figure 25: Concerns about SMAs, by income, March 2006
  • Figure 26: Concerns about SMAs, by age, March 2006
• Preferred type of institution for SMAs
  • Figure 27: Type of institution prefered for SMA, by income, March 2006
  • Figure 28: Type of institution prefered for SMA, by age, March 2006
  • Figure 29: Type of institution prefered for SMA, by education, March 2006
  • Figure 30: Type of institution prefered for SMA, by gender, March 2006
• Percentage of investable assets in SMAs
  • Figure 31: Percentage of investable assets invested in SMA(s), March 2006
• Mutual fund investors and other investments owned
  • Figure 32: Investments preferred outside of SMA, March 2006
  • Figure 33: Other investments owned by mutual fund investors, by income, December 2005
• Likely future investments of mutual fund holders
  • Figure 34: Future investment considerations of mutual fund holders, by income, December 2005
• SMA investors that have other investment advisors
  • Figure 35: Have assets with an advisor other than the manager of the SMA, March 2006
• SMA investors and unified managed accounts
  • Figure 36: Respondents who have, or would consider opening a UMA, March 2006
• Future and Forecast
• Future trends
• U.S. millionaire households to increase
  • Figure 37: Forecast of U.S. millionaire households, 2005-10
• Mass affluent also increasing
  • Figure 38: Forecast of U.S. households with net worth between $100,000 and $1 million*, 2004-09
• SMA growth likely weighted toward HNW households
  • Figure 39: Advisor attitudes toward SMA sales growth, 2004
• Unified Managed Household (UMH) on the horizon
• Market forecast
• SMA assets under management
  • Figure 40: Forecast of SMA assets under management, at current and constant prices, 2005-10
• Forecast factors
• Appendix: Trade Associations