Strategy & Management Consulting Paris London Luxembourg

March2016

TRENDS & OPPORTUNITIES ON FUNDS DIGITALDISTRIBUTION

Solutions for digital distribution

Digital Funds Distribution

Contact:David VILLARD, PartnerDavid.villard@aurexia.com+33 6 7553 1947

Competition between Banks and FinTechs: Banks being too big to change, two solutions appear:

1. Collaborate with Fintechs which offer additional services and are willing to partnerwithbanks

2. Face Fintech and competitors offering alternatives to traditional banking

• Exponential growth of FinTechs in the world since 2008: 4 times more FinTechs in 2 years,3 times more investments in 5 years with $ 3 bn today

Uneven growth across countries: The United Kingdom and Ireland are leaders on the European market with 69 % of thefinancing

Opportunity stimulated by the economic environment: Lack of transparency of traditional banking, high service fees, slow digital mutation and altered public image during the crisis

0

0,5

1

1,5

2

2,5

2012 2013 2014

United Kingdom Rest ofEurope

FinTechs

•Financial technology, also known as FinTechs, is an economicindustry composed of companies that use technology to makefinancial services more efficient. Financial technology companiesare generally start-ups founded with the purpose of disruptingincumbent financial systems and corporations that rely less onsoftware

Wikipedia

EUROPEAN FINTECHSMARKET (in BILLIONS€)

Sou

rces:Sta

tista

BANKS REACTIONSTO FINTECHS EXPENSIONAROUND THE WORLD

43%Creationofin-house

Fintech

20%Creationofanopen

architecture

20%Partnershipwith Fintechsthrougha

whitelabel

10%Acquisition ofFinTechs

7%CreationofFintechthrough

subsidiaries

1. Fintechs disrupt traditional banking (1/2)

2

Strategic choice, competition or patnership

Sou

rces:Sta

tista

2. Panorama of services proposed by FinTechs

ServicesMarketData

Since 2010, FinTechs disrupt an increasing number of banking activities

Securities / Loans Asset Management

PRIVATESAVINGSMANAGEMENT

FEES

EXECUTION&TRAITEMENT

PAIEMENT,E-MONEYTRANSFERTS CROWDFUNDING

EMPRUNTS&P2P

• Revamp of existing offers, identification of both badly addressed or unaddressed needs by traditional offers and the creation of new markets bound to new uses

• Developmentof innovativedigital wealth management offers, payments, loan solutions, factoring, moneytransfers

• Developmentof Crowdfunding (30 new platforms)since the creation in 2014 of adedicated regulatoryframework

• Sustained trend of platform creations dedicated tocompany funding• Expected further market consolidation, intensificationof competitionand the

high entrybarriers

• Robo-Advisors offer fully automatized on-line personal savings management servicesbased onalgorithms

• First four platformsare operational since 2014, a fifth one was expected to launch in the second half of2015

• D-to-C distributionrepresents40% of the AUA in the UK, for the retail segment and continues to consolidate marketshares

• D-to-C platforms in France haven’t beenlaunchedyet

INSTITUTIONALCLIENTS

dough

3

Robo-Advisors landscape around the world

11 402

13 188

19 184

16 404

14 531

21 34422 261

0€

5 000€

10 000€

15 000€

20 000€

25 000€

2014 2015 2016 2017 2018 2019 2020

Sou

rces:Sta

tista

Value of the averagetrade on Robo-Advisors savings management platform

• Creation:2015

• AUM : $ 3,3b

• Creation:2015

• AUM : $17b

• Creation:2015

• AUM : $ 4,1b

• Creation:2010

• AUM : $ 600m

• Creation:2011

• AUM : $ 2b

• Creation:2009

• AUM : $1,9b

AUMend of2015

• Creation:2010

• AUM : € 2,4b

• Creation:2013

• AUM : € 1,25b

• Creation:2014

• Launching :2016

• Creation:2014

• AUM : € 1,5b

• Creation:2011

• AUM : € 2b

• Creation:2012

• AUM : $ 800m

• Creation:2013

• AUM : $ 2,7b

AUMendof2015

Key figures 2015-2016

•15% of Charles Schwab Intelligent Portfolio American clients have investedmore than 1 millionUSD in cash.•Assets in automated portfolios have increased by 210% in 2015. Itrepresents 50 billionsaround the world.•Despite that, assets managed by Robo-Advisors are representing only asmall portion of the 20 000 billions asset management industry. A marketshare of0,25%•Management fees charged by Robo-Advisors are 50% less expensive thanfees charged by les tarditional advisors triggering the creation of la Robo-Advisors units by major banks (Morgan Stanley, Wells Fargo, …)

3. A new era for personal investment

4

4. Important Blockchain pillarsBlockchain challenges

Transparency•Each transaction in the system is recorded in the decentralized

register of ownership (creation of a block)

• Each system computer stores a copy of this blockchain

therefore Information is publicly available for inspection

• Data on money flows and tracking of markets involved are

revealed

Regulatory

•Absence of blockchain regulation, but new enforcement and

regulation are expected throughout 2016

•The Blockchain Alliance thrives to help government agencies

develop a better understanding of the blockchain, (US

enforcement agencies, but also Europoland Interpol)

Access

•Permissionless ledgers : transaction validation by anonymous

participants provided that the validator has solved an

algorithm

•Permissioned ledgers : transaction validation by legal entities

enabling banks to keep official records of asset ownership and

legally accountable participants

Privacy•Sensitive personal information is protected by

cryptography used to provide privacy to the parties involved

in atransaction

•However, in existing systems, all transactions, including

flow of money between parties, their names and amount

transacted are exposed in the clear on the blockchain

Security•Security level of transactions is correlated to the number of

required confirmations and therefore impacts the speed of the

process due to the decentralized consensus method used

•Security increases with the number of confirmations : a

common requirement is to wait for 6 confirmations which

takes 1 hour (10 min delay/confirmation)

5

5. Blockchain analysisBlockchain challenges from an Asset Manager’s perspective

•Lower infrastructure and transaction costs

compared to the traditional settlement model

•Transparency and immediacy of execution and

settlement

• Elimination of errors and reconciliation process

•Optimized KYC AML sharing, collateral

management, regulatory reporting…

STRENGTHS

S W

O T

6

•Use blockchain infrastructure as a mean for

smart contracts implementation

• Automate, standardize and enhance security of

contracts (detection of ownership changes)

•Contribute to blockchain consortiums to shape and

develop the technology

•Absence of established regulatory framework

(national and international)

• Absence of industry standards

•Absence of tools for audit and processing of

anonymous transactions meta data

• Costs related to operational implementation

•Operational risk related to technology

implementation

• Limited number of simultaneous transactions

(maximum 7 transactions/sec)

•Privacy issues related to the decentralized and

transparent structure of the ledger

• Hacks due to technology recentness

WEAKNESSES

OPPORTUNITIES THREATS

6. MIF 2 : an accelerator for D-to-C distributionRegulatory challenge and digital strategy

• End of the inducements for Discretionary Portfolio Management andIndependentFinancialAdvisors

• New requirements related to inducements for Non-Independent FinancialAdvisors

• New product governancerequirements

MIF 2

• No ban of inducementsfor PRIIPs• No obligationto discloseinducementsamountspaid• New product governancerequirements

DIA2

Inbalance

Imp

acts

on

fun

ds

dis

trib

uti

on Offer andpricing

•Increase of the custody fees, account

management fees and sales fees

• Charge of advisory or management service fees

Sharedmodel

•Definition of a new model between in-house

producers , in-house distributors, and related actors

(B-to-B platforms)

Digitalized Platforms

•Creation of online distribution developed by

producers such as Asset Management Companies

Customerexperience

• Create mobile solutions

• Improve the content of existing tools

• Propose decision-making tools (algorithm or

personalized advice)

• Portal dedicated to retail clients (transparency,

dedicated reporting, exchange of documents)

Social mediapresence

• Increase visibility and reputation to acquire and

retainclients

• Ensure a business intelligence

• Targeted advertising and dynamic image

• Highlight financial, economical information and

expertise

Distributionchannel

• Reference funds on B-to-B distribution platforms

• On-line subscription/redemption of funds (D-to-

C)

• Create a new proximity to customer

• Improve knowledge of retailcustomers:

Behaviour, expectations and needs

Dig

ital

Stra

tegy

7 It is important for Asset Management companies to adopt a digital strategy at the risk of being beaten by competitors.

7. SWOT Analysis of the D-to-C Market in FranceBefore embarking in the digital distribution of funds

6573

94,3

116,5

146

40

20

0

160

140

120

100

80

60

2010 2011 2012 2013 2014

AUA for D-to-C platforms(in billions€)

UnitedKingdom +25%

+24%

+29%

+12%

Sou

rce:

Pla

tforu

m

UnitedKingdom€298

Netherlands€15.5

Germany€170.3

Switzerland€269.5

ItalyFrance €223.3€98.7

Spain€39.5

Institutional clients

AUA by type of distributionplatform*1

Austria€19

Retail clients

Trad

itio

na

lb

anks

Dig

ital

Pla

tfo

rm

s

Sou

rce:

Pla

tforu

m-

2014

• Advantage to present less costs compared

to the expenses charged by the classic B-to-

C platforms

• Capacity to offer on-line value-added

services (discretionary management ,

advisory)

• Huge impact in terms of innovation and

image

STRENGHTS

S W

O T

8 *1Sum of AUA treated by B-to-B, B--C and D-to-C platforms

• Market with great growth potential with

upcoming MiFID 2 measures and the

limitation of inducements

• Market in its launching phase inFrance

• Absence of Asset

committed to

Management

D-to-C

firms

funds

commercialisation

• Direct distribution in newcountries

• Lack of experience with retailcustomers

• Burden of bank accountsopening

• Administrative management of AML-KYC

documents

•Responsibility of the investor's profile

evaluation(MIF)

•Responsibility of the products coherence-

customer category(MIF2)

•Lack of visibility from retail customers (brand

image)

• Expensive project implementation

• Competitionwith:

• Major Asset Managers

• Onlinebanks(Boursorama)

• Onlinebrokers (Binck)

• Specialised fund markets (SicavOnline

• (SicavOnline)

• Cannibalization of the existing

distributionnetwork.

WEAKNESSES

OPPORTUNITIES THREATS

8. Impact of RDR on funds’ cost transparencyClean share class addressed to retail clients

Advisor

0,50%

0,25%

0,75%

0,75%Advisory

fees

0,35%*Others

Tota

lfee

s: 1

,10

%

0,75%

Advisory fees

0,50%Advisory

fees

0,25%Platform

fees

0,20%*Others

Ch

arge

sto

tale

s:1

,70

%

1,50%

Inducements

Advisor

0,50%

0,25%

D-TO-CPHYSICALNETWORKFEES

AfterRDRBeforeRDR

FEES

Impact of RDR on funds’cost transparency

• In the UK, RDR reaches its goal of costs transparency

on funds directed to retail customers (3 stages for

invoicing: management fees, advisory fees and

platformscosts)

• Launch of clean shares (unbundled) consisting in the

deduction of distribution costs (~0,25%) and advisory

fees (~0,50%), from annual management fees

(~0,75%)

• Clean share funds (without inducements) are

becoming the most widely distributed by D-to-C

digital platforms in the UK

• For retail clients, advised by a Financial Advisor, the

supported final cost remainsunchanged

• Decrease of the Total Cost Ratio of a Fund for the

final investor, when the latter realises its funds

purchases on a D-to-Cplatform

• For non advised clients, the cost of Fund subscription

decreases noticeably (of0,60%)

• Possibility for retail clients to compare the funds of

different Asset Managers within open architecture

platforms

Final client Retail

Finalclient Retail

AM company AM company

B-to-B Plateform

B-to-B Plateform

Ad

ded

valu

ese

rvic

es

9 *Custody fees, transEquity fees, closing fees

9. Overview of funds distribution platformsFrench market segmentation (off physical network) : B-to-B, B-to-C, D-to-C & Robo-Advisors

3AM companyFinal

Retailclient

1

0

D?-to-C

Robos Advisors

Without execution

With execution

KIID TCC

ALM-KYC

Notifications

ReportingFiscal

Online broker

Onlinebanks

B-to-C Platform

Distributionmasteragreement

Inducemen ts collection

TransEquity(Banks)

Advisory (CGPI)

B-to-B Platform

Custodians Securities

Centralizing custodian

2

4

Evolution of B-to-Bplatforms

• Strongimpact on B-to-B platforms business model with the restrictions on inducements

• Loss of income for B-to-B platforms linked to independent distributors

• Evolutionof B-to-B platforms businessmodel to complete their range of administrative services

• Invoicing of services previously paid by inducements directly toAsset Managementfirms

• Diversification with the implementation of White Label solutions allowing Asset Management firms to offer a D-to-C service to retail clients

Proceeding

1 The retail clientaccessesthe B-to-C platformonlineto opena cash account,a securityaccount, and to place orders

2 At the receptionof the customer’sorder, the B-to-C platformtransmitsthe order to the custodianforcentralization

3 Transmission of collectedorders by the custodian to the Asset Management firms

4 Deliveryof the securities by the custodianagainst paymentby the B-to-C platform (bank of the final retail client). The custodian transmitsthe positions statementto the Asset Management firm

Before placing an order on a B-to-B platform, the retail client can be assisted by the Robo-Advisorwhich,on the basis of his risk profile, will suggest a fund portfolioor adaptedETF.

The B-to-B platformassists the physical network and the B-to-C distributionplatform with the collectionof inducementsand the writing of distributionagreements

10

10. Focus on « Robo-Advisor » platformsFundShop, Marie Quantier, Yomoni, Advize and Anatec

Custodian&

Execution

Subscription

(Monthly)Service KYCProducts

Investmentadvisory:

Portfolio allocation (by algorithm)

adjusted to client’sprofileClient’s profile

evaluation : risk

aversion , yield

objectives,

investmenthorizon

Funds

Life insurancewrap

Fortuneo,

Boursorama,ING

Director

Assurancevie.com

Choicebetween:

Free, 9 €, 14 € or

119€

ETF

Securities Account

Choice between :

Free or 5,90 € +5%

ofprofits

Monitoring

InteractiveBrokers

(Onlinebroker)

(lowcost) Alerts sending for

arbitration

realization(3-4

times/year)

Reporting

Portfoliofollow-up

through an intuitive

webinterface

(Tools and

dashboards)

Features

API offer

(whitelabel)

-

Partnership between Robo-Advisors andtraditionalinstitutions

2012

2013

ETF

Life insurance

Funds

Life insurancewrap

CréditMutuel

Arkea

Arbitration

realizationby

YOMONI

Discretionary Portfolio

Management : 10standard

portfolios adjusted to

clientsprofile

1,6% of assets under

management -

Investment advisory: Standard

portfolios createdby

Morning StarInvestment

Consulting

Generali

Real-time alertfor

arbitration

(real-time)

0,60% on Euro funds

and 0,85% for the

rest

Life insurance

broker

Weekly reporting

(valorisation, portfolio

performance)

API offer

(whitelabel)

BankCare

2015

2012

2015

ETF

Life insurance

Investment advisory:

Portfolio allocation (byalgorithm)

adjusted to client’sprofile

Account aggregation services

Unknown

Recommendations

concerning

continuous portfolio

optimization

Unknown

Par

ten

aria

tTe

chn

iqu

e

Par

ten

aria

tTe

chn

iqu

e

Sou

tien

Fin

anci

er

Sou

tien

Fin

anci

erP

arte

nar

iat

Tech

niq

ue

Par

ten

aria

tC

om

mer

cial

Sou

tien

Fin

anci

er

Par

ten

aria

tsC

om

mer

ciau

x

11

11. Benchmark of D-to-C platforms (1/5)D-to-C offer comparison in the UK

PEA

PERP

Securitiesaccount

Funds

ETF

Equity

Bonds

(Orientations)

Funds

(Orientations)

0 - 250k £ : 0,35%

250k - 1m £ : 0,20%

Funds selection

tools adapted to

investor’sprofile

Standardized

portfolios

AdvisoryCleanshare

classProducts

Offered

accounts

Open

architectureFund’s fees Tools

Mobile

applications

iPhone & iPad

iPad

Funds

ETFETC

Equity

Bonds

Equityfunds

(ExecutionOnly)

0 - 250k £ : 0,35%

250k - 1m £ : 0,20%

iPhone &iPad

Android

BlackBerry

Windows

(Orientations)0 iPhone & iPad

Guides : Investment

strategy, Funds

selection,assessment

of riskaversion

(2200 funds)

(3000 funds)

(2000 funds)

(50funds)

PEA

Securitiesaccount

PEA

PERP

Securitiesaccount

PEA

PERP

Securitiesaccount

< 1m £ : 0,35%

> 1m £ : 0,18%

Fundsselection

tools

Standardized

portfolios

FinancialAnalysis

Funds

(ExecutionOnly)0,39%

iPhone & iPad

Android

BlackBerry

Windows

(320funds)

PEA

Securitiesaccount

Cashaccount

2000

2014

2009

Before 2000

2011

2012

Funds

ETF

Equity

Bonds

(Orientations)

0 - 50k £ : 0,35%

> 50k £ : 0,30%

Financial analysis

Funds selectiontools

(1300 funds)

PEA

PERP

Securitiesaccount

The brand image of the Asset Management company is a critical factor in the choice of an investor, but the range of products, the decision supporttools for the selection of funds and the orientations are the criteria which give a competitive advantage10

11. Benchmark of D-to-C platforms (2/5)D-to-C offer comparison in the UK

PEA

PERP

Securitiesaccount

Funds

ETF

Equity

Bonds

Investmentadvisory

Discretionary

management

Funds

ETF

Bonds &Equity

(Orientations)

0 - 250k £ : 0,45%

250k - 1m £ : 0,25%

1m £ - 2m £ : 0,10%

> 2m £ : 0

Investmentguides

Calculators

Trainingvideos

AdvisoryCleanshare

classProducts

Offered

accounts

Open

ArchitecturePlatformfees Tools

Mobile

application

iPhone & iPad

Android

Windowsphone

Funds

ETF

Equity

Funds

ETF

Bonds & Equity

Derivatives &

Structuredproducts

Investmentadvisory

Discretionary

management

0 - 500k £ : 0,25%

500k - 2m £ : 0,15%

> 2m £ : 0,05%

iPhone &iPad

Android

BlackBerryWindows

(Orientations)

10 £ / transEquity

Maximum 80£ / an

iPhone & iPad

Android

Research

Analysis

(2500 funds)

(3000 funds)

(2500 funds)

(3800 funds)

PEA

PERP

Securitiesaccount

PEA

PERP

Securitiesaccount

PEA

PERP

Securitiesaccount

0 - 250k £ : 0,40%

250k - 1m £ : 0,20%

List of funds by

investor’sprofile

Live MarketData

Calculators

Financialanalysis

guides

Funds

ETF

Equity

(Orientations)

0 - 250k £ : 0,30%

> 250k £ : 0,20%

iPhone & iPad

Android

Funds selectiontools,

portfolio analysis,

trading

(1600 funds)

PEA

PERP

Securitiesaccount

Funds

(Orientations)0,35%

iPhone & iPad

Android

BlackBerry

Funds selection tools

Trainingvideos

(1500 funds)

PEA

Securitiesaccount

Before 2000

Before 2000

Before 2000

2012

Before 2000

2010

D-to-C platforms, not owned by Asset Management companies go into an extension of their range of services by offering discretionary management andinvestment advisory , this with the aim of getting the demand of non advised investors who require support and accompaniment11

11. Benchmark of D-to-C platforms (3/5)D-to-C offer comparison in Singapore

Funds,

Life-insurance,

multi-support life-

insurance

(FinancialAdvisor)

Funds, Equity,

Bonds, ETF,CFD,

TradedLife

Policies

(FinancialAdvisor)

Sales fee: 2,8%

Switch fee:2,8%

Management

fees:1%

Consolidated

reporting

Clientrunning

AdvisoryCleanShare

classProducts

Offered

accounts

Open

ArchitectureFunds fees Tools

Mobile

application

iPhone

iPad

Android

Equity, Bonds,

Funds, ETF,

Futures,Forex

Funds,

DAT

(FinancialAdvisor)

Sales fee:3%

(FinancialAdvisor)Sales fee: 1,5%

iPhone

iPod

Android

Information on

financialmarkets

Funds analysistools

520funds

850Funds

19 Asset managers

440funds

27 AssetManagers

350funds

20 AssetManagers

Cashaccount

CTO

Cashaccount

CTO

Cashaccount

CTO

Sales fee : 0,75%

Switch fee:0,50%

Management

fees:1,5%

Fundscomparison

tools

Online trainings,

Calculators,

decisionmaking

aids

Funds,

Bonds,

Life-insurance

(FinancialAdvisor)

Sales fee:3-5%

Management

fees:0,5%

iPhone

iPad

Android

Funds selection tools

P&L calculator

Financial research

Forum

800funds

50 AssetManagers

Cashaccount

CTO

Funds,Equity,

Bonds, CFD,

Forex, ETF,

Warrants

Sales fee: 1-3%

Management fees

0,275%

iPhone

iPad

Android

P&L calculator

Personalizedalerts

18 AssetManagers

Cashaccount

CTO

12 No D2C offer from Asset Managers, the online distribution of funds in Singapore is made by the big banks, and the financial intermediaries

11. Benchmark of D-to-C platforms (4/5)D-to-C offer comparison in Poland

(Use of existing

bank account)

TFI

PTE

TFI

Bonds

Equity

Forex

Discretionary

management

(Management

feesonly)

E-learning

Riskassessment

Trainingvideos

AdvisoryCleanshare

classProducts

Offered

accounts

Open

architecture/

Nbr offunds

Funds fees ToolsMobile

application

TFI

PTE

TFI

?

(Management

feesonly)

(10funds)

(250funds)

(16funds)

(24funds)

(100% online

accountopening)

(Use of existing

bank account)

(Use of existing

bank account)

(Management

feesonly)

Dynamic toolfor

funds selection,

Standardized

portfolios

Funds

recommendation

according to

investor’sprofile

TFI

(Management

feesonly)

Funds

recommendation

according to investor’s

profile

(3funds)

(Use of existing

bank account)

2009

1995

2012

2012

2010

2012

TFI

PTE

(Management

feesonly)

(100funds)

(100% digitized

accountopening)

13 The development of online fund distribution in Poland is strongly stimulated by the compulsory pension system

11. Benchmark of D-to-C platforms (5/5)D-to-C offer comparison in Germany

PEA

PERP

Securitiesaccount

TFI

PTE

Possiblefinancial

advisory

TFI

Bonds

Equity

Forex

Discretionary

management

0,25% if AUM>

20k€

2 €/trade

Funds selection

Financial research

AdvisoryCleanshare

classProducts

Offered

accounts

Open

architecture/

Nbr offunds

Funds fees ToolsMobile

application

iPhone &iPad

Android

iPhone&iPad

Android

TFI

PTE

TFI

Possiblefinancial

advisory

0,125%-0,250%(max 66,3€/

order)

iPhone&iPad

Android

Blackberry

9 € - 50 € /year

iPhone&iPad

Android

Funds selection

Funds

comparisontools

(8000 funds)

(10 000 funds)

(1700 funds)

(280funds)

PERP

Securitiesaccount

Cashaccount

)

PEA

PERP

Securitiesaccount

PEA

PERP

Securitiesaccount

8 € - 45 € /year

Dynamic toolfor

funds selection,

Standardized

portfolios

Thresholdalerts

Videos, market

overview and

analysis

TFI

iPhone&iPad

Android

(9000 funds)

TFI

PTE

iPhone&iPad

Android

(8400 funds)

PEAPERP

Securitiesaccount

Cashaccount

0,125%-

0,250% (max Fundsselection

Financial research61,5 € / trade)

PERP

Securitiesaccount

Cashaccount

0,125%-

0,250% (max

66,6€)

14 The development of online fund distribution in Poland is strongly stimulated by the compulsory pension system

12. Open architecture vs. Closed architectureReasons for open architecture of D-to-C platforms in the UK

Sources :Platforum

The similarities in terms of market concentration of French and English Asset Management, is a strong orientation for an open architecture

Netherlands

78%

31%

UKFrance

44%

81%

Switzerland

71%

Germany

69%

Italy

•As a comparison, in other countries of Europe, The top 5 Asset

Management companies cover a market share appreciably more important:

Switzerland 81 %, Netherlands 78 %, Germany 71 %, Italy 69 %,

…, France 44 %...

Contributing factors to theopen architecture offer

• In the absence of external funds, it is possible that in certain

situations, D-to-C platforms offering only in-house funds can be

considered out of the D-to-C platforms framework imposed by the

FCA

• In the UK, the concentration of the Asset Management market is

lower (Market breakdown) than the other Europeancountries

• For example, the top 5 Asset Management companies in

the UK cover a 31% of market share

• This breakdown of the retail market of funds in the UK, incites D-to- C

platforms to offer an abundance of funds in order to attract more

retail clients on theirplatforms

• This is to be put in perspective with the pricing model of the services

provided by D-to-C platforms , charging on average 0,30% of the

invested amount by theclient

• To simplify the selection process of funds, D-to-C

platforms reduce the funds range in order to

accelerate the decision process of the client, and

therefore shorten the reduce the time between the

initial contact and the firstpurchase

Iden

tifi

edtr

end

s

Concentration of the European Asset Managementmarket

in France17

13. Building of the offerConsideration of the range of services , products and envelopes

LEVEL1

LEVEL2

LEVEL3

Service Produit ToolEnveloppe

Fund

Architecture

Opening/Closing

Funds selection

Accountsaggregation

CTO

PEA

UC

Simple

execution

ETF

Equity

Bonds

Structuredproduction

Life insurance in white

label

DynamicReporting

CTO

PEA

UC

Discretionary

management

Fund

Architecture

Opening/Closing

Fundsselection

CTO

PEA

UC

FinancialAdvisory

(Robo-Advisor)

Distribution agreement

In-house /

Outsourcing

+

+

HOW?

WHAT:

• Capture the rise of purchasing financial ProductsOnline

• Manage assets andnetworks

• Manage customer investmentcycles

• Service offering level

• Geographicalscope

• Operational model in a prototype approach ( Quick tests and quick breakthrough while consideringgains)

18

14. Implementation of online subscription-redemption (1/6)Blockchain Solution

AM Company

Final Retail Client

Custodian

1

Online

nformation

FundSubscription/ Repurchase

3 AML-KYC

2 I Account

4

AM ‘sWebsite

Retail client’s eWallet

Blockchain Register

1The retail customer goes on the Web site of the Asset Manager’s website, the customer is guided to the page dedicated to on-line subscription-repurchase

2 The customer provides personal information

3 The customer provides the complete set of AML-KYC information/digital documents

4Fund shares subscription by the retail client. The order is received through a Blockchain register provided by the Custodian

Interface WebRTO * Orders are visible in real time by the Asset Management company

*Clearing is nearly instant (confirmation time required by the Blockchain), the client pays using an eWallet, shares are safeguarded in the blockchain

*Securities are safeguarded on a register basis and visible by the customer on the platform of the Asset Manager

Ad

van

tage

s

• Shortening of funds distribution chain

• Possibility of being in direct link with the retail customer, to betterunderstand their needs and adapt products accordingly

• Visibility on the consistency of the fund distribution strategy with thedefined target market and to the categories of associated customers(integration tracking algorithm)

• Less expensive and reliable solution compared to traditional registersolutions

Dis

adva

nta

ges

• Responsibility of the Asset Management company regarding thecustomer relationship and the collection of the informationconcerning : account opening , KYC, information linked to tax system

• Having a good visibility (brand image) with retail clientele is necessaryto guarantee the success of D-to-C distribution

19

14. Usecases for Financial InstitutionsBlockchain: disruptive technology for financial institutions

Co

ntr

ol

Post

trad

ep

roce

sses

Ori

gin

atio

n

Facilitated settlementprocess

• Settlement timing shortened (T+3 currentlyvs 10 minutes)• Automated settlement process thanks to smart contracts• No need for clearing houses – move back to bilateraltrading

Delivery vs Payment transformation

• Simultaneous exchange of assets with P2PPayment-vs-Payment or Delivery-vs-Payment

• Automation of DVP via smart contracts, « internet of things»

Lower operational costs and risks

• Centralised ledger records the movement of every assetwithproof of ownership

• Reduction of number of interfaces to bemaintained• Mutualised reconciliation processes

Reduced regulatoryreporting

• Easily auditable blockchain with all holdings and transactions publicly available (permissionless)

• Grant access to regulators to a comprehensive audittrail (permissioned)

• Any movement of asset can be traced back toinception

Disintermediation of themarket

• No need for clearing houses – move back to bilateral trading

• No need for intermediary structures (CSDs, sub-custody, brokers…)

• Elimination of intermediation between buyer and seller

Fraud and error management

• Lower risk of fraud : doublespending or fake transactions almost impossible

• All market participants registeredon the distributed ledger with information authenticity guaranteed and updated automatically

• Instant access for financialinstitutions to KYC documents

20

14. Implementation of online subscription-redemption (2/6)White Label integration module (CoFunds, FNZ, MFEX, FundsNetwork..)

Ad

van

tage

s

• Shortening of funds distributionchain

• Possibility of being in direct link with the retail customer, tobetter understand his needs and adaptproducts accordingly

• Visibility on the consistency of the fund distribution strategy withthe defined target market and to the categories of associatedcustomers (integration trackingalgorithm)

• Less expensive and reliable solution compared to in-housedeveloped alternatives

Dis

adva

nta

ges

• Responsibility of the Asset Management company regarding thecustomer relationship and the collection of the informationconcerning : account opening , KYC, information linked to taxsystem

• Adapted primarily to informed retail clients (execution only),who don’t needadvisory

• Having a good visibility (brand image) with retail clientele isnecessary to guarantee the success of D-to-Cdistribution

1The retail customer goes on the Web site of the Asset Management company, he is guided to the page dedicated to on-line subscription-repurchase

2

The customer provides the whole AML-KYC documentation (questionnaires prepared by the Asset Management company, hosted by the platform and offered to the customer through the D-to-Cinterface)

3Opening of securities and cash accounts for clients by the intra-group custodian of the outsourced SRL platform

Subscription for shares of funds by the retail customer. The order is received by4 the SRL outsourced platform without arousing actions on behalf of the Asset

Management company.

5 Sending of the order to the custodian of the Asset Management company

6Transmission of the collection by the custodian of the AssetManagement company

7 Securities delivery by the by the custodian of the Asset Management company

AM company

Finalretail client

Centralizin g custodian

5 7

6

1

CASHACCOUNT OPENING

SECURITIES ACCOUNT OPENING

Onlin e

3

2 AML-

KYC

4 FUNDSUBSCRIP URCHASE

TION/P

InterfaceWeb Back-officeand

SRL execution

WhiteLabel

AML-KYC

Tax Reportin g

KIID

Notification

AM’sWebsite

OutsourcedSRL platform

21

14. Implementation of online subscription-redemption (3/6)Partnership with an online broker

Ad

vant

ages

• Possibility of offering an open architecture with competitiveAsset Management funds to make funds comparisoneasier

• Possibility of integrating an interface, to aggregate bank accountsheld in several credit institutions, in order to allow the customerkeep an eye on the bigger picture (Fiduceo)

Dis

adva

ntag

es

• Time limits for the reception of the supporting necessary documentsto the opening of cash and securities accounts

• The Asset Management company does not make the openingof cash and securitiesaccounts

• Cost relative to client relationshipmanagement

• Management of the initial contact AML-KYC and centralization of thedocumentation

1The retail customer goes on the Web site of the Asset Managementcompany, he is guided to the page dedicated to on-line subscription-repurchase

2 The customer provides the whole AML-KYCdocumentation

3Opening of securities and cash accounts for the client by the custodianonline broker

4Subscription for shares of funds by the retail customer. The order is directlyreceived by the online broker

5Sending of the order to the custodian of the Asset Management company forcentralization

6Transmission of the collection to the custodian of theAsset Management company

7Securities delivery by the custodian and payment by the custodian – onlinebroker

AM company

ClientFinal Retail

Centralizin g custodian

5 7

6

1

InterfaceWeb SRL

WhiteLabel

Onlin e

SECURITIES ACCOUNTOPENING

3

2 AML-

KYC

4

CASHACCOUNTOPENING

FUND SUBSCRIPTION/PUR

CHASE

Tradeexecution

KIID

Notificatio n

AML-KYC

TAX REPORTING

AMS’isteWWeebbsit

e SGP

OnlineBroker

18

14. Implementation of online subscription-redemption (4/6)RTOauthorization

FinalRetail Client

Centralizin g Custodian

1

nformation

3 AML-KYC

Online

2ACCOUNT

i

FUND

4 SUBSCRIPTION/PURCHASE

AM ‘sWebsite

Ad

vant

ages

• Ease of implementation and reduced budget of implementation incomparison with the other models ofSRL

• The Asset Management company is not allowed to make the opening ofcash and securities accounts account and manage the administrativefunctionsassociated

• Possibility to offer an open architecture with competingfunds

Dis

adva

ntg

es• Only concerns Asset Management companies having an RTO

authorization• The signature process of agreements with all the retail banks can take

time• Reluctance of the banks to sign agreements: reduction of the GNP

generated by the expenses related to orders executions (inagency/online)

AML-KYC

Tax Reporting

CUSTODIAN

Notification

5AM company

6

7Agreement signature*

Retail’s client custodian

Clientrecord transmission

1

4

TreatmentInterface

Web RTO

6

7

The retail customer goes on the Web site of the Asset Management company, he is guided to the page dedicated to on-line subscription-repurchase

2 The customer provides personal information: IBAN (Securities & cash account)

3 The customer provides the whole AML-KYCdocumentation

Subscription for shares of funds by the retail customer. The order is directlyreceived by the Asset Managementcompany

Transmission of the collection to the custodian of the Asset Management5 company for centralization

Transmission of the collection from the custodian to the Asset Management company

Securities delivery by the custodian and payment by the custodian of the clientwith whom the Asset Management company is under partnership

19

Op

era

tio

nal

imp

acts14. Implementation of online subscription-redemption (5/6)

Example of customer experience

• Choice of the type ofofferedservices

• Selection of aWhite Labelplatform

• Selection ofa custodian

• Selection / creationof a range of adapted products: clean share class

• Strategic choice between open or closed architecture

• Check of the correctnessof information

• Implementation of archiving procedures concerning customer data

• Implementation of procedures concerning the control of executed operations and their appropriatecharacter

Choiceoffunds Choice of the

allocatedamount foreachfund

Agreement onthegeneralconditions

Orders review beforeconfirmation

Confirmationof orders

Reception of the agreementconcerning account opening and the AML documentation bythe Asset Management company

Confirmation of theopening of cash andsecurities accounts

4days

Investmentadvisory Discretionary

management ExecutionOnly Securitiesaccount

opening,…

5min2min

Personalinformation (Name, first name, address, phone number

5min

Formofaccount MIFquestionnaire Fiscal options

questionnaireAML questionnaire (cf. page19)

Supportingdocuments Mailing of thesigned

documents

30min

• Centralization and processing of the customerinformation

• Creation of a dedicatedcustomer service

• Implementation of a unit in charge of the reception/processing of documents

• Agreement of subcontracting with thecustodian

Questionnaire witha scrollingmenu

Scanofsupporting documents

Electronicsignature nonsecurised

Financialadvisory Discretionary

Management Simpleexecution Account opening :

cash account, securitiesaccount…

2

Personal information

1

Useraccount

3

Selectionof offers

6

Funds selection

7

Orders confirmation

5

Securities account opening

4

LCB-FTQuestionnaire

Providee-mail address

Choiceofpassword Confirmation ofthe

e-mailaddress

20

14. Implementation of online subscription-redemption (6/6)Subscription on Register basis

AM company

1

Interface Web RTO

Onlin e

nformatio n

FUND SUBSCRIPTION/

PURCHASE

3 AML-

KYC

2ACCOUNT

i

Treatment

AML-KYC

4 Tax Reportin g

Custodian

Notification

Retail final AM’S Website Retail’sclient

client custodian

5B

Traitement

Custody

Notificatio n

AML-KYC

Tax Reaporti

n g

LifeInsurance

5A

1The retail client goes on the Web site of the Asset Managementcompany,he is guidedtowards the page dedicated to on-linesubscription-redemption

2 The clientprovides an IBAN ( cash and securitiesaccounts)

3 The client provides information and fills out an AML-KYC questionnaire

4Subscriptionfor funds by the retail client, with a possibility to make the payment by credit card or bank transfer. The order is directly received by the Asset Managementcompany

5A Request for a transfer to a registerpositionkeeping mode to the retail bank of the client

Subscriptionoffundsshares by the retail client in the register5B

Ad

van

tage

s

• Ease of implementation and reduced implementation budgetcompared to the other models ofOSR

• Retail customer registers on the liabilities of the AssetManagement company ,what allows the follow-up of itsbehaviour

Dis

adva

nta

ges

• Cost related to client relationship management

• Management of the initial contact AML-KYC and centralization of thedocumentation

• Possibility to create partnerships with some

insurance companies to enable :

• Open an life insurance policy online

• Create a life insurance policy under a white

label

• Arbitrage request submitted by the AM

Company

25

1946

Generation

XGeneration

ZGeneration

Y

1963

15. Generations X Y Z vs. Generation D

Preference for online information and need to compare by yourself

1976 2000 2025

Generation

• 140 millions of people in Europe are counting on digital services to manage theirdailylife

• 60 millionsof them are investors

Investors Generation

D64% 39% 27%

Deeplyintegrated, 100%dutemps

Used to 78%oftime

Steady 62%oftime

Use of digitalplatforms

Managementandmonitoring tools to reach his financial

advisor

Planning tools in particular projectmanagementoriented

tools

Toolstomonitorourpositions andreachourfinancialadvisor Value allocation

To manage your financial portfolio and choose an investment , which are among the sources of informationand counsellingthose you give the most

importance ?

74%

45%

22%

69%

42% 36%

80%

70%

60%

50%

40%

30%

20%

10%

0%

FinancialInstitutions Entourage Media

+63%

Sou

rces:G

rou

pe

BP

CE

Iden

tifi

edTr

end

s

• 520 000 active individual investors on the internet in Francein2015 (+ 10% compared to 2012)

• 1 % of the adult French population (1.7% in Britain and 1.3 % in Germany)

• Age of actives on the internet close to other individual investors• 56 years is the average age of active online investors ,• 50% were 60 orolder• 93 % aremale• € 230,000 median financialwealth

26

In conclusionAsset Management : the industry is facing strategic challenges facing the Fintechs

FinTechs vs.Banks•Banks react to the Fintechs development with strategic

acquisitions, partnership, and in-house projects.

Active management vs Passivemanagement•Funds are decreasing their market shares due to the ETF boom where AUM are

up to 2 800 billions at the end of March 2015 thanks to their competitives fees

Synergies and growth with D2Cdistribution• Develop the retail market directly an offer new digitalized savings

services lying on discretionary management expertise

GenerationalMarketing•Change of investors behaviour online, notably from « Digital natives » where

expectations services are evolving

Regulatory constraints•MIF 2 et IDD create imbalances when UCITS Funds are sold on

securities account or life insurance policy

27

A specific type of consultancy solely focused on financial services

25%Aurexiaannualgrowthyearon

30+clients

partners

3Locations

LON – PAR - LUX

70+consultants andgrowing

WHAT WE DO

IMPLEMENTATION

PROGRAMME MGT

PROJECT MGT

CHANGE

EXPERT BUSINESS ANALYSIS

OUR STORY

Aurexia was founded in 2006 on the belief that the banking industry needed morethan pure management consulting skills from its service providers.

Coming from leading consultancies, Aurexia founders supplemented deep domainknowledge with pragmatism & practicality to partner with clients in the delivery ofkey transformation programmes. Due to this approach we have partnered with thetop 5 continental investment banks.

2014 Aurexia opened its London office, with Luxembourg shortly following in 2015. Withthis strategic move, Aurexia is better positioned to support historical clients’ needs andbroaden its client base to worldwide industry leaders.

BUSINESS AREAS WE COVER (London Practices)

FINANCE &RISK

RETAIL BANKING

FUNCTIONAL & IT ARCHITECTURE

INSURANCE

INVESTORSSERVICES

CORPORATE& INVESTMENTBANKING

28

Aurexia staff at the core of our development

We have built an internal framework that ensures that each Aurexia consultanthas a forward-looking vision of the industry challenges and opportunities.Throughout their career at Aurexia, consultants actively participate to thecompany’s industry review and clientofferings

OURPEOPLE

What makes Aurexia special is a unique blend of industry expertise, solution-oriented mind-set and best-in-class transformation skills. Aurexia consultants aredecisive in scoping, launching and implementing their clients’ projects. They allpossess the necessary soft skills to integrate into client teams delivering assingleunit

OURVALUES

Respect

Team spirit

Share of knowledgeOur

valuesBusiness expertise

Qualityfirst

Innovation

OURCULTURE

We support and encourage an entrepreneurial outlook andindependent thinking. Aurexia is not about hierarchy andorganizational charts, we believe in a flat structure empowering allemployees to feel that this is their firm to own and run. Resulting inplenty of opportunities for cross-learning, working on projects thatmake a real contribution to personal development as well settingclients up forsuccess

25

Our Expertise

FINANCE & RISKKEY ENGAGEMENTS

KEY INDUSTRY CHALLENGES

•Regulation: IFRS9 inventory of positions shifting fromAccrued accounting to Fair Valueaccounting

•Regulation: IFRS9 implementation scenario analysis forthe management of new accounting classifications inGeneralLedgers

•Project Management: Management of the firm-widePrudent Valuation project and industrialization of AVAcomputations

•Project Management: Lead CIB entities preliminarystudy to integrate CIB framework with the firm-wide anduniversal target financial data warehouse (Risk-Finance-Liquidity integrated approach)

26

THOUGHT LEADERSHIP PUBLISHED

•Finance Regulatory Overview : a global overview of regulatory challenges thatFinance and Risk departments will face in the next years

•Finance Function Target Operating Model : a clients’ interviews-based studydrawing the possible futures of the Finance function in the post-crisis and highly-regulated context of financial services

•Aurexia Blog : Aurexia consultants share their views on the upcoming challengesand conundrums of the Finance and Riskdomains

•Conferences : Leading discussion on the impact of changes in the calculations ofprudentvaluations

Fundamental Review of the Trading Book IFRS9 Expected Losses implementation IFRS9 Classificationsimplementation Finance, Risk, Liquidity process,data and

architectureconvergence

Our Expertise

•Regulatory overview : impacts of regulation on Custodian / Asset Services andAssetManagers

• BPO : study on the impact of BPO on Asset Management and the creation ofa sharedservice

•FinTech impact on distribution: analysis on the business process impacts ofMiFID 2 on Fund distribution for Asset Managers and the role to be played byFinTechcompanies

•Aurexia Blog : Aurexia consultants share their views on the upcomingchallenges faced by newregulations

INVESTORS SERVICES

Funddistribution Post trade activities outsourcing for

broker/dealer

CASS 871(m) CRS

KEY INDUSTRY CHALLENGES

THOUGHT LEADERSHIP PUBLISHEDKEY ENGAGEMENTS

•BPO: Market Study on functions that can be outsourcedto reduce costs, and market availability to outsource

•Merger: Coordination of the merger between 2 AssetManagers for custody & fund administration processes &procedures

•Process Optimization: Introduction of automation &reduction in process breaks within clients onboardingprocess

•Regulation: Regulatory engagements across multipleorganizations partnering with clients to define thebusiness response to the regulations. (e.g. MiFID2, EMIR,DF, FATCA, AIFM)

27

Our Expertise

•Regulatory overview : analysis of the impacts of MiFID 2 on CiB front to back processes

•Industry watch : Fundamental Review of the Trading Book analysis and impact overview

•Industry watch : Cash management for Corporates, optimizing Banks'proposition

•Aurexia Blog : Aurexia consultants share their views on upcoming impacts on liquidity and collateral industrychallenges

CORPORATE & INVESTMENT BANKING

•New Business Line: Set-up of a Global business line andprocessing for Collateral Management, from requirementto application including reengineering of the OTCValuation process

Derivatives•Book Transfers: Transfers OTC portfolios and organize novation of trades

•Regulatory engagements: CIB Clearing complianceprogrammes for US, Asia and Europe. Also thecompletion of compliance Remediation plan for a Primebroker

•Data Governance: Set-up a Chief Data Officer functionto rationalize use of referential data in the BCBS 239perspective

MiFIDII BCBS239 EMIR/DF DataQuality Digital offerings forCiB

KEYINDUSTRY CHALLENGES

THOUGHT LEADERSHIP PUBLISHEDKEY ENGAGEMENTS

32

Our Key Partners

30

www.aurexia.com

Charles BAIN de la COQUERIE+33 (0) 6 80 37 32 15

charles.baindelacoquerie@aurexia.com

Dominique HERROU+33 (0) 6 77 94 48 14

dominique.herrou@aurexia.com

Eric VERNHES+33 (0) 6 86 51 54 76

eric.vernhes@aurexia.com

David VILLARD+ 33 (0) 6 75 53 19 47

david.villard@aurexia.com

TO CONTACT OUR PARTNERS

MEDIA

PublicationsAurexia Institute, TV & Blog

LinkedInSuivez notre company page

Site web responsivewww.aurexia.com

OUR OFFICES

PARIS Office 62 rue de Caumartin, 75009 Paris

LONDON Office1 Fore Street, London EC2Y 5EJ

LUXEMBOURG Office 4 rue de Bragance, L-1255 Luxembourg