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					How to Attract HNWI

Mortgage & Insurance Broker Conference,
October 2008

Gary Connolly, Merrion Capital
Glossary of Terms
 Bull   Market - A random market movement causing an
    investor to mistake himself for a financial genius
   Market Correction - The day after you buy stocks
 Bear   Market – When you are able to sleep like a baby.
    Waking up every hour crying.
 Economist     – Someone who talks in somebody else‟s sleep

 Broker    - Poorer than you were last year
 Institutional  Investor - An investor from the past 12
    months who's now committed
 Profit   - Religious guy who has a direct line to God
 Credit    Crunch – Lending market disruption - Not a new
    cereal from Kelloggs
 New    Financial Disclosure – Past performance is not a useful
    guide to the future. Unit prices may fall as well as plummet
Time Tellers
Agenda

   Understanding Ireland‟s High Net Worth market



   Lessons learned from High Net Worth clients and advisors



   How can you build your High Net Worth business?
             Who are HNWI?

                                             Ultra High Net Worth Individuals
                                             €10M+ in liquid financial assets
                                UHNW


                                                  Individuals with €1M-
                                 HNW              €10M in liquid financial
                                                  assets

                                                         Individuals with €100K-€1M
                             Mass Affluent               in liquid financial assets



                                                               Individuals with less than
                                 Mass                          €100K in liquid financial
                                                               assets




Source: Guideline Analysis
                Understanding Ireland’s High Net
                Worth Market
                     Between 1995 and 2005, household wealth grew more than
                      threefold:
                        71% of Irish wealth is in residential property assets
                        Lowest weight^ in Financial assets


                     First generational wealth has important implications:
                        Tends to be higher risk, in an effort to generate high
                          returns
                        Eschew diversification


                     Demographics are important
                        Population set to expand by 23% by 2020 ^^
                        Key wealth generating cohorts will see accelerated
                         growth




^Includes Spain, France, Belgium, Portugal, Germany, UK, Italy, USA and Japan.
^^ United Nations world population forecast
Source: BOI Private Banking, Wealth of the Nation, 2006.
                    Ireland’s Asset Allocation



                                          Bonds
                           Cash            12%
                            3%




                   Public & Private
                        Equity                            Property
                         14%                                71%




Source: BOI Private Banking, Wealth of the Nation, 2006
                   International Diversification




Source: Cap Gemini/ Merrill Lynch, World Wealth Report 2006
    Diversification
                     Hedge Against Stupidity….Warren Buffett




    Most Basic Tenet of Investing

    Some of Your Portfolio Underperforming All of the Time

    Dangers of Over-Concentration

    Property – 71% of Wealth Attributable to Residential Property

    Past Performance…

        Cisco during tech-bubble


                         Dangers of extrapolation best
                         demonstrated by the King…
Extrapolations on Elvis

                In 1960 there were 216
                 Elvis
                 impersonators
                In 1970, there were 2,400

                By 1980, there were an
                 estimated 6,300

                By 1992, there were 14,000


                By the year 2020, ONE in
                 FOUR people will be Elvis
                 impersonators, bringing the
                 total to 1.7 billion
                 worldwide
Diversification

   Next decade will see much greater diversification

            Emphasis on Property will decline

            Quality advice should be tailored accordingly


   What leads one bull market NEVER leads the next

            May re-assert itself at some point

            Trying to predict next bull market leader is far from simple
Demographics…
                   Population Over 65 Years


                                                Num ber   % Total Population (rhs)
           2,000,000                                                                 35
           1,800,000
                                                                                     30
           1,600,000
           1,400,000                                                                 25
           1,200,000                                                                 20
           1,000,000
             800,000                                                                 15
             600,000                                                                 10
             400,000
                                                                                     5
             200,000
                   0                                                                 0
                            2005 2010 2015 2020 2025 2030 2035 2040 2045 2050


NCB Ireland’s Demographic Dividend, June 2006
                    The Economically Active Age Groups
                    (15 to 64 Years)

            3 ,7 5 0 ,0 0 0

            3 ,5 0 0 ,0 0 0

            3 ,2 5 0 ,0 0 0

            3 ,0 0 0 ,0 0 0

            2 ,7 5 0 ,0 0 0

            2 ,5 0 0 ,0 0 0

            2 ,2 5 0 ,0 0 0

            2 ,0 0 0 ,0 0 0
                              2005     2010     2015   2020   2025   2030   2035   2040   2045   2050
                               Average Annual Growth Rates:          2005-10:   2.1%
                                                                     2010-15:   1.5%
NCB Ireland’s Demographic Dividend, June 2006                        2015-20:   1.0%
                   The Baby Boom Generation

                                                                    2005
                                                               Male        Female


                      90 years

                      80 years

                      70 years

                      60 years

                      50 years

                      40 years                                  9

                      30 years

                      20 years

                      10 years

                 Under 1 year
                             -60,000       -40,000   -20,000          0         20,000   40,000   60,000

NCB Ireland’s Demographic Dividend, June 2006
                   The Baby Boom Generation
                                                                  2020
                                                               Male       Female


                      90 years

                      80 years

                      70 years

                      60 years

                      50 years

                      40 years

                      30 years

                      20 years

                      10 years

                 Under 1 year
                             -60,000       -40,000   -20,000          0        20,000   40,000   60,000

NCB Ireland’s Demographic Dividend, June 2006
                   The Baby Boom Generation
                                                                       2050
                                                                    Male       Female


                        90 years

                        80 years

                        70 years

                        60 years

                        50 years

                        40 years

                        30 years

                        20 years

                        10 years

                   Under 1 year
                               -60,000          -40,000   -20,000          0        20,000   40,000   60,000

NCB Ireland’s Demographic Dividend, June 2006
                    Household Income & Spending
                    (By Age of Head of Household, % of Total)


                                      Disposable Income      Total Household Expenditure
               30

               25

               20

               15

               10

                5

                0
                          < 25             25-34     35-44      45-54       55-64          65+


NCB Ireland’s Demographic Dividend, June 2006
Lessons learned from High Net
Worth Clients and Advisors



…evidence from Canada
         Democratisation of Wealth Management

                               Institutions

Investor Expectations                            Supplier Product Push
• more planning                Ultra HNW         • value added services
• access to experts                              • sophisticated products
• customised solutions                           • leverage technology
• product choice                 HNW
• global choice

                              Mass Affluent

              Investors behave like the wealth segment above them
               Ultra HNW demands predict future HNW demands
Commoditisation 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
                      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
                  Lessons from the Ultra High Net Worth segment


                               What Wealth Management services do you value the most?

                                                                    Services most Valued

                                                           Investment Advice                            92%
                                                    Portfolio Management                              78%
                                                               Tax Planning                         70%
                                               Inheritance / Estate Plans                         59%
                                    Trust Planning & Administration                             49%
                                            Next Generation Mentoring                 26%
                                                       Succession Planning          14%
                                                                               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
                       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
Building your High Net Worth Business
    Wealth Management as distinct from
    Fund (Asset) Management
   The two can be confused as Irish Market has companies offering
    both.

   Asset management is a key feature, but Wealth Management has a
    greater emphasis on financial advice and is concerned with gathering,
    maintaining, preserving, enhancing and transferring wealth.

   Products include:
      Core banking-type products
      Lending products, such as margin lending, credit cards,
        mortgages and private jet finance.
      Insurance and protection products, such as property and health
        insurance, life assurance and pensions.
      Asset management in its broadest sense: discretionary and
        advisory, financial and non-financial assets (such as real estate,
        commodities, wine and art), conventional, structured and
        alternative investments.
      Advice in all shapes and forms: asset allocation, wealth
        structuring, tax and trusts, various types of planning (financial,
        inheritance, pensions, philanthropic).
      Family Offices– „concierge-type‟ services, including yacht broking,
        art storage, real estate location, and hotel, restaurant and
        theatre booking.
 It’s a Crowded Field Out There!




…but room for quality offering
Clients Wealth & Investment Demands

   Exclusivity, or at least appearance of

   Less product driven sales approach
    required

   Lack of take-up of Discretionary
    Mandates a sign
What Works Best
   TRANSPARENCY, TRANSPARENCY, TRANSPARENCY

   Fee-based advice

   Solution driven sales, not product/ remuneration
    driven

   Product exclusivity is somewhat illusive
           Can be bought on a transaction-only basis


   Service is easier to make proprietary – Service
    Exclusivity…
           Don‟t be afraid to charge an ongoing fee for it
Challenges Advisors face in the HNW market


   Deliver more service to HNW clients without significantly
    increasing costs

   Best practices:
      Standardise your workflow



       Take a broad view of client relationships

       Rigorously segment your client base

       Practice continuous professional development

       Perform your core competency and outsource the rest
    Final Thoughts
o   This is a crowded market with many financial services firms
    having a relationship with the same customer

o   Competitors are continuously innovating. Therefore, it is
    imperative to monitor their programs – targeted to take your
    customers!

o   No agreed single „preferred‟ model – though fee based offering
    likely to stand the test of time

o   With a quality offering, HNW market offers great rewards

o   Current difficulties are CYCLICAL – the growth in wealth
    management is SECULAR


              THANKYOU AND BEST OF LUCK!
General Disclosures

   Merrion Stockbrokers Ltd is a member firm of the Irish Stock
    Exchange and the London Stock Exchange. Merrion Fund Management
    Limited is authorised by the Financial Regulator as a Fund Manager
    and Merrion Stockbrokers is regulated by the Financial Regulator.
    Merrion Stockbrokers is the investment manager to the Funds. Both
    companies are subsidiaries of Merrion Capital Group and part of
    Landsbanki Group.


   Past performance is not necessarily indicative of future
    performance. The value of investments may fall as well as rise and
    investors may not recover the amount invested. Any decision to
    invest must be based on information contained in the prospectus.

				
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