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Chris McDermottCFP and SVP, Product ManagementFidelity Investments
September 9, 2012
*Trends Affecting Today’s Investor
Technology Leadership and
Innovation
Private Ownership and Financial
Strength
Integrity and Reputation
Investor Advocacy Open Architecture
PERSONAL INVESTING
• No. 1 provider of IRAs2
• 13.5 million customer accounts
• Major brokerage firm
INSTITUTIONAL• 5,000 financial
intermediary clients
•Broker/dealers
•Insurers
•Independent advisors
•Family offices
WORKPLACE SAVINGS
• No. 1 provider of 401(k) plans3
• 14.5 million DC participants
• Major provider of stock plan services and health & welfare plans
ASSET MANAGEMENT
• $1.5 trillion under management1
• Equity, fixed income and asset allocation
• Pyramis Global Advisors
• Global staff and client base
1 As of 12/31/2011.2 Cerulli Associates, The Cerulli Edge Retirement Edition, First Quarter 2011. Based on an industry survey of
firms reporting total IRA Assets Administered for Q3 2010.3 Workplace defined contribution data is based on more than 20,000 plans and 11.9 million recordkept participants as of June
30, 2012, and excludes tax-exempt market plans. The analysis is based on qualified plans and includes data from Fidelity Advisor 401(k) Program.
2
Fidelity Investments: Who are we?
3
Over a decade of difficult market conditions
Economy, fiscal policy & demographic trends providing headwinds
What does this mean for those who provide guidance to investors?
Three Focus Areas:
4
1998 2001 2004 2007 20100
50
100
VIX (daily 1998-2012)
1998 2001 2004 2007 20100
2
4
6
8
10 Year Treasury Yield (daily 1998-2012)
1998 2001 2004 2007 2010400
900
1400
1900
S&P 500 (daily 1998-2012)
S&P 500: 121910 Yr T-Bill:
4.79%VIX:
20.84
Daily Averages 1/1/98 – 8/30/08 Daily Averages 9/08 – 8/24/12
S&P 500: 114610 Yr T-Bill: 2.91%VIX: 27
More than a Decade of Market Crashes, Low Rates and Volatility Spikes…
5
Investors are Reacting to Headlines…
6
How Investors are feeling…
7
Source: SimFund, excludes ETFs, VA and Closed End; Data is global in scope and is as of 6/30/2012
2007 2008 2009 2010 2011 2012 ytd
$82
$35
$302
$171
$69
$103
BONDS: +$762 billion
2007 2008 2009 2010 2011 2012 ytd
$121
-$196
$21
$49
-$36
$23
Retail Equity and Bond Flows 2007- Q2 2012(in Billions)
EQUITIES: – $18 BILLION
They continue to vote with their feet…
8
Over a decade of difficult market conditions
Economy, fiscal policy & demographic trends providing headwinds
What does this mean for those who provide guidance to investors?
Three Focus Areas:
9
Aging population with low retirement readiness
Pension funding levels low – corporate and government
Consumers facing mountain of debt
Investor confidence and trust shaken
Trends we are seeing…
10
Percent Of Population Age 65 and Older
Source: U.S. Department of Health and Human Services and U.S. Department of Commerce, “An Aging World - International Population Reports,” June 2009. Estimates for years 2010 and beyond.
1950-2000 CAGR Overall Pop = 1.7% 65+ = 1.4%
2000-2050 CAGR Overall Pop = 0.8% 65+ = 2.6%
1950 1960 1970 1980 1990 2000 2010 2020E 2030E 2040E 2050E
4% 4% 4%5% 5%
6% 6%8%
10%
13%14%
8%9%
11%12%
13%15%
17%
20%
24%26%
27%
Developing WorldDeveloped World
Trend #1: Aging Populations Present Challenges:
The average working American household
(primary decision makers aged 45) has saved only $33,000
for retirement
Americanhouseholds could
experience a potentialincome drop of
28%in retirement
Source: Fidelity Retirement Savings Assessment, April 18, 2012
Americans are Falling Short of Retirement Needs:
For retired Americans, the
median savings is
$55,000 ~40% do not have
sufficient incometo cover monthly
expenses
Source: Fidelity Retirement Savings Assessment, April 18, 2012
This Includes Those In Retirement:
2003 2004 2005 2006 2007 2008 2009 2010 20110%
20%
40%
60%
80%
100%
120%
90%
92% 93%
101%
108%
79%
82%
85%
74%
13 Source: Goldman Sachs, 2011, Credit Suisse, 2012 estimates.
Aggregate DB pension funding status (assets/liabilities) of S&P 500 sponsors
Mandatedlevel tofreeze benefits
Full Funding level U. S. corporate
pension plan deficit is $458B
Trend #2: Corporate DB Under-funded:
14Source: Pew Center on the States 2011 NOTE: Pew was able to obtain fiscal year 2009 data for all states except Hawaii and Ohio. For Hawaii, fiscal year 2008 data were used; for Ohio, 2009 data were projected using preliminary valuations.
OK
RI
MS
MA
TX
AZ
COUT
WY
ID
NV
IA
CA
OR
WA
NM
AK
HI
MT
MN
ND
SD
KS
NE
AR
LA
ALGA
FL
MO
WI
IL
MI
IN
KY
TN
SC
NC
VAWV
PA
NY
NJDE
CT
VT ME
MD
MS
VTNH
OH
DC
OK
92%-101% 84%-91% 79%-83% 69%-78% 52%-68%
State Pension Under-funding Represents a Collective $660 Billion Gap:
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011100
110
120
130
140
150
160
170
180
190
200
3
4
5
6
7
8
9
10
11
$8.27T totalmortgage debt (rhs)
15
U.S. home price index (lhs 2000=100)
S&P/Case-Shiller U.S. National Home Price Index & Total Household Mortgage Debt
2000-2011, Quarterly $T
Source: Haver Analytics, February 2012.
S&
P/
Cas
e-S
hille
r In
dex
Mortgage debt
Trend #3: Consumer Face Mountain of Debt:
16Government debt includes federal, state, and local government debt. Source: Federal Reserve Board, FAM(AART) as of 9/30/11.
GovernmentNon-Financial Corporations
HouseholdsFinancial
Corporations
30-Yr Avg. Debt/GDP Ratio:
57% 63% 69% 65%
Current Debt/GDP Ratio:
87% 76% 87% 91%
Change in Debt Levels, Q3 2008–Q3 2011
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Percentage Point Change
Deleveraging Still a Headwind of U.S. Economy:
53%concerned with how
market conditions are impacting their
investments
52%pessimistic about the
general economic market over the next
six months
56%concerned about the
impact a downturn will have on their investments
46%believe that the rules
for investing have changed in the past 3
years
68%have changed the
long term growth rate they anticipate
receiving on their investments
42%of investors expect
stocks to return 3% or less on average over
the next 5 years.
17
Source: These results are based on an online survey conducted among a sample of 621 adults comprising 321 men and 300 women 18 years of age and older who own a retirement or investment account. The data was collected January 19-22, 2012 by ORC International, an independent research firm not affiliated with Fidelity Investments. The results of this survey may not be representative of all investors meeting the same criteria as those surveyed for this study.
Trend #4: Investors are Pessimistic:
18
Over a decade of difficult market conditions
Economy, fiscal policy & demographic trends providing headwinds
What does this mean for those who provide guidance to investors?
Three Focus Areas:
Quarterly Webinars
70% lift in Seminar attendance ‘11 vs.‘08
19
Viewpoints reaches over 10 million investors annually
Seminars & Webinars
Articles & Interactive Graphics 1:1 Planning Interactions 1 million+
planning interactions annually
48% lift in one-on-one planning sessions ‘08-vs.’11
Screenshots for illustrative purposes only
Source: Fidelity business data as of Dec. 31, 2011. One-on-one retirement planning sessions with Fidelity representatives and workplace participants or individual investors using Retirement Quick Check, Retirement Income Planner or Income Strategy Evaluator
Different Approaches to Engaging and Educating:
20
Market Related:
“How can we little investors protect ourselves from the fallout from Europe?”
“How will the slowing economy in Europe and China effect the US's recovery?“
“How should I adjust my portfolio in order to gain additional yield?
Financial Planning Related:
“Help we find ways to help generate/maintain income in retirement?”
“How will tax changes impact my financial plan? What strategies should I be thinking about?”
“How do I balance competing financial priorities?” Debt, Retirement, College?
Focus On The Key Questions:
21
57%acted on the information
by more than
doublingtheir Deferral Rate
45%acted on the information
by making Asset Allocation changes
Employees Who Used Guidance Tools…
Source: Fidelity Investments as of Sept 2011
Done well, it can positively influence behavior…
Questions & Answers
Appendix: Important Disclosure InformationS&P 500 Index
S&P 500 Index is a market capitalization–weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.
Barclays Capital U.S. Long Government/Credit Bond Index
Barclays Capital U.S. Long Government/Credit Bond Index is a market value-weighted index designed to measure the performance of fixed-rate, dollar-denominated, investment-grade debt securities with maturities of 10 years or more.
CBOE Volatility Index
CBOE (Chicago Board Options Exchange) Volatility Index (VIX) is a weighted average of prices on S&P 500 Index options with a constant maturity of 30 days to expiration. It is designed to measure the market’s expectation of near-term stock market volatility.
S&P/Case-Shiller U.S. National Home Price Index
S&P/Case-Shiller U.S. National Home Price Index is a value-weighted quarterly index that measures changes in U.S. single-family home prices nationally.
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Indexes are unmanaged. It is not possible to invest directly in an index.
Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem St., Smithfield, RI 02917
625567.1.0
23