• Owen James has been running its programme of A Meeting of Minds for nearly 11 years. • A Meeting of Minds are “C” suite events bringing together the key influencers in the industry to address the

key issues facing their businesses and the industry as a whole. • Through these events we have created a substantial body of strategic thinking and are now keen to take

both the community and this thinking to the next level. • In September 2016, we therefore engaged Scorpio Partnership (part of McLagan *) to undertake the

inaugural financial benchmarking programme for the Financial Adviser marketplace.

* McLagan provides compensation consulting, operational benchmarking and best practice research across the financial industries. McLagan is part of Aon Hewitt, a business unit of Aon plc (NYSE: AON). For more information on McLagan, please visit mclagan.aon.com.

Introduction

The programme has five key objectives: 1. To bring together our client firms as one body to raise the profile of the

financial advisory industry. 2. To demonstrate the financial advice industry‘s important contribution to the

UK‘s economic wellbeing. 3. To provide key insights on advisory firms that will add value to all of your

businesses. 4. To offer the opportunity for individual firms to receive a dashboard

benchmarking their own businesses against their selected peer group *, and finally

5. To offer firms the opportunity to stick their hands up and say they are interested in selling their business. **

** The Individual Financial Adviser Report: Dashboard – please refer to slide 26 ** The M&A piece – please refer to slide – 29

Its objectives

Profile of respondent firms

The survey was launched in September 2016 to 1,750 of Owen James’ client firms

1,750

52 = 3% response rate

103 Partial responses

5.8%

*According to APFA there were 14,491 financial advice firms in the UK at year end 2015

What will encourage more firms to participate?

Total number of recipient firms contacted

Complete data used in the survey results

There were a total of 155 respondent firms

Total Sample Demographics

£15.5bn £143m

Median firm revenue

£1.3m

124k £120k 29%

Median firm AUM Total AUM

Total # of clients Average portfolio size Intention to sell in 5 years

These proportion were mirrored in those firms looking to sell, clustered in the SE and NW. 29%

21% 10%

8%

8%

8%

6% 6%

4% 2% South-East

North-West

London

Yorkshire & Humberside

West Midlands

East Midlands

South-West

Eastern

Scotland

Wales

The largest proportion of respondents were based in the SE or NW

Embracing digital – or not…..

Firms with a younger client demographic already have a digital service in place or plan one within the next 12 months

53 53

59 59

50

55

60

Yes Planned in the next12 months

Planned but laterthan the next 12

months

No plans to launchthis type of service

Aver

age f

irm cl

ient a

ge, in

year

s

Robo Service Plans

Larger firms are embracing the digital offering with 67% either already offering or planning to offer a digital service. Those firms wishing to sell are much less likely to make a digital investment at this point in time.

Please tell us the average age of your client base at year end 2015. Does your firm have a Robo/digital service?

13%

7%

14%

20%

12%

7%

5%

27%

10%

9%

20%

65%

87%

73%

33%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Overall

<GBP100m

GBP100-300m

GBP300m+

Yes Planned in the next 12 months

Planned but later than the next 12 months No plans to launch this type of service

Financial performance

However, the increase dipped to 12% for those larger firms with over 20 advisers.

2015 & 2014 AUM and Year on year change in AUM

Assets under management improved across the board in 2015 with a median 15% increase

120,000 40,000

120,000

464,000

88,000

230,000

658,500

142,500 53,000

142,500

580,000

99,000

260,000

750,000

15% 15% 16% 14% 15% 16%

12%

0

200,000

400,000

600,000

800,000

1,000,000

Overall <GBP100m GBP100-300m GBP300m+ <5 Advisors 5-20 Advisors 20+ Advisors

Media

n firm

AUM

(GBP

'000)

2014 2015 Median YoY AUM Change

Client funds are overwhelmingly managed on an advised basis

Just 13% of client money is managed on a discretionary mandate

The business model is nearly fully independent as evidenced by 94% of respondent firms while restricted advice is more present among the larger firms.

Please tell us how your client assets were split for performance year end 2015. What business model does your firm adopt?

85%

13%

2%

Advisory

Discretionary

Execution only

94% 93% 95%

67%

6% 0% 0%

14% 12% 7% 5%

19%

0%

25%

50%

75%

100%

Overall <GBP100m GBP100-300m GBP300m+%

of fir

ms

Independent advice Restricted advice (one provider)

Restricted advice (more than one provider)

Returns on AUM

However revenue returns on AUMs have decreased slightly year on year

1.02%

1.24%

1.07%

0.72%

0.95% 1.01%

1.38%

0.99%

1.18% 1.04%

0.73% 0.91%

0.98%

1.31%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

Over

all

<GBP

100m

GBP1

00-3

00m

GBP3

00m+

<5 A

dviso

rs

5-20

Adv

isors

20+

Advis

ors

Retur

n on

AUM

, %

2014 Return on AUM 2015 Return on AUM

35%

65%

Initial Ongoing

How were your revenues split for performance year 2015?

The highest revenue increase came from larger firms with over GBP300m in assets. Revenue increases for those firms wishing to sell was 4% lower than those with no plans to sell.

Please tell us your revenue figure for performance years 2015 & 2014

1,100 475

1,099

3,300

654 1,560

7,800

950 1,128 1,250

492

1,250

3,957

649

1,800

8,500

1,134 1,359

12%

8%

14% 15%

10%

15% 15%

10%

14%

0

2,000

4,000

6,000

8,000

10,000

12,000

Over

all

<GBP

100m

GBP1

00-3

00m

GBP3

00m+

<5 A

dviso

rs

5-20

Adv

isors

20+

Advis

ors

With

in 5 y

ears

No P

lans

Media

n firm

reve

nues

(GBP

'000)

2014 2015 Median YoY Revenue Change

There was a median year on year increase in revenues of 12% between 2014-15

240 112

271

614

190 271

683

335

184 292

140

337

802

230 339

909

340 239

0

200

400

600

800

1,000

1,200

Over

all

<GBP

100m

GBP1

00-3

00m

GBP3

00m+

<5 A

dviso

rs

5-20

Adv

isors

20+

Advis

ors

With

in 5 y

ears

No P

lans

Media

n Ope

ratin

g Pro

fit (G

BP'00

0)

2014 2015

Operating profits for those firms looking to sell saw the lowest proportionate rise.

Please tell us your total operating profit (total revenues minus total costs) for performance years:

Operating profits rose across the board in 2015

Plans to sell business AUM Number of Advisors

63%

54%

62%

73%

0% 20% 40% 60% 80%

Overall

<GBP100m

GBP100-300m

GBP300m+

Compensation as a Percentage of Total Costs

These costs rise further to 73% of overall costs for those firms with over £300m in assets.

Proportion of total costs spent on compensation

63% of overall costs are spent on compensation

The financial advisers

Larger firms are most likely to be increasing headcount. Those firms wishing to sell within the next 5 years are less likely to be investing and increasing headcount

Do you expect your firm’s overall head count in 2016 to:

Headcount ratios overall are 48% front office to 52% administration staff with larger firms most likely to be

increasing headcount

2% 5% 7%

35%

67%

23% 20%

40%

32%

63%

33%

73% 80%

53% 68%

0%

25%

50%

75%

100%

Overall <GBP100m GBP100-300m

GBP300m+ Within 5years

No Plans

Perce

ntage

of fi

rms

Decrease Remain the same Increase

35%

13% 25%

27%

Advisers Paraplanners

Administrators Other staff

And how many of the following made up your staff at the end of performance year 2015?

Para planners experience much less differential in pay across the country with GBP30k the threshold compensation level.

Median Total Compensation by region

88 82 80

68 64 62 55

50 45

39 35 32 30 30 33

28 27 30

0

25

50

75

100

London South-East Scotland East Midlands South-West Eastern Yorkshire &Humberside

West Midlands North-West

Media

n 201

5 Tota

l Com

pens

ation

(GBP

‘000

)

Advisors Paraplanners

Overall median compensation for advisers by region puts London and the South East ahead of their peers

Total Sample Demographics

£15.5bn £143m

Median firm revenue

£1.3m

124k £120k 29%

Median firm AUM Total AUM

Total # of clients Average portfolio size Intention to sell in 5 years

Mid to larger firms load their advisers with marginally higher clients numbers than their smaller peers.

Client loading on the front office

On average, advisers of respondent firms look after 114 clients each

114 102 118 106 104 115 124

9

40

9

25

9

25

51

667 450

667

280

667 503

330

1

10

100

1,000

Overall <GBP100m GBP100-300m GBP300m+ <5 Advisors 5-20 Advisors 20+ Advisors

Numb

er o

f clie

nt pe

r fro

ntoffic

e inc

umbe

nt (lo

g sca

le)

Medium Min Max

750 Median

number of clients per

respondent firm

Partnering with the financial adviser industry

The three leading DFMs used by respondent firms are Brewin Dolphin, Investec and Quilter Cheviot

21%

19%

17%

23% of respondents ticked

‘other’ indicating a highly diluted use of DFMs

Other top 7 firms exhibit significantly lower market share

than these three leaders

True Potential and Arc stand out as the most utilised platform services

There are multiple platform providers used by financial advisers

….while back office systems are focussed on two key providers

40% 40% But there are multiple additional

providers

31% 25% For larger firms of GBP300m+,

Iress (Xplan) dominates but 44% use other providers

Distribution Technology leads the field

Risk profiling providers are more evenly dispersed

… while FE Analytics is the preferred research tool

40% And Finametrica closely follows

31% Morningstar is some way behind with 15% users

Compliance spend is a median 5% of costs and FSCS levies at 3%. Outsourcing costs appear to reflect on profit margins, with firms that outsource seeing median margins 3% lower than non-outsourcing peers.

Are there any other core functions that you outsource, eg. HR?

11%

24% 30% 14%

27%

42%

0%

25%

50%

25% 50% 75%

Profi

t Mar

gin

Percentile of firms

Yes No

The HR function is the largest outsourced function for adviser firms

42% 58%

0% 25% 50% 75% 100%

Over

all

Percentage of firms

Yes No

47%

22%

13%

13% 6%

HR Finance Legal IT Marketing

Are there any other core functions that you outsource, eg. HR? Profit margin by firms that outsource support functions

What percentage of your costs are spent on your Compliance resource? And what percentage of your costs are spent on FSCS levies?

5%

3%

0%

2%

4%

6%

Compliance Spend FSCS Levies

Media

n % of

costs

Performance benchmarking

The charts on this page demonstrate how the results from your firm can be

benchmarked against your relevant peer set and the 2016 UK Financial Advisers market.

FIRM ASSETS UNDER MANAGEMENT

Next steps Sample individual Financial Adviser dashboard report

GBP 120 million

71% 58% 63%

0%25%50%75%

100%

Your firm Peer set UK FinancialAdvisers market

Total compensation as a % of costs

50% 49% 48%

0%25%50%75%

100%

Your firm Peer set UK FinancialAdvisers market

Total compensation as a % of revenues

70% 84% 76%

0%25%50%75%

100%

Your firm Peer set UK FinancialAdvisers market

Cost income ratio, %

8% 3%

15%

0%5%

10%15%20%

Your firm Peer set UK FinancialAdvisers market

2015 AUM growth, %

291 276 285

0100200300400

Your firm Peer set UK FinancialAdvisers market

Revenue per advisor, GBP ‘000

1.34% 1.22% 0.99%

0.00%0.50%1.00%1.50%2.00%

Your firm Peer set UK FinancialAdvisers market

Return on assets, %

Individual Financial Adviser reports – The Dashboard • Individual Financial Adviser reports – The Dashboard - are an output of the Owen James

Financial Adviser marketplace benchmarking study. • As an advisory firm, Owen James would like to offer you the opportunity to benchmark

your own business against a peer group which you are invited to define. • If you are able to provide the full data, Owen James will produce this Dashboard for your

individual firm. Obviously all data is treated in strictest confidence. • The fee for this work is £500 plus VAT. • If you would like to go ahead with this, do please call Evie Owen on 01483 861334.

Individual Financial Adviser Report: Methodology

The M&A piece: • At Owen James, we are working with a specialist consultant who has been a Managing

Director of a national firm, which was then "consolidated". He is keen to pass on his learning to support financial advisory firms keen to acquire or be acquired. If you would like to explore this activity further, do please call Evie Owen on 01483 861334 to discuss.

Individual Financial Adviser Report: Methodology

Thank you for taking the time to read this far. If you would like to discuss any aspect of this report do please call Evie Owen at Owen James on 01483 861334

or email evieowen@owenjamesevents.com.