Navcap = Intelligent Distribution

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  1. NAVCAP™NAV Capital Partners, LLC<br />Intelligent Distribution™<br /> 2. NAVCAP™ Competitive Advantage<br /><ul><li>Outsourced…
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  • 1. NAVCAP™NAV Capital Partners, LLC<br />Intelligent Distribution™<br />
  • 2. NAVCAP™ Competitive Advantage<br /><ul><li>Outsourced Distribution
  • 3. Variable Cost vs. Fixed Cost
  • 4. Salaries, Expense Management, Supervision, Licensing and Compliance, and Performance Tracking
  • 5. Talent Retention, Compensation, and T&E Management managed by NAVCAP
  • 6. Core Competencies
  • 7. Asset Management vs. Third Party Distribution (sales, marketing, and distribution)
  • 8. Focus on Core Strengths (asset mgmt) and Execute at the Margin vs. sales, marketing, and distribution
  • 9. Talent
  • 10. Captive Cost Model (fixed) vs. NAVCAP™ High Value Differentiator (variable)
  • 11. Experience, Industry Knowledge, Platform and Product Knowledge by Firm; Consults, MLPA, PIA, Pace, MFA, UMA, MAC, CG, etc.
  • 12. Deep Relationships with Financial Advisors, Key Accounts, Home Office Personnel, and other intermediaries
  • 13. Domain expertise, history of performance, demonstrated track records
  • 14. Initially 10-12 Experienced Specialists focused on Wirehouses and Regional Broker Dealers
  • 15. Results
  • 16. NAVCAP® - NAV Capital Partners is only compensated for results
  • 17. Distribution cost is based on a percentage of advisory management fee (we get paid when and only when we deliver assets)</li></li></ul><li>Where’s the business?<br />
  • 18. Wealth Management Landscape Consolidation<br />Assets: $2trn<br />FAs: 20,000<br />=<br />+<br />Assets: $1.4trn<br />FAs: 16,000<br />+<br />=<br />Assets: $1.7trn<br />FAs: 21,600<br />=<br />+<br />The brokerage/wealth management landscape is undergoing seismic change<br />
  • 19. Shifts in distribution<br />Source: Strategic Insight Simfund, Empirical Research Partners<br />*Wirehouse brokers include financial brokers at Merrill Lynch, Smith Barney, Wachovia, Morgan Stanley & UBS<br />
  • 20. The top five states hold 41.56% of total opportunity<br />Adding the next five captures 61.43%<br />The top half of states yields 88.47%<br />The other twenty six produce 11.53% of flows<br />Defining Priority Segments<br />
  • 21. Defining Priority Segments<br />
  • 22. Institutional clients shifting gears<br />Survey of Pension Consultants<br />Source: Eager, Davis & Holmes Survey, Empirical Research Partners<br />
  • 23. Industry Changes<br /> Industry changes have permanently altered asset management distribution. The effects of the latest crisis will be structural. Four main drivers have created an inflection point:<br />Shift in economics away from the manufacturer <br />Less rich revenue mix<br />Rapidly falling return on the cost of sales<br />Resurgence of boutique money managers <br />The shift in economics away from the asset manager will dramatically change their view of fixed distribution costs.<br />The confluence of merging platforms (UMA), share class acceptance/conversion, and downward pressure on fees in general continue to negatively affect average fee rates and margins. Even if the S+P remained at record levels, the actual fee income would remain dramatically reduced.<br />
  • 24. Industry Changes<br />Dynamic landscape requires flexibility <br /><ul><li>Consolidation continues both product manufacturers and distributors
  • 25. Variable cost model preferable
  • 26. Distribution model should be extremely focused on opportunity not geography
  • 27. Advancing technology creates opportunity for “Boutiques”
  • 28. Major shift toward advisory platforms
  • 29. Unified Managed Accounts</li></ul>Shift to low-cost beta continues<br /><ul><li>Demand for low volatility and absolute return products is increasing
  • 30. Increasing appetite for outcome or solution driven product development
  • 31. Significant opportunity for absolute return product in mutual fund package</li></li></ul><li>Industry Changes<br />The shift in economics away from the asset manager will dramatically change their view of fixed distribution costs.<br /> The confluence of merging platforms (UMA), share class acceptance/conversion, and downward pressure on fees in general continue to negatively affect average fee rates and margins. Even if the S+P remained at record levels, the actual fee income would remain dramatically reduced.<br />Less rich revenue stream<br /> Platform consolidation continues to drive effective fee rates lower. Load waived A shares are being converted and replaced by lower fee institutional shares in the best case. SMA model delivery is in most cases now less than 40 basis points in a slightly worse scenario. Also, customers will no longer pay high fees for beta. The race to be the low cost provider of beta continues. Revenue sharing is increasingly asset-based, further contributing to declining margins. <br />Rapidly falling return on cost of sales<br /> The cost of a dollar of revenue continues to grow (approximately 13%/year 2006-2009). Shrinking existing coverage models and wholesaler compensation is not keeping pace with declining revenue. The costs of both starting and shrinking a sales force are considerable. The cost of no sales with fixed distribution costs is unbearable.<br />
  • 32. NAVCAP™ = Intelligent Distribution™<br />NAVCAP Specialists<br />(outsourced)<br />Variable cost, aligned<br />Turn-key Solution<br />Strong pedigree<br />Demonstrated performance<br />Existing relationships<br />Highly skilled<br />Results driven<br />Easy to add/delete<br />Key accounts<br />NAVCAP is an owner operator model geared for longevity<br />Captive Wholesalers (internal)<br />Fixed cost, unaligned<br />T&E funding and oversight/accounting<br />Travel and expense budgets are not aligned with ownership<br />Benefits<br />Training, supervision, HR, registration, licensing<br />Distraction from core competency<br />Difficult to build/delete<br />Costly turnover<br />
  • 33. NAVCAP™<br />
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