Establishing a Growth Engine through Marketing and Business Development The 2014 Fidelity RIA Benchmarking Study reveals key lessons from RIAs who are strong in marketing and business development Many RIAs struggle when it comes to marketing and business development. The 2014 Fidelity RIA Benchmarking Study reported that only 5% of participating firms felt their capabilities in this area were advanced, and only 30% felt they were fairly strong. So, what can we learn from firms that seem to have figured out how to develop and harness these capabilities? What are they doing differently from Others? This report takes a close look at the activities of “Marketing Leaders”— the 35% of firms that believe that their marketing and business development capabilities are fairly strong or advanced, and have been able to register better numbers than other participants of the Study when it comes to growth of clients, assets, and revenues. Insights gleaned from the activities of Marketing Leaders may help RIAs enhance these important business-building capabilities to help put their firm on a new growth trajectory. Inside: Checklist For an Advice 2.0 Model I. Introduction Be laser focused on your strategy 2 II. Lessons from Marketing Leaders Put the investor at the epicenter (1) Prioritize growth 3 4 (2) Plan effectively Transform your advisors (3) Ingrain your firm story (4)  Generate new business Crack the product code opportunity through operational discipline Drive operational excellence (5) Maximize your marketing mix III. Actions to Consider 3 5 6 8 10 . Definition of terms in this report Section I: Introduction The 2014 Fidelity RIA Benchmarking Study took a close look at the marketing and business development activities of participating RIAs and found that many firms have room for improvement. The Study also examined High-Performing Firms1 that outperformed All Other Eligible Firms on a number of core financial metrics, to understand what they are doing differently.2 This revealed a number of marketing and business development best practices worth noting. Now we turn to Marketing Leaders that have specific skills in marketing and business development, to uncover additional insights that may help RIAs improve their own processes and capabilities. • “Study” refers to The 2014 Fidelity RIA Benchmarking Study. •  he terms “RIA,” “RIA firms,” and “firms” refer only to those RIA firms that T participated in the Study. •  he term “Marketing Leaders” refers to the 35% of RIA firms that rated T their marketing and business development capabilities as fairly strong or advanced. •  he terms “Other RIAs” and “Others” refer to participating firms in the T Study that are not considered Marketing Leaders for the purposes of this report. About the research and respondents The Fidelity RIA Benchmarking program seeks to provide RIAs with insights into how their firms compare with others in the industry, so they can identify areas of opportunity, set goals, and work toward improving their business performance. The 2014 Study focused on marketing and business development. Respondents were primarily RIAs that custody some portion of their assets with Fidelity Investments (“Fidelity”).3 The online survey was conducted from May 6 through June 30, 2014, and was administered by an independent third-party research firm not affiliated with Fidelity.

Fidelity was identified as the Study sponsor. More than 600 firms participated in the survey, of which 411 completed it, forming the basis for the findings of this report. Skills in marketing and business development appear to contribute to stronger growth (see Figure 1). From 2010 to 2013, Marketing Leaders outperformed Other RIAs in terms of growth of clients, assets, and revenue.

Since these firms are twice as large (with a median of 10 full-time equivalents versus five for Other RIAs), these growth rates are typically off of a higher base, making them even more impressive. All statistics in this report are from The 2014 Fidelity RIA Benchmarking Study. Figure 1: Compound annual growth rates* METRICS: MARKETING LEADERS OTHER RIAS CLIENTS 9.5% 6.8% ASSETS 16.5% 13.4% REVENUE 15.9% 13.3% 35% of RIAs in the Study are Marketing Leaders with advanced/fairly strong marketing and business development capabilities * rom 2010 to 2013. F The term “High-Performing Firms” refers to the subset of participating firms in this Study with business results that meet the criteria defined in the Fidelity white paper “Firing on All Cylinders: Fueling Growth with Benchmarking Insights.” Reference to the concept of “performing” in the name of this group is not intended to connote investment returns. Past performance is no guarantee of future results. 2 Refer to the Fidelity white paper “Firing on All Cylinders: Fueling Growth with Benchmarking Insights” for more insights on High-Performing Firms, and the definition of All Other Eligible Firms. 3 C  learing and custody provided by National Financial Services LLC, an affiliate of Fidelity Brokerage Services LLC. 1 2 . Section II: Lessons from Marketing Leaders In the Study, RIAs rated their own marketing and business development capabilities. Since Marketing Leaders categorized themselves as being proficient in these areas, we took a closer look at actual behaviors to see if their actions aligned with their response. We found that Marketing Leaders do, in fact, excel in five important areas. They: (1) prioritize growth, (2) plan effectively, (3) ingrain their firm story, (4) generate new business through operational discipline, and (5) maximize their marketing mix.

This report delves into each of these areas to draw out key insights. 1 Prioritize growth Growth is even more important for Marketing Leaders than for Other RIAs, which has implications for the strength required of their marketing and business development capabilities. While close to half (49%) of Other RIAs say a lack of focus on growth is a key barrier to optimizing marketing and business development, only 31% of Marketing Leaders state this as a concern. Marketing Leaders typically spend about 2.4% of their revenue on marketing and business development, while Other RIAs spend about 1.8% (a 33% difference). More Marketing 61% versus 43% Percentage of Marketing Leaders that say growth is extremely important versus Other RIAs Figure 2: Top marketing and business development initiatives Percentage of firms currently devoting resources 64% Marketing Leaders 61% 54% 44% 40% Other RIAs 51% 39% 39% 41% 40% 20% Work on marketing plans Improve the sales process Work on COI strategies Leaders also plan to keep consistently growing this expenditure over the next five years, which may imply a longerterm focus. In addition, Marketing Leaders devote more resources than Others to a variety of initiatives that can help positively impact their firm’s growth (see Figure 2). These include working on a marketing plan and a strategy for centers of influence (COIs), and taking time to improve the sales process. Most firms in the Study say organic growth is more of a focus than inorganic growth, including Marketing Leaders.

Relative to their peers, however, Marketing Leaders are more interested in inorganic growth, especially acquisitions. Over the last three years, Marketing Leaders were more likely to have at least considered an acquisition or tuck-in, while they were less likely to have considered selling or merging compared to Other RIAs. Looking forward, this difference in focus will become even more pronounced (see Figure 3). 20% Improve Align Work on client referral compensation PR strategy strategies with business development goals Figure 3: M&A strategies over next five years* Percentage of firms Considering: Marketing Leaders Other RIAs Acquiring 73% 62% Merging 28% 46% Selling 8% 20% * rom 2014 to 2018. F 39% versus 28% Percentage of Marketing Leaders that plan to consistently grow their marketing and business development spend over the next five years versus Other RIAs 3 .

2 Plan effectively Planning and execution can be just as important to the success of marketing and business development activities as they are for realizing a firm’s long-term strategic vision. Marketing Leaders outpace Other RIAs by a wide margin when it comes to creating, executing, and monitoring a plan. Far more Marketing Leaders have a written marketing plan than Other RIAs, and the majority of this group (88%) say they update the plan semiannually or annually. They also say they are more satisfied with the plan’s quality, effectiveness, and execution. Marketing Leaders appreciate the importance of having plans with clear goals and assigning responsibility for different tasks to help ensure things get done, specifying both ownership and deadlines. 49% versus 21% Percentage of Marketing Leaders with a written marketing plan versus Other RIAs 45% versus 7% Of firms with plans, percentage of Marketing Leaders very satisfied with the effectiveness of their plan versus Other RIAs* 37% versus 10% Percentage of Marketing Leaders that are extremely/very proficient in measuring marketing and business development success versus Other RIAs 70% versus 52% Percentage of Marketing Leaders that use actual results to drive compensation for the firm’s business development professionals versus Other RIAs Marketing Leaders recognize the need to monitor their progress and are more likely than Other RIAs to say they are proficient in measuring the success of their marketing and business development activities. The metrics used to monitor progress— such as growth in firm clients, assets, and revenues—are similar across RIAs, suggesting that the difference in proficiency may come down to Marketing Leaders being more disciplined in how these indicators are tracked and used. Additionally, Marketing Leaders are more likely than Other RIAs to track the progress that is being made by looking at a number of factors—from pipeline reports to the closing ratio of new prospects (see Figure 4).

They are also much more likely to be using customer relationship management (CRM) systems for this, rather than tracking activities manually. 87% versus 67% Percentage of Marketing Leaders with marketing plans that have goals and assigned ownership versus Other RIAs 78% versus 61% Percentage of Marketing Leaders that assign specific deadlines to their marketing plans versus Other RIAs Figure 4: Performance tracking metrics and tools Percentage of firms tracking: Marketing Leaders Other RIAs Pipeline reports 71% 53% Prospects not retained 64% 45% Prospects not referred 56% 41% Closing ratio 49% 32% * ercentage of firms that selected a 6 or a 7 on a scale from 1 to 7, where 1 = Not at All Satisfied and 7 = Extremely Satisfied P 4 . 3 Ingrain your firm story As both headcount and assets in the RIA space continue to grow at a fast pace,4 so too does competition. This underscores the need for all RIAs to have a compelling and differentiated story that describes their business model and unique attributes, and the benefits that investors can expect from working with the firm. Across the board, Marketing Leaders have been doing a better job on this front than Other RIAs. Close to three-quarters of Marketing Leaders agree that they have created a clearly defined firm story that explains what differentiates them from other firms, while less than half of Other RIAs have done so. Importantly, a larger percentage of Marketing Leaders have also specifically tailored this story to the needs of their target clients, thereby potentially improving the chances that their particular story will resonate with the clients they most want to reach. More Marketing Leaders also agree that their firm’s story is consistently reflected in all their marketing materials, helping to both reinforce the message and create a strong image in the minds of clients, prospects, and COIs. 73% versus 47% They also agree that the fundamentals of their firm story are known to the majority of their clients and key COIs, helping these potential advocates spread the word about what the firm does (see Figure 5). 58% versus 36% As both headcount and assets in the RIA space continue to grow at a fast pace,4 so too does competition.

This underscores the need for all RIAS to have a compelling and differentiated story... Percentage of Marketing Leaders that have created a clearly defined firm story versus Other RIAs* Percentage of Marketing Leaders that have a firm story that is specifically tailored to the needs of their target client profile versus Other RIAs* 58% versus 41% Percentage of Marketing Leaders that strongly agree that their firm story is consistently reflected in all their marketing materials versus Other RIAs* Figure 5: Awareness of firm story fundamentals* Percentage of firms who say their Marketing Leaders 51% Other RIAs 46% 36% Clients know the fundamentals of the firm’s story 33% Key COIs know the fundamentals of the firm’s story * ercentage of firms that selected a 6 or a 7 on a scale of 1 to 7, where 1 = Strongly Disagree and 7 = Strongly Agree. P 4 “RIA Marketplace 2013, The Changing Landscape of a Maturing Industry,” The Cerulli Report, 2013. 5 .  4 Generate new business opportunity Figure 6: Steps to obtain client referrals* through operational discipline Our Study shows that approximately 75% of an advisor’s new clients come from referrals made by current clients or COIs, underscoring the importance of having strong relationships to help encourage these introductions. While there is room for improvement among most RIAs when it comes to being proactive to build a flow of referrals, Marketing Leaders have taken more steps than Other RIAs on this front. 46% versus 22% Percentage of Marketing Leaders with client referral processes that are advanced or fairly strong versus Other RIAs 43% versus 15% Percentage of Marketing Leaders with COI referral processes that are advanced or fairly strong versus Other RIAs Marketing Leaders are far more likely than Other RIAs to rate their client and COI referral processes as advanced or fairly strong. With respect to client referrals, Marketing Leaders are three times more likely than Other RIAs to say they have a clear plan for proactive outreach. In addition, they find a range of activities effective to encourage client referrals, including specific events, discussions, and targeted communications (see Figure 6). Percentage of firms that Rated each activity as effective: Marketing Leaders Other RIAs Conduct referral-focused events 37% 19% Discuss referrals in client meetings 32% 18% Send referral-oriented communications 18% 8% * ercentage of firms that selected a 6 or a 7 on a scale of 1 to 7, where 1 = Not Effective P and 7 = Highly Effective. Why are Marketing Leaders more likely to find these activities effective? We believe their progress is tied to key practices discussed throughout this report, including having a clear plan, telling a compelling firm story that is tailored to target client needs, and communicating target client profiles to referral sources.

Consistently doing these things should lead to a higher level of effectiveness with events, client referral conversations, and communications. Marketing Leaders are also more diligent when it comes to nurturing COIs. Twice as many agree that they research and identify key COIs to work with, helping to zero in on the best candidates, and three times as many agree that they have a clear plan for proactive outreach. Marketing Leaders also recognize that referrals are a two-way street. About one in three tries to understand the target clients of their COIs, while only about one in six Other RIAs do so. Marketing Leaders are also more likely to communicate their firm’s target client profile to COIs and follow up to stay engaged. * ercentage of firms that selected a 6 or a 7 on a scale of 1 to 7, where 1 = Strongly Disagree and 7 = Strongly Agree. P 6 30% versus 15% Percentage of Marketing Leaders that take the time to identify key  COIs versus Other RIAs* 23% versus 7% Percentage of Marketing Leaders that have a clear plan for proactive outreach to COIs* 32% versus 11% Percentage of Marketing Leaders that effectively communicate their firm’s target client profile to clients and COIs versus Other RIAs* .

More than half of Marketing Leaders see referring clients to COIs as an effective way to get leads back in return. Giving updates on referrals that are provided and discussing them in COI meetings are also seen as effective tactics (see Figure 7). In addition to having strong relationships with clients and COIs, it is critical to have strong talent and incentive systems in place to help bring new business to the firm. More Marketing Leaders agree that their business development professionals have the right skills and training to succeed than Other RIAs. Marketing Leaders are also more likely to agree that they meet regularly to discuss business development issues, create clear client acquisition goals, track progress using their CRM systems, and proactively share win-loss analysis across the firm (see Figure 8). Marketing Leaders also are more likely to use actual results to drive compensation for people in the firm who are involved with business development. Figure 7: Steps to obtain COI referrals* Percentage of firms that Rated each activity as effective: Other RIAs Refer clients to COIs 52% 29% Give updates on referrals provided 41% 28% Discuss referrals in COI meetings 39% 19% Conduct referral-focused events 29% 12% * ercentage of firms that selected a 6 or a 7 on a scale from 1 to 7, where 1 = Not Effective P and 7 = Highly Effective. Figure 8: Steps to help drive new business* Percentage of firms that: Marketing Leaders Other RIAs Use actual results to drive compensation for the firm’s business development professionals† 70% 52% Meet regularly to discuss business development goals, progress, and recent developments 49% 23% Have clear client acquisition goals 35% 9% Use CRM to track leads and follow up 35% 18% Proactively share win-loss analysis across the firm 59% versus 24% Percentage of Marketing Leaders who say their business development professionals have the right skills and training to succeed versus Other RIAs* Marketing Leaders 33% 13% * ercentage of firms that selected a 6 or a 7 on a scale from 1 to 7, where 1 = Strongly Disagree and P 7 = Strongly Agree. N  o scale used. † * ercentage of firms that selected a 6 or a 7 on a scale of 1 to 7, where 1 = Strongly Disagree and 7 = Strongly Agree. P 7 .

 5 Maximize your marketing mix Explanation of terms There are many different activities that firms can use to reach out to clients, prospects, and COIs to tell their story. From communications to PR, Marketing Leaders are putting more time and money into their marketing activities than Other RIAs. • Communications (e.g., newsletters, direct mail campaigns) • Collateral (e.g., brochures, pitch books) • Events (e.g., client appreciation, educational, referral) •  igital marketing and advertising — excluding social media (e.g., online D ads, Web site, email, blogs) The top three activities used by both groups are communications, collateral, and events, but a difference can be seen in the depth of usage, with 58% of Marketing Leaders using all three, compared to 40% of Other RIAs. Marketing Leaders are also heavier users of social media,5 traditional advertising, and PR, with the biggest difference from Other RIAs being the use of PR (see Figure 9). • Social media (e.g., Twitter ®, Facebook®, LinkedIn®, Pinterest ®, Google+®) • Traditional advertising (e.g., signage, print, radio, TV, sponsorships) •  R (e.g., radio or TV appearances, news releases, bylines) P Figure 9: Use of marketing activities Other RIAs Marketing Leaders Percentage of firms that use 100% 75% 78% 75% 78% 77% 69% 65% 56% 50% 57% 50% 46% 40% 39% 32% 25% 20% 0% Communications 5 Collateral Events Digital marketing and advertising —excluding social media Be knowledgeable about regulations regarding social media and your firm’s specific policies. 8 Social media Traditional advertising PR . Figure 10: Percentage of marketing budget attributed to marketing activities* Other RIAs Marketing Leaders Mean percentage 100% 75% 50% 31% 25% 13% 21% 20% 19% 25% 15% 18% 14% 3% 0% Communications Collateral Events *If firm uses the activity. In addition, more Marketing Leaders say all these activities are strategically important to their business, with over half (51%) pointing to the high importance of collateral and events. Not surprisingly, Marketing Leaders spend most of their marketing budget on these two activities (see Figure 10). Other RIAs spend most of their budget on events and communications. Marketing Leaders view events, in particular, as being an effective way to Digital marketing and advertising —excluding social media 4% Social media generate new business (see Figure 11), and they are twice as likely to use events with prospects than Other RIAs (20% for Marketing Leaders versus 10% for Other RIAs). The effectiveness of events can likely be attributed to the time and money put into this activity, with more Marketing Leaders saying a high level of effort is required by their marketing staff for events than Other RIAs. 9% Traditional advertising 5% 3% PR 43% versus 26% Percentage of Marketing Leaders that say a high level of effort is required by marketing staff for events versus Other RIAs Figure 11: Effectiveness in generating new business* Percentage of firms that RATED EACH ACTIVITY as very effective: Marketing Leaders Other RIAs Events 60% 34% Collateral 31% 16% Communications 27% 11% * ercentage of firms that selected a 6 or a 7 on a scale of 1 to 7, where 1 = Not Effective P and 7 = Highly Effective. 9 . While social media is still relatively new to the marketing mix, Marketing Leaders use more tactics in this area than Other RIAs (see Figure 12). Our Study shows that a larger percentage of Marketing Leaders have also been tapping into these channels for 24 months or more, showing a willingness to be earlier adopters of new techniques. 47% versus 21% Of firms using Twitter, percentage of Marketing Leaders using Twitter for 24 months or more versus Other RIAs 57% versus 36% Of firms using Facebook, percentage of Marketing Leaders using Facebook for 24 months or more versus Other RIAs 10 Figure 12: Use of social media tactics LinkedIn® Blogs Twitter® Facebook® 42% 31% Marketing Leaders 27% 25% 26% 19% 14% Other RIAs 17% . Additional Resources F  iring on All Cylinders: Fueling Growth with Benchmarking Insights Section III: Actions to Consider Marketing Leaders have taken important steps to develop growth engines for their firms, and Other RIAs may want to adopt some of their practices to help enhance their own marketing and business development programs. In addition, sound capabilities on this front may be perceived as important when being reviewed by valuation specialists who can take into account the ability to generate revenue organically when looking at the overall worth of a firm. The results of this Study suggest that firms should consider the following: 1 2 3 4 5 6 7 Develop a marketing plan, assigning responsibilities and milestones, and create metrics to measure progress and success. In addition, update that plan annually or semiannually to make sure it supports any changes in business strategy and incorporates any learnings from the prior year. Craft a more compelling firm story, targeted to their ideal clients, that is well understood by staff members. This should be reflected in all sales and marketing materials in a consistent way, and actively shared with clients and COIs. Establish specific referral processes and programs to create more operational discipline around referrals.

Let clients and COIs know what type of investor is a good fit for the firm, and keep in touch to stay top of mind and report on progress. B  uilding an Action Plan to Drive Growth Within Your Practice: A Business Development and Marketing Planning Toolkit C  reating a Consistent Story for Clients and Prospects: A Story Development Guide A  Guide to Growing Your Business Through Centers of Influence and Strategic Alliance Marketing C  reating the Best Communications Program for Your Clients and Prospects H  osting Events to Help Strengthen and Grow Your Business D  igging into Digital Advice Make sure staff members have the right skills and training to excel at business development. Tie incentives to actual results to keep business development professionals focused on new revenue generation. Measure which marketing activities have the biggest impact on their business and which ones are most appropriate for key audiences— clients, prospects, and COIs. Then execute accordingly, putting more time and money behind the most effective techniques. Events may be the best place to start, given the focus that Marketing Leaders place on this activity. Test the waters with newer or less widely utilized activities, like social media or PR, to see what kind of results can be generated. Hire a third party to help build a marketing plan, develop a firm story, and/or execute specific activities.

Insights and support from a marketing specialist may help boost efforts and provide new momentum. 11 . 20 0 se aport boule vard boston, ma 02210 Please contact your Fidelity representative, call our main number at 888.678.1611, or visit our Web site to access additional resources and to learn more about Fidelity’s RIA Benchmarking program and the Practice Management and Consulting program. For investment professional and institutional investor use only. Not for distribution to the public as sales material in any form. The information contained herein is as of the date of its publication, is subject to change, and is general in nature. Such information is provided for informational purposes only and should not be considered legal, tax, or compliance advice. Fidelity does not provide legal, tax, or compliance advice.

Fidelity cannot guarantee that such information is accurate, complete, or timely. Federal and state laws and regulations are complex and are subject to change. Laws of a specific state or laws that may be applicable to a particular situation may affect the applicability, accuracy, or completeness of this information. This information is not individualized and is not intended to serve as the primary or sole basis for your decisions, as there may be other factors you should consider, and it may not be inclusive of everything that a firm should consider in this type of planning decision.

Some of the concepts may not be applicable to all firms. Always consult an attorney, tax professional, or compliance advisor regarding your specific legal or tax situation. The 2014 Fidelity RIA Benchmarking Study was conducted between May 6 and June 30, 2014, in collaboration with an independent third-party research firm unaffiliated with Fidelity Investments; 411 firms participated. The experiences of the RIAs who responded may not be representative of the experiences of other RIAs and are not an indication of future success. Registering for, completing, and accessing the survey required access to and use of a third-party Web site, operated by an independent third-party research firm unaffiliated with Fidelity Investments.

The third-party providers listed herein are neither affiliated with nor an agent of Fidelity, and are not authorized to make representations on behalf of Fidelity. Their input herein does not suggest a recommendation or endorsement by Fidelity. This information was provided by the third-party providers and is subject to change. There is no form of legal partnership, agency, affiliation, or similar relationship between an investment professional, the third-party service providers, and Fidelity Investments, nor is such a relationship created or implied by the information herein. Third-party marks are the property of their respective owners; all other marks are the property of FMR LLC. Fidelity Family Office Services is a division of Fidelity Brokerage Services LLC, Member NYSE, SIPC. Fidelity Clearing and Custody provides clearing, custody, or other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC. The material in this report is copyrighted by Fidelity Investments.

No portion of these materials may be reproduced, distributed, or otherwise used in any form without the express written consent of Fidelity Investments. © 2015 FMR LLC. All rights reserved. 704110.5.01.9863706.100 0215 .