FA Insight 2017 Securing Your Firm’s Future survey highlights March 2017

Mergers & Acquisitions Among Independent RIAs

Signs point to a surge in RIA mergers and acquisitions

Survey indicates strong advisor M&A appetite to continue for a third year.

76 percent forecast at least one deal for their firms in the next five years.

Solo advisors are the #1 M&A target.

Buying books of business also has strong appeal.

Bigger RIAs with deeper pockets plan to do more deals.

However, smaller firms are also planning for more transactions.

RIAs see M&A helping on many fronts – revenues, assets, expertise & clients.

Succession planning is a growing concern among those considering deals.

M&A Trends

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M&A Activity Remained High in 2016

4

3036

30 2936

51

40

69

50 48 46

3338

4843

85

77

0

10

20

30

40

50

60

70

80

90

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Num

ber o

f Tr

ansa

ctio

ns

Annual Transactions Announcements

Though down from record 2015 levels, deal activity outpaces recent averages

2000-2014 Average = 42 deals / year

Source: FA Insight, M&A database, 2000-2017

Pace of M&A Likely to Quicken

Source: The 2014 Insight Study of Advisory Firms: Growth by Design; and Base: Total Respondents (n=234) Q2: Has your firm been involved with a merger or acquisition in the past five years? Q15: Is your firm considering at least one transaction in the next five years?

Interest in M&A engagement soars relative to prior periods

5

26%

34%

76%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Experienced a transactionas of 2014

Experienced a transactionas of 2016

Expecting a futuretransaction as of 2016

Perc

enta

ge o

f Firm

s Res

pond

ing

Transaction Experience and Expectations

One Third of Recent Deals Involved Solo RIAs

Q4: Which best describes your most recent transaction? (Select one) (n=80)

Industry M&A Activity from 2011-2016

6

15%

1%

1%

4%

13%

15%

19%

33%

0% 5% 10% 15% 20% 25% 30% 35%

Other

“Tucked in” a breakaway broker

Acquired by another firm

Acquired by some other entity

Merged with another firm

Acquired a book of business only

Acquired firm with multiple advisors

Acquired solo advisor with own practice

Percentage of Firms Responding

Transactions by Type

Top target: Solo Advisors

Q16: If you are considering a transaction in the near future, which best describes the transaction types that you are considering? (Select all that apply) (n=178)

Smaller deals top to-do list of most prospective acquirers

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Expected M&A Transaction Type

14%

7%

7%

14%

36%

42%

47%

61%

Other

Acquisition by another type ofentity

Join or be acquired by aconsolidator

Acquisition by anotheradvisory firm

Merge with another firm

Acquire firm with multipleadvisors

Acquire book only

Acquire solo advisor

RIAs Are Leading the M&A Pack

Source: The FA Insight M&A database

The financial advisory industry’s most active acquirers since 2008

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30% 28%40% 42%

50%42% 39%

62%

44% 51% 52%

35%26%

22% 23%22%

18%16%

17%

21%21% 14%

25%34%

26% 25% 9% 24%18%

15%

14%9%

12%

10% 12% 12% 10%20% 15%

26%

6%21% 19% 22%

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Perc

ent o

f Acq

uisit

ions

Acquirer Type by Year

RIA Traditional Aggregator Bank/Trust Other

Bigger RIAs Lead the Charge…

Base: Total Respondents (n=234) Q2: Has your firm been involved with a merger or acquisition in the past five years? Q15: Is your firm considering at least one transaction in the next five years? Q23: Which of the following ranges includes your firm’s approximate total gross revenue over the last 12 months?

… While Smaller RIAs Expect the Biggest Jump in Deal Activity

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14%

32%

50%

69% 77%

68% 75% 76%

100%

91%

0%

20%

40%

60%

80%

100%

120%

<$500K $500K - $1.5M $1.5M - $4M $4M - $8M $8M+

Completed M&A

Planning future M&A

Transaction Experience and Expectations

Firm Size Range by Annual Revenue

Perc

enta

ge o

f Firm

s Res

pond

ing

Desire for Growth is Key M&A Driver

Q6: What were the primary reasons your firm implemented this transaction? (Select up to three) (n=80) Q18: What are the primary reasons you are considering a future transaction? (Select up to three) (n=178)

Succession planning likely to drive more deals

10

15%

7%

8%

15%

17%

24%

25%

31%

34%

45%

6%

13%

6%

21%

21%

24%

30%

46%

37%

49%

Other

Access to new service capabilities

Gain capital for reinvesting into the firm

Add skilled labor or technical expertise

Expand into new market

Increase client growth

Provide shareholders with a successionsolution

Increase asset growth

Realize economies of scale

Increase revenue growth

Plan to Complete a Transaction in the Future Completed a Transaction

Managing Expectations

Source: The 2016 FA Insight Study of Advisory Firms: Growth by Design 11

4%

7%

11%

23%

24%

27%

32%

44%

45%

69%

6%

8%

18%

23%

24%

24%

26%

45%

33%

58%

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

Other

Gain capital for reinvesting into the firm

Improve the client experience

Gain access to new services or expertise

Increase client growth

Expand into a new market

Provide shareholders with a succession solution

Increase asset growth

Realize economies of scale

Increase revenue growth

Percentage of Firms Responding

Anticipated vs. Actual Benefits of a Recent Merger or Acquisition

Actual Benefit

Anticipated Benefit

Methodology

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Results are based on an online survey of 234 independent registered investment advisors (RIAs) conducted by FA Insight and TD Ameritrade Institutional, a division of TD Ameritrade, Inc., in December 2016. Survey respondents were clients of TD Ameritrade Institutional and non-clients.

All survey respondents have been in operation for at least one year, generating a minimum of $100,000 in annual gross revenue and serve individuals or households as primary clients. The margin of error is ± 5.6%.

This slide presentation references data from the proprietary FA Insight M&A database (2000-present) and the 2016 FA Insight Study of Advisory Firms: Growth By Design to draw conclusions about trends and provide context.

Important Information About the Survey The Securing Your Firm's Future survey was completed in December 2016 through an online survey with the owners / shareholders of 234 independent RIAs, followed by interviews and focus groups. The median size for RIA firms represented in the study was $800,000 in annual revenue. The margin of error is +/- 5.6% based on a 90% confidence interval. About TD Ameritrade Institutional TD Ameritrade Institutional is a leading provider of comprehensive brokerage and custody services to more than 5,000 fee-based, independent RIAs and their clients. Our advanced technology platform, coupled with personal support from our dedicated service teams, allows investment advisors to run their practices more efficiently and effectively while optimizing time with clients. TD Ameritrade Institutional is a division of TD Ameritrade, Inc., a brokerage subsidiary of TD Ameritrade Holding Corporation. About TD Ameritrade Holding Corporation Millions of investors and independent registered investment advisors turn to TD Ameritrade’s (NASDAQ: AMTD) technology, people and education resources to help make investing and trading easier. Online or over the phone. In a branch or with an independent RIA. First-timer or sophisticated trader. Our clients want to take control, and we help them decide how - bringing Wall Street to Main Street for more than 40 years. TD Ameritrade has time and again been recognized as a leader in investment services. Visit www.amtd.com for more information. Brokerage services provided by TD Ameritrade, Inc., member FINRA /SIPC FA Insight is a product of TD Ameritrade Institutional, Division of TD Ameritrade Inc., member FINRA/SIPC. FA Insight and TD Ameritrade are trademarks jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank.© 2017 TD Ameritrade.

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