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Distribution Strategy for Managed ETF Solutions

A Guide to Developing Effective Growth Strategies in a Competitive Market

Randy Bullard CEO ETF Strategy Group www.ETFStrategyGroup.com October 2012


The Managed ETF Solutions industry has experienced significant growth over the last several years. According to Morningstars ETF Managed Portfolios Landscape Report, the entire industry is growing at approximately 50% annualized as of September 2012. With this growth has also come a proliferation of new products, as well as a growing number of maturing products with competitive 3+ year track records. Recent conferences hosted by the major ETF issuers for ETF Strategist asset management firms have highlighted the increasingly competitive nature of the industry. Morningstar currently reports on almost $50 billion in AUM/AUA from 130 ETF Strategist firms. But only a dozen of those firms are managing or administering over $1 billion in AUM, and only one (Windhaven) is over $10 billion in AUM/AUA. Relative to the broader asset management industry, even the larger ETF Strategists are very small firms, and most struggle with growth on a variety of dimensions. The vast majority of ETF Strategist asset management firms are operating well below the critical scale necessary to run efficient and profitable businesses. Compounding this problem, the most recent Morningstar report indicates that the big are getting bigger, with flows of new assets predominantly going to the handful of largest providers. Smaller firms are struggling to stand out in an increasingly crowded market, even with annual industry-level growth of 50%.

Growth Through Effective Distribution

It will not come as a surprise to any veteran of the asset management industry that distribution is the key to building a long-term successful asset management firm. Even firms with great stories, performance track records, and management teams will fail to succeed in growing their businesses without a well-developed and executed distribution strategy. ETF Strategy Group has developed this overview and guide to aid ETF Strategist investment management firms in understanding obstacles and opportunities for distribution in the wealth management industry, and to aid them in formulating productive distribution strategies that will help th em be more competitive in the market, raise awareness of their products and services with financial advisors, and grow assets under management/advisement. The guide is broken into the following main topics: Evolution of the Managed ETF Solutions Market Wealth Management Program Types & Product Packaging Distribution Channel Overview & Opportunities Implementing a Productive Distribution Strategy o o A Content-Centric PR & Marketing Strategy The Changing Face of Advisor Sales & Wholesaling

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Evolution of the Managed ETF Solutions Market

The market collapse of 2008 was a watershed event for the asset management industry. A number of industry trends already in process have accelerated in the subsequent market recovery. One of those trends is the considerable growth in all categories of managed solutions. Managed Solutions (including traditional separately managed accounts, mutual fund wrap/advisory, Rep-as-Advisor, Rep-asPortfolio Manager, Unified Managed Account, and ETF Advisory) have all seen a steady recovery since 2008. Due to expanded regulatory requirements for delivering a fiduciary standard of care, and pressure to increase margins and recurring revenue, advisory firms in all channels have aggressively pushed their advisors away from traditional transaction-based investment products, and towards fee-based managed solutions.

Assets in Total Managed Solutions ($Billions) 2007 to 2011

Source: Money Management Institute & Dover Financial Research

Exchange Traded Funds (ETFs) had a small footprint within the realm of managed solutions prior to 2008, and were largely relegated to brokerage accounts and the self-directed market. Since 2008 though, and particularly since 2010, ETFs have had the fastest growth rates within the Managed Solutions marketplace. In their 2012 report Growth in a Time of Uncertainty, The Asset Management Industry in 2015, McKinsey Consulting predicts that the second act is about to begin in ETF industry growth. Currently at $1.5T in total assets (at the time of the report), they predict that by 2015 more than $1.6T in new money will enter ETFs with a globa l market in excess of $3.1T. Managed ETF solutions (as defined by the Money Management Institute and reported by participating MMI survey respondents) have seen the most dramatic growth of all of the different program types within managed solutions (28.1% in 2011). This growth in managed ETF solutions is likely understated though, as the MMI survey data focuses on the wirehouse and national/regional broker dealer markets, and a large portion of the g rowth in managed ETF solutions has been in the independent RIA and independent broker-dealer markets.

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The utilization of non-correlated asset classes and diversification through stylebox constrained investment products (e.g. growth / value, large / small cap, equity / fixed income) according to modern portfolio theory failed to protect many clients in 2008 when supposedly noncorrelated products became highly correlated in a collapsing market. At the same time, the ability to add alpha through individual security selection has come under renewed attack. Managers 2011 AUM, Market Share & Growth by Program Type and products that focus on individual security selection (e.g. long-only equity Source: Money Management Institute & Dover Financial Research separately managed accounts and mutual funds, as well as traditional transactional brokerage business) are declining in favor with advisors. The most dramatic growth in recent years has been in lower cost indexed or passive investment strategies through ETFs and mutual funds. An increasing portion of the returns that investment products produce are explainable in various forms of beta. As a result, there has been a proliferation of product development and innovation from a growing universe of ETF issuers that package that beta in very low cost ETFs. As demonstrated by the graphs, the growth and adoption of ETFs is now challenging the traditional security selection-centric asset management industry, leading advisors to change the types of solutions and products they offer their clients. Building on these market dynamics and others, a new category of asset managers has emerged in the last decade ETF Strategists. Rather than seeking alpha through individual security selection, ETF Strategists generally seek to minimize risk, improve diversification, and seek alpha by selecting and managing exposures using ETFs rather than through stock or other security selection. By using ETFs, strategists are able to avoid stock/security specific risk, while addressing many of the shortcomings in the failed traditional style-boxed based investment approach. The development of the ETF Strategist segment of the asset management industry began around 2000 with the growth and adoption of ETFs, but has seen its most explosive growth since the 2008 market reset. Starting around 2000, a large number of independent RIAs and emerging quantitative asset managers began constructing solutions for their clients using ETFs rather than the individual eq uities and bonds that had traditionally been used. The products developed by many of these firms have now matured, resulting in topperforming portfolios with one, three, five, and even ten year track records, making them suitable for broad market distribution into the fast growing managed ETF solutions market. The next phase of evolution for this segment of the industry is now upon us broad market distribution and adoption.

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Program Types & Product Packaging

ETF Strategies are inherently simple investment products in their underlying construction (a portfolio of ETFs). But there are a variety of different types of programs, and product packagings that are tied to various types of distribution platforms, channels, and advisor types. Many of these programs have substantial systems and operational requirements, compliance/legal issues, and setup costs that managers must consider in determining exactly how to package their products for productive distribution. The following diagram outlines the primary types of programs and product packagings (columns), and the various operational processes and systems (rows) that managers will need to develop to support those programs.

Portfolio Delivery Framework

The following sections provide additional details on each of these program types, and issues ETF Strategists should consider in determining how to package their products for maximum effective distribution. Crossreferencing these program types with information in the section on Channels can be useful in determining which packagings will create opportunities in specific channels.

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Direct Separately Managed Accounts (SMA) In this type of program, the ETF Strategist is directly soliciting a client, operating as a primary fiduciary RIA, and typically working on one of the major RIA custodial platforms for custody, trading, and other services. The key distinction between direct SMA business and other business is the strategist firm is acting both as a fiduciary advisor to the client and as the asset manager. There is no other advisor sitting between the manager and the client. For this reason, asset managers offering their products directly to clients via Direct SMAs must have robust client service teams, and compliance procedures to ensure adherence to fiduciary standards. Because the strategist is operating as a full advisor to the client, Direct SMA business tends to be the highest margin (and highest cost) business, with a typical advisory fee of 50-125bps depending on the nature of the firm and client relationship. Dual-Contract SMA Many firms (wirehouse, regional/national BD, RIA custodians) operate dual-contract SMA programs in which the manager has a direct contract with the client and is serving in the same discretionary/fiduciary role as with Direct SMA business. The primary differences with Direct SMA are that the manager is working in concert with the clients primary advisor (who has their own contract with the client, hence the term dual contract), and the manager typically must trade and manage the assets on the advisors custodial platform. Dual-contract SMA programs are a bit of the worst of both worlds in that they have all of the operational costs and complexities of managing accounts on a 3rd party platform, but are generally not promoted or otherwise heavily supported by the home office organization. Managers available in dual-contract SMA programs are explicitly not covered by home office research, and are not endorsed or recommended to advisors, thereby limiting growth and distribution opportunities. On the positive side, managers can typically charge higher fees (individually negotiated directly with the advisor and/or client). To operate on a dual-contract SMA platform, managers will either need to utilize an in-house multi-custody shadow portfolio accounting and order management systems, or access and trade the accounts directly via tools provided by the custodian o r platform provider. Some ETF Strategists have had great success building high-margin books of business via dualcontract SMA programs, particularly in the wirehouse channel. Sub-Advised SMA Sometimes called SMA wrap accounts, or just separately managed accounts, Sub-advised SMAs were historically the largest type of program accessible to ETF Strategists, prior to the development of model-based UMA/SMA programs (more on that shortly). Managers/products available to advisors through Sub-Advised SMA programs must be approved by the sponsors research organization, typically requiring managers to have a minimum of $500mm in total AUM/AUA, $100mm in specific strategies to be supported on their platform, and a 3+ year GIPS compliant track record. Sponsors typically negotiate lower fees in sub-advised programs, often with volume breaks (e.g. 40bps for the first $100mm, 35bps for assets over $100mm). In SubAdvised SMA programs, the manager is discretionary and responsible for all trading. As with dual-contract SMA programs, managers typically need to have a robust portfolio accounting and trading infrastructure that supports trading through the underlying brokerages desk, or trading away with settlement to the custodian. Sub-Advised SMA programs are generally superior distribution opportunities (as compared to dual-contract programs) since they have smaller product rosters and are promoted to advisors and better supported by th e sponsoring institution.

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Mutual Fund & Sub-Advised An increasing number of managers are having success packaging their strategies as 40-act mutual funds, or even as an ETF of ETFs (e.g. AdvisorShares). Mutual funds are more accessible to advisors and clients, are simpler to administer than SMAs, and are more cost-effective for smaller account sizes (e.g. < $50k). Theres also a significant portion of the advisor marketplace that are more comfortable using mutual funds than various forms of SMA and UMA programs. Managers wanting to launch mutual funds of their portfolios should budget $125,000 in total startup costs, and will need to get AUM up to approximately $20mm before the administrative costs of the fund are being covered by fees. Managers can typically charge a much higher asset management fee in mutual funds and have greater control of the economics as compared to SMA/UMA programs. There are several quality outsourced providers that can turnkey the development and operations of a mutual fund for ETF Strategists. In addition to launching a mutual fund directly, there are numerous fund families that actively research and hire sub-advisors for their own funds. The details and business case considerations regarding mutual fund development and sub-advisory distribution opportunities are beyond the scope of this paper, but launching mutual funds for high performing and high potential products can be a cost effective means to generate assets in many channels that are inaccessible via SMA/UMA programs. Model-Based SMA/UMA (Unified Managed Accounts) The most accessible (requiring the least infrastructure) and fastest growing form of distribution for ETF Strategists is via Model-Based SMA/UMA programs. In UMA programs, managers transmit changes to their model portfolios to the sponsor or overlay manager who is responsible for trading and other operations. The manager is operating solely as a research provider or nondiscretionary sub-advisor in the provision of their model. Because of this reduced role, managers typically receive a reduced fee (20-35bps) in model-based programs. Most UMA programs have research-constrained product rosters, as well as pre-configured asset allocations administered by the sponsors research organization. These pre-configured asset allocations are often particularly productive distribution opportunities for ass et managers as they are promoted heavily by the home office and are the easiest solution for advisors to access for their clients. Some sponsors have begun to convert their existing sub-advised SMA programs to model-based SMA/UMA programs as a means to capture additional revenue and reduce manager fees. Some sponsors have also begun to set up separate and distinct model-based ETF Strategist programs that have become the most productive distribution channel for a number of the leading ETF Strategist asset managers. Model-Based Rep-as-Portfolio Manager Rep-as-Portfolio Manager programs are generally utilized by more sophisticated advisors that select securities directly and act as their own portfolio mana ger, rather than selecting ETF Strategists or other 3rd party asset managers to manage their clients assets. There are though a growing number of programs that allow advisors to select securities (e.g. individual stocks, bonds, ETFs) for a portion of a client portfolio, and comingle those selections with models managed by 3rd party strategists. Some of these programs are configured as Unified Managed Accounts, whereas others are configured more like discretionary brokerage accounts where the advisor is given trading tools and direct access to manager mo dels for implementation. Presently there are limited distribution opportunities for ETF Strategists in these types of programs, but as the fee-based platforms within the industry continue to evolve in the coming years, it is likely that the lines between rep-as-PM and UMA programs will continue to blur, and ETF Strategists will have increasing opportunities to distribute their portfolios to the sophisticated advisors that utilize those programs. Page | 7

Distribution Channel Overview & Opportunities

ETF Strategist asset managers have multiple opportunities for distributing their portfolios, from directly soliciting and serving retail investors as a discretionary RIA (typically via directly managed SMAs), to sub-advising in the institutional market. The following framework outlines the major distribution channels available to ETF Strategist asset managers with sample firms (certainly not exhaustive lists) within each channel. The following pages provide details for each channel, some perspective on the distributio n opportunity for the channel, and costs, considerations and strategies for pursuing opportunities in the channel.

Distribution Channel Framework

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Wirehouse While the term wire house has a much broader definition in some circles, general usage refers to the (now) four major historic broker dealer advisory firms Morgan Stanley Smith Barney, Wells Fargo Advisors, Merrill Lynch (owned by Bank of America) and UBS. The wirehouses led the development of fee-based wealth management solutions and have the largest and most mature platforms, accessible to thousands of advisors. Wirehouse advisors are generally constrained to the solutions/programs supported by their home office organizations. Some ETF Strategists have raised significant assets in the dual-contract programs of wirehouses without research coverage or endorsement from the home office, but as of this publication, the wirehouses are not broadly distributing 3rd party ETF Strategist solutions in their more productive sub-advised (SMA and UMA) programs. This is typically because they have developed proprietary asset allocation products that they would prefer to promote over 3rd party offerings. As ETF Strategists gain traction in the broader market and the wirehouses are forced to compete for advisors that use those portfolios, and as the wirehouses in-house solutions are forced to compete (on a performance basis) against 3rd party managed ETF solutions, the channel is likely to become more productive for ETF Strategists. Regional/National Broker Dealer The regional broker dealer market has shrunk considerably in the last decade as firms have been acquired and merged into the wirehouses (e.g. UBS acquiring Piper Jaffray and McDonald Investments), and as former regionals have merged to become larger nationals (e.g. Stifel Nicolaus acquiring Ryan Beck and others). Nevertheless, the regional broker dealers are a strong channel and represent a good distribution opportunity for ETF Strategists. Some regional/national broker dealers have been leaders in the promotion of 3rd party ETF Strategists to their advisors, even constructing dedicated programs (e.g. RBC Wealth Management Consulting Solutions). Most of the regional/national BDs have mature fee-based platforms analogous to the wirehouse offerings, but are typically easier to work with and provide sales coverage for. Independent Broker Dealer (IBD) Unlike advisors in the wirehouses and regional/national broker dealer firms, independent broker dealer firms dont typically have strong proprietary fee-based platforms that would support ETF Strategist distribution. Advisors at IBDs vary considerably in the nature of their practice and utilization of investment solutions (e.g. insurance affiliated brokers focusing in insurance products, or transactional brokers focusing on traditional stock brokerage business). IBD advisors will often operate in a hybrid model, being affiliated with a broker dealer for their brokerage business, and one or more of the RIA custodians or turnkey platforms for their fee-based advisory business. IBD advisors that provide any substantial investment advisory services typically use one of the turnkey platforms (see below). ETF Strategists that seek opportunities in the IBD market should focus on specific firms where they can develop a preferential home-office sales relationship, or pursue firms in partnership with the TAMPs that are better positioned to service IBD advisors. Registered Investment Advisors & Hybrid BD/RIA Independent RIAs are the fastest growing channel of the financial advisory market. Independent RIAs generally partner with one of the major RIA custodians (Fidelity, Schwab, TD Ameritrade or Pershing) for custody and trading services, and often for other platform and product services. The TAMPs (see below) also generally target advisors in the RIA market, and also partner with the major RIA custodians. We have also included LPL and Raymond James in this category as hybrid firms that straddle the line between national broker dealers and independent RIA platforms, in that they have programs that allow advisors to operate independently and utilize their platforms as independent RIAs, competing with the Page | 9

other RIA custodians (e.g. Schwab). While the entire independent RIA market is growing, it is also one of the most complex channels to target for distribution. Independent RIAs are very different in how they practice, the products they use, and the vendors they partner with. Many ETF Strategists also operate as RIAs in servicing their direct retail clients, and many are actively partnered with one or more of the major RIA custodians for marketing and promotion of their solutions to other RIAs. The Independent RIA channel probably represents the highest potential, but also complex to address market for ETF Strategists. Turnkey Platforms (TAMPs) The TAMPs are typically used by advisors in the independent broker dealer and independent RIA channels. Some turnkey platforms target other niche markets such as small banks. Turnkey programs are extremely varied in their product rosters and philosophies. Some firms (e.g. Placemark) have a broad super-market approach and provide very easy access for ETF Strategists, where other firms (e.g. Genworth) offer their advisors very constrained product rosters based on their internal research and investment philosophy. Some TAMPs have also created their own managed ETF solutions (e.g. Envestnet PMC) that compete with 3rd party ETF Strategist portfolios. The TAMPs as a category have been early adopters and promoters of ETF Strategists and represent good distribution opportunities/partners and efficient access points for ETF Strategists. Multi-Family Office (MFO) & Small Institutions The smaller institutional (< $100mm) and multi-family office markets have traditional used more sophisticated products (e.g. hedge funds, private equity, limited partnerships, real assets), often selected in partnership with institutional consultants. Recently though, some institutions (particularly $10-50mm portfolios) have begun working with established ETF Strategists in lieu of institutional consultants in something of an outsourced CIO model. Like the independent RIA channel, the MFO and small institutions market is very heterogeneous and difficult to penetrate without a highly experienced sales force. The larger traditional institutional market is not covered in this guide, as those firms generally would not consider ETF Strategists for their portfolios. U.S. Banks The U.S. banks could rightly be sub-segmented by size (smaller regionals vs. the larger nationals) as well as advisor types (retail bank brokers and wealth advisors vs. HNW private client and trust groups). In general, banks are late adopters of wealth management solutions, and the bank channel is not a particularly lucrative market at this time for ETF Strategists. In addition, many bank research groups are averse to tactical management and other characteristics of many managed ETF solutions, and typically control asset allocation choices and limit product selection to traditional products (e.g. long only equity and fixed income). There are exceptions though, and some ETF Strategists have had considerable success partnering with banks (particularly regional banks) in utilizing their managed ETF solutions as the house solution for their advisors. Canada While not truly a channel per se, the Canadian market represents a unique opportunity for U.S. based asset managers. The market is dominated by approximately six bank-affiliate financial institutions, plus a handful of independent RIA equivalents and a few large insurance affiliated advisory firms. Two of the top -3 firms have well developed model-based programs that provide efficient distribution opportunities for managers, and the rest have well developed sub-advised SMA programs. The Canadian market is typically several years behind the U.S. market in product development/adoption, but the major Canadian platforms are likely to develop

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ETF Strategist rosters for their advisors in the next few years, following in the footsteps of the major U.S. based platforms. Direct Retail Many ETF Strategists started as wealth managers, directly soliciting and servicing individual investors and operating as independent RIAs. Managed ETF solutions are particularly well suited to direct retail distribution given their relatively simple operations, holistic nature (as compared to style-box constrained products), transparency, and low cost. For ETF Strategists with established direct retail advisory practices, invested in digital and local market marketing efforts can be highly productive. Some ETF Strategists have developed very innovative and productive direct retail strategies, such as hosting a local radio program. For ETF Strategists that do not presently directly solicit or service retail investors, developing a full advisory offering can be a cost-effective way to diversify the business. International Like Canada, International isnt truly a channel, but it does represent a very large potential future distribution opportunity for ETF Strategist asset managers. The non-U.S. markets are extremely varied in their regulatory requirements, and in their use of investment products. The European markets are increasingly accessible to U.S. based asset managers, and some ETF Strategists have had success packaging UCITs for EUwide distribution, typically in partnership with the major European banks. The European private banks, as well as major private/trust banks in Asia (Singapore, Shanghai, Tokyo), the UAE and Latin America are all potential distribution partners for ETF Strategists. Effectively selling into any of these markets requires considerable investment in understanding the market, legal/regulatory expenses, and the establish of partnerships with foreign banks/institutions with dedicated and knowledgeable sales resources. Insurance / Annuities The U.S. insurance industry has primarily utilized proprietary (and expensive) mutual fund families for annuity products. Recently some insurance companies have begun using (or at least considering) ETFs, and managed ETF portfolios within variable and fixed annuity wrappers. Success in the insurance channel generally requires sales, legal and operations resources familiar with the operating requirements for running portfolios within insurance packages, and an active partnership sales model with a leading insurance provider. 401K / Retirement Perhaps one of the largest (largely untapped) distribution opportunities for ETF Strategists is the 401k (and other retirement accounts) market. 401k programs tend to be dominated by proprietary (and often expensive) mutual fund offerings, but in recent years several providers such as Mid Atlantic Capital Group have begun offering programs and technology for implementing managed ETF solutions efficiently within 401K programs. As with other channels, opportunities in the 401k market are best developed by experienced sales staff that are familiar with the variety of 401k program providers and plan administrators.

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Implementing a Productive Distribution Strategy

Distribution is more than sales. Implementing a productive distribution strategy for an ETF Strategist asset manager requires planning and execution across six primary disciplines and functional areas.

PR & Centers of Influence Awareness An effective press strategy can provide enormous leverage in support of sales. A PR strategy requires the cultivation of relationships with key writers for the on -line and print publications most frequently read by a strategists primary target channels. Creating regular newsworthy events or stories, as well as writing by-lined articles can provide significant inbound interest in your portfolios, as well as provide content (reprints) that can be used in support of your direct sales and marketing efforts. Event Planning, Marketing & Materials A productive marketing program is organized around key industry events and activities, with a deliberate plan and calendar to drive preparations of necessary materials, event planning, follow-up communications and sales dialogs, etc. Collateral that highlights product metrics and attributes are necessary but insufficient to support mailings, digital distribution and conference participation. Value-adding content in the firm of meaningful research and ideas that advisors can use to support their utilization of your product are critical. Digital Marketing Not surprisingly, today advisors often first turn to an asset managers web-site to learn more about the firm and products. A high quality, professional, and regularly updated web site is a basic cost of entry requirement for ETF Strategists operating in a competitive asset management market. A well-organized direct email marketing infrastructure, managed social media presence, webinars, and other on-line interactions can build awareness and loyalty with advisors.

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Key Account / Home Office Sales Generally responsible for getting your portfolios on the shelf and keeping them there, key account management and home office sales is particularly important for ETF Strategists looking to compete in the wirehouse, regional/national BD, and independent BD/hybrid channels. Key account staff need to be highly skilled (e.g. CFA holders) and able to represent the firm well both in research dialogs, and business exchanges (i.e. financial arrangements) required to get preferential positioning on major fee-based platforms. Outside Advisor Sales Historically referred to as wholesaling, the role of outside advisor sales has changed significantly in the past decade. Due to the cost of providing branch-level support, most ETF Strategists have adopted a hybrid sales model in which representatives participate in major events/conferences and pursue referrals generated from digital marketing and inside sales campaigns. The section below on The Changing Face of Advisor Sales & Wholesaling provides additional content on this topic. Inside Sales & Support Most asset managers (including ETF Strategists) typically maintain a ratio of at least one inside agent to one field wholesaler, with that ratio being much higher in some instances. Some ETF Strategists have been very successful in staffing a larger inside sales function to drive sales through targeted call and email campaigns, and in digital marketing campaigns tied to major industry events. Inside sales is much more cost-effective and flexible than outside wholesalers. See the section below on The Changing Face of Advisor Sales & Wholesaling for additional thoughts on the role of inside vs. outside sales.

A Content-Centric PR & Marketing Strategy Core to a productive public relations and digital marketing strategy is regularly developing content that is compelling and value-adding to advisors. Beyond information specific to your strategies and investment philosophy, what is your firm going to be known for? Developing compelling content is hard work and requires deliberate planning and resource allocation. While some firms work with outside agents/consultants on the development of content, a content strategy must ultimately be driven by the CIO and other thought leaders within the ETF Strategists organization. Content can take the form of white papers, how to guides, trade rationales, economic views and opinions, and other topical content that advisors can use to become informed, and also aid them in their own efforts at raising assets and utilizing your products in the development of solutions for their clients.

The Changing Face of Advisor Sales & Wholesaling The advisor sales model has changed significantly in the past decade. In the 1990s and before, branch-level wholesaling (often buying lunch for the branch and handing out sleeves of golf balls while giving a rote product pitch via PowerPoint) was key to driving product awareness and adoption. Increasingly, large sponsors do not allow wholesalers in their branches, and advisors dont want to invest the time. There are multiple models that ETF Strategists have developed in lieu of putting feet on the street, primarily digital marketing, event marketing, and outbound campaigns via inside sales organizations. Partnership selling with ETF issuers, TAMPs and other industry Centers of Influence are also increasingly providing sales leverage for ETF Strategist asset managers. Page | 13

About Randy Bullard & ETF Strategy Group

ETF Strategy Group (ESG) was founded in July 2012 to help ETF Strategist investment management firms develop and grow their businesses. ESG provides a variety of services including the following: Strategic business consulting, and distribution strategy development and implementation services for ETF Strategist asset management firms. Third-party marketing services designed to help ETF Strategist asset managers execute effective distribution strategies and grow assets under management in key markets. Investment banking services designed to help ETF Strategist asset managers gain access to growth capital, and implement productive growth and business transformation strategies. Consulting and business development services to ETF issuers, private equity firms, and product/service providers targeting the growing ETF Strategist asset management market.

ETF Strategy Group is led by Randy Bullard. Randy has over 20 years of industry experience in strategy consulting and asset management services, most recently as co-founder in 1999 of Placemark Investments. While at Placemark, Randy led the firms PR, Marketing and Business Development efforts, as well as many aspects of the firms product and service development and evolution. Randy led the establishment of custom wealth management programs for ~20 leading providers including Smith Barney Consulting Group, UBS, RBC Wealth Management, TD Ameritrade, BMO Nesbitt Burns and many others resulting in $8B+ in assets under management and relationships with thousands of financial advisors. Prior to founding Placemark Investments, Randy was a Principal Consultant with A.T. Kearney, leading strategy and systems implementation projects for firms in the financial services industry including Goldman Sachs and Citigroup. Randy has published numerous articles and papers on wealth management industry topics, and is a frequent speaker and cited industry leader on a variety of topics including Unified Managed Accounts, Overlay Management, Wealth Management Platforms, and Managed ETF Solutions. For additional information, please contact Randy at Randy.Bullard@ETFStrategyGroup.com

Copyright 2012 Randy Bullard, ETF Strategy Group. Distribution in whole permitted withou t notifica tion. Distribution in part or o ther usage granted upon request. www.RandyBullard.com

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