U.S. Retail Investor Advice Relationships 2021 Navigating Perpetual Unease

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1 PRODUCT DETAILS U.S. Retail Investor Advice Relationships 2021 Navigating Perpetual Unease OVERVIEW & METHODOLOGY This report is part of an annual series of investor-focused reports, which is the outcome of a partnership between Cerulli Associates and Phoenix Marketing International. It is designed to provide insight into the relationship between financial providers and retail investors. It covers the provider-client relationship from end to end, starting with client acquisition, progressing through advice delivery, investment management, and pricing and client retention strategies, among other topics. In addition, the report includes a sizing of the retail investor marketplace by channel and product to help firms identify client acquisition and product distribution opportunities. The report is designed as a business planning tool, and additional support leveraging this data in the form of customized workshops and other presentations is available. USE THIS REPORT TO Gain insight into how investor demand for personalized financial advice continues to grow Learn impactful tools for advice providers to implement in an effort to help clients set goals, maintain investment discipline, and reduce their decision fatigue Explore the opportunity set that exists for providers to minimize the threat of client defection while optimizing new client acquisition in the face of investor contentment with current relationships Assess current investor sentiment, preferences for risk exposure, and advice engagement amid an ongoing pandemic, labor market challenges, and political unrest QUESTIONS ANSWERED How can advisors improve the value of the advice they offer clients? How should advisors update their client communications strategy? What factors are most important for clients in setting financial plans? Which behavioral biases are most likely to impact investors in different life stages? Which relationship elements drive client satisfaction? Included with Purchase Digital report in PDF format Unlimited online firm-wide access Exhibits in Excel Interactive Report Dashboards Interact and explore select report data with Cerulli s visualization tool. Key findings Analyst support Interactive Report Dashboards Digital Advice Assets and Trends: Compare Cerulli s five-year asset projections for the digital advice market against customizable user growth rates, and understand investors digital advice comfort levels and frequent use of online financial tools with filters by advice orientation, head of household assets, and household investable assets. Distribution of Financial Assets: Review household financial asset sizing and distribution, alongside average household age, by investable asset ranges. Additionally, analyze a breakdown of household net worth by category (debt, financial assets, nonfinancial assets) and type of financial asset, with filters by age and financial asset ranges. Investor Outlook Comparison: Examine a detailed analysis of investor economic outlook and self-reported risk tolerance with customizable segmentations by year, primary provider channel, age, advice orientation, and investable assets. Primary Advisor/Provider Relationships: Understand overall investor satisfaction with their primary advisor/provider across years, provider channels, age groups, investable assets, and advice orientation. Dashboards include charts depicting the distribution of investors who believe the value they are receiving from their financial advisor is worth the expense, level of satisfaction, most important reasons for their current levels of satisfaction, and the services that are being used with the firm. Cerulli Associates info@cerulli.com

2 Chapter 6 Household Satisfaction Exhibit 6.01 Percent of Respondents Satisfied with Primary Provider and Primary Advisor, Q 2021 Sources: Phoenix Marketing International, Cerulli Associates Analyst Note: Cerulli defines satisfaction as top-two rating on a seven-point scale and dissatisfaction as a bottom-two rating on a seven-point scale. All other responses are counted as neutral. Primary provider Primary advisor 90% 61% 55% 62% 63% 64% 58% 67% 68% 69% 70% 81% 75% 77% 79% 76% 73% 80% 81% 82% 79% 78% 79% 80% 81% 86% 84% 0% Q 2021 As of 2Q 2021, satisfaction with their financial provider firms and the advisors who they work with reached 86% and 84%, respectively, marking new high for each since Cerulli began compiling these figures in Key Implication: Climbing equity markets and an invigorated emphasis on more comprehensive advice relationships continue to fuel investors contentment with their current relationships. In the past, prospective market entrants have frequently cited investor frustration with current engagements as potential means for disruption, but this opportunity continues to wither. Given the complexity of affluent investors lives in general, few are willing to investigate the provider landscape without a marked disappointment from their incumbents. 89 The Cerulli Report U.S. Retail Investor Advice Relationships 2021

3 : Expanded Executive Summary Report Authors Chapter 1: Navigating Perpetual Unease Exhibit Behavioral Finance Bias Descriptions and Identification Questions, Exhibit Overall Investor Behavioral Finance Bias, Exhibit Investor Behavioral Finance Bias by Age, Exhibit Investor Behavioral Finance Bias by Investable Assets, Exhibit Investor Behavioral Finance Bias by Advice Orientation, Exhibit Co-Incidence of Investor Behavioral Finance Bias, Chapter 2: Investor Market Sizing Exhibit Cerulli Wealth Tiers, 2020E Exhibit Distribution of Households and Financial Assets by Financial Assets and Age Range, 2020E...32 Exhibit Distribution of Household Financial Assets by Type of Asset and Financial Assets, 2020E...33 Exhibit Distribution of Household Financial Assets by Type of Asset and Age Range Databank, 2020E Exhibit Distribution of Household Financial Assets by Generation, 2020E...35 Exhibit Household Nonfinancial Assets by Financial Asset Tier, 2020E...36 Exhibit Household Nonfinancial Debt by Financial Asset Tier, 2020E Exhibit Distribution of Core Retail Investor Assets by Primary Provider Channel and Investable Assets, 2020E...38 Exhibit Primary Provider Channel by Advice Orientation, Exhibit Primary Provider Channel by Investable Assets, Exhibit Primary Provider Channel of Investor Households by Age Range, Exhibit Reasons for Beginning Relationship with Primary Provider by Primary Provider Channel, Exhibit Percentage of Investors Assets Held at Primary Provider by Primary Provider Channel, The Cerulli Report U.S. Retail Investor Advice Relationships 2021

4 Chapter 3: The Digital Advice Landscape Exhibit Competing Business Models in the Digital Advice Market, Exhibit Part 1. Digital Advisor Comfort, Q Exhibit Part 2. Digital Advisor Comfort Databank, 2Q Exhibit Part 1. Frequent Use of Online Financial Tools by Age Range and Investable Assets, 2Q Exhibit Part 2. Frequent Use of Online Financial Tools by Advice Orientation, 2Q Exhibit Top-20 Digital Advice Providers by Assets Under Management, 2021E...50 Exhibit Five-Year Projected Growth of Direct/Legacy Firm Digital Advice Platforms, E Exhibit Five-Year Projected Growth of Start-Up Digital Advice Firms, E...52 Exhibit Five-Year Projected Growth of Combined Digital Advice Market, E...53 Chapter 4: Investor Profiles and Sentiment Exhibit Part 1. Investor Economic Outlook by Advice Orientation, 2Q Exhibit Part 2. Investor Economic Outlook Databank, 2Q Exhibit Investor Risk Level, Q Exhibit Part 1. Investor Risk Level by Advice Orientation, 2Q Exhibit Part 2. Investor Risk Level Databank, 2Q Exhibit Part 1. Advice Orientation by Primary Provider Channel, 2Q Exhibit Part 2. Advice Orientation Databank, 2Q Exhibit Perception of Quality of Financial Advice, Q Exhibit Part 1. Perception of Quality of Financial Advice by Advice Orientation, 2Q Exhibit Part 2. Perception of Quality of Financial Advice Databank, 2Q Exhibit Respondents That Need More Investment Advice Than Past Years and Market Returns, Q Exhibit Part 1. Respondents That Need More Investment Advice by Advice Orientation, 2Q Exhibit Part 2. Respondents That Need More Investment Advice Databank, 2Q Exhibit Part 1. Investors Who Like to Be Actively Involved in Day-to-Day Management by Advice Orientation, 2Q Exhibit Part 2. Investors Who Like to Be Actively Involved in Day-to-Day Management Databank, 2Q The Cerulli Report U.S. Retail Investor Advice Relationships 2021

5 Chapter 5: Client Acquisition Exhibit Part 1. Reasons for Beginning Relationship with Primary Provider by Advice Orientation, 2Q Exhibit Part 2. Reason for Beginning Relationship with Primary Provider Databank, 2Q Exhibit Part 3. Reason for Beginning Relationship with Primary Provider by Channel, 2Q Exhibit Part 4. Reason for Beginning Relationship with Primary Provider by Length of Time With Primary Advisor, 2Q Exhibit Willingness to Recommend Primary Advisor, Q Exhibit Part 1. Willingness to Recommend Primary Advisor by Advice Orientation, 2Q Exhibit Part 2. Willingness to Recommend Primary Advisor Databank, 2Q Exhibit Part 1. Factors Rated Extremely Important in Choosing an Advisor by Advice Orientation, 2Q Exhibit Part 2. Factors Rated Extremely Important in Choosing an Advisor Databank, 2Q Exhibit Part 1. Origin of Primary Advisor Relationship by Advice Orientation, 2Q Exhibit Part 2. Origin of Primary Advisor Relationship Databank, 2Q Exhibit Online Services and Features Households Currently Use by Advice Orientation, 2Q Exhibit Online Services and Features Households Would Like to Use by Advice Orientation, 2Q Exhibit Part 1. Investors Likelihood to Consult Their Advisor by Advice Orientation, 2Q Exhibit Part 2. Investors Likelihood to Consult Their Advisor Databank, 2Q Exhibit Part 1. Willingness to Move to Advisor s New Firm by Advice Orientation, 2Q Exhibit Part 2. Willingness to Move to Advisor s New Firm Databank, 2Q Chapter 6: Household Satisfaction Exhibit Percent of Respondents Satisfied with Primary Provider and Primary Advisor, Q Exhibit Part 1. Level of Satisfaction with Primary Provider by Advice Orientation, 2Q Exhibit Part 2. Level of Satisfaction with Primary Provider Databank, 2Q Exhibit Part 1. Level of Satisfaction with Primary Advisor by Advice Orientation, 2Q Exhibit Part 2. Level of Satisfaction with Primary Advisor Databank, 2Q Exhibit Reason for Satisfaction Level with Primary Advisor, Q The Cerulli Report U.S. Retail Investor Advice Relationships 2021

6 Exhibit Part 1. Reason for Satisfaction with Primary Advisor by Advice Orientation, 2Q Exhibit Part 2. Reason for Satisfaction with Primary Advisor by Age Range, 2Q Exhibit Part 3. Reason for Satisfaction with Primary Advisor by Investable Assets, 2Q Exhibit Reason for Satisfaction with Primary Advisor by Length of Time with Primary Advisor, 2Q Exhibit Part 1. Households That Plan to Switch Providers by Level of Satisfaction with Primary Provider, Q Exhibit Part 2. Households That Plan to Switch Providers Databank, 2Q Exhibit Satisfied, But Looking Investor Snapshot, Chapter 7: Relationship Management Exhibit Part 1. Advisor Walletshare of Household by Advice Orientation, 2Q Exhibit Part 2. Advisor Walletshare of Household Databank, 2Q Exhibit Part 1. Average Length of Relationship With Primary Provider by Advice Orientation, 2Q Exhibit Part 2. Average Length of Relationship With Primary Advisor Databank, 2Q Exhibit Reason for Opening New Investment Accounts, 3Q Exhibit Part 1. Services Used with Financial Advisors by Advice Orientation, 2Q Exhibit Part 2. Services Used With Financial Advisors Databank, 2Q Exhibit Part 3. Services Used With Financial Advisors Databank, 2Q Exhibit Households Preferred Amount of Contact with Provider, 2Q Exhibit Part 1. Households Satisfied with Contact with Provider by Advice Orientation, 2Q Exhibit Part 2. Households Satisfied with Contact with Provider Databank, 2Q Exhibit Part 1. Household Rating of Advisor by Advice Orientation, 2Q Exhibit Part 2. Household Rating of Advisor by Age Range, 2Q Exhibit Part 3. Household Rating of Advisor by Investable Assets, 2Q Exhibit Part 4. Household Rating of Advisor by Primary Provider Channel, 2Q The Cerulli Report U.S. Retail Investor Advice Relationships 2021

7 Chapter 8: Fees and Pricing Exhibit Part 1. Willingness to Pay for Advice by Advice Orientation, 2Q Exhibit Part 2. Willingness to Pay for Advice Databank, 2Q Exhibit Part 1. Perceived Value vs. Expense of Advisor by Investable Assets, 2Q Exhibit Part 2. Perceived Value vs. Expense of Advisor Databank, 2Q Exhibit Part 1. Investor-Reported Fee Structure, Q Exhibit Part 2. Investor-Reported Fee Structure Databank, 2Q Exhibit Part 3. Investor-Reported Fee Structure Databank, 2Q Exhibit Part 1. Clients Preferred Fee Structure by Advice Orientation, 2Q Exhibit Part 2. Clients Preferred Fee Structure Databank, 2Q Chapter 9: Delivering Advice Exhibit Households Financial Advice Orientation, Q Exhibit Willingness to Pay for Advice, Q Exhibit Advice Opportunity Households by Age Range and Investable Assets, 2Q Exhibit Part 1. Desired Retirement Planning Changes by Advice Orientation, 2Q Exhibit Part 2. Desired Retirement Planning Changes Databank, 2Q Exhibit Households That Find It Important to Have a Written Financial Plan, Q Exhibit Part 1. Financial Planning Opportunity Respondents by Age Range and Advice Orientation, 2Q Exhibit Part 2. Financial Planning Opportunity Respondents Databank, 2Q Exhibit Part 1. Investor Research Activity by Advice Orientation, 2Q Exhibit Part 2. Investor Research Activity Databank, 2Q Exhibit Part 1. Investor Research Activity by Advice Orientation, 2Q Exhibit Part 2. Investor Research Activity Databank, 2Q Exhibit Part 1. Perception of Investment Expertise by Advice Orientation, 2Q Exhibit Part 2. Perception of Expertise Databank, 2Q Company Index The Cerulli Report U.S. Retail Investor Advice Relationships 2021

8 Index of Companies Company Index Acorns... 50, 52 Betterment... 45, 50, 52 E*TRADE... 44, 51, 53, 118, 121 Empower...44, 51, 118, 121 M1 Finance...39 Merrill Lynch...45 Morgan Stanley... 44, 51, 53, 118, 121 Personal Capital... 44, 45, 51, 118, 121 Robinhood... 39, 54, 66, 84, 95, 107 Schwab... 44, 45, 51, 53 SoFi Wealth...52 TD Ameritrade... 44, 51, 53 Vanguard... 45, 51 Wealthfront... 45, 52 Webull The Cerulli Report U.S. Retail Investor Advice Relationships 2021