The Fundamentals of Wealth Intelligence for

Financial Markets

2012

White Paper

An Analytical Approach to Wealth IntelligenceApplying Analytics for Effective Wealth Identification

About WealthEngine™, Inc.WealthEngineTM, Inc. is a leading provider of sophisticated wealth intelligence solutions to financial services firms, including asset managers, commercial banks, private wealth managers, insurance agents and brokers, as well as organizations within the luxury, education, healthcare and nonprofit industries. More than 3,700 clients use WealthEngine’s solutions for comprehensive analytics and research on individuals, companies and foundations. Headquartered in Bethesda, MD, WealthEngine serves clients in both the United States and the United Kingdom. For more information, visit www.wealthengine.com.

An Analytical Approach to Wealth Intelligence 1

Those advisers who are able to convey a thorough understanding of their target audience and employ creative ways to prospect are most successful in attracting and retaining business. The reputation and investment performance record of your firm are only a part of the equation. To secure a larger share of the more than $10 trillion that Americans have invested through financial professionals, you need a unique approach.

When looking to upsell to current customers, expand your reach or build your pipeline of qualified prospects, a well-thought and well-executed strategy will deliver results. Data analytics play an important role in the strategy and decision making process. In essence, numbers when correlated with possibilities, can tell a compelling story.

Analytics allow you to take essential data on your customers and prospects and use them to develop ratings and scores that empower you to systematically understand who they are, how to target them, when to reach out and what solutions to present.

REPUTATION

PERFORMANCE

AUDIENCE

STRATEGY

CREATIVITY

ANALYTICS

Apply Analytics for Effective Wealth Identification:

T Identify current customers for cross sell and upsell opportunities

T Identify prospective cus-tomers with connections to current customers

T Identify new prospects who are similar to top customers

T Segment and prioritize business development efforts on highest value prospects

T Execute targeted market-ing campaigns and sales promotions

T Maximize marketing ROI

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How Analytics Factor Into Wealth IntelligenceWealthEngine utilizes hundreds of data points to more effectively analyze wealth and develop custom analytic solutions for clients. When examined together, these attributes create a complete picture or profile of an individual’s wealth. This information is critical to understanding your target audience and their needs, determining which lead generation techniques are best to broaden your sales horizons, and developing strategies to sell additional products and/or services to existing customers.

WealthEngine provides key insights such as the individual’s net worth, total assets and cash on hand scores that correlate with discretionary income and investable assets, as well as insight on their relationships, education, businesses owned or employment, affiliations, lifestyle, interests and more.

By aggregating information from multiple data sources and across a variety of wealth attributes, WealthEngine’s analytics provide a means to rate or score an individual based on both their ability to use your services and the likelihood of them doing so.

This insight gives you the ability to apply a systematic approach to understanding your customers and prospects, so you can uncover new opportunities, save time and better focus your marketing and business development efforts. When done using both internal data found within your own organization and external data sources, you have customized and actionable insight to guide your business development strategy.

The WealthEngine DifferenceWealthEngine’s scores can help you identify, segment and prioritize those customers and prospects with the right attributes, with greater confidence and precision than ever before.

Use the information about your existing customers to develop a target audience for your business and drive marketing and business development strategies to win new customers and increase assets under management (AUM). This insight also enables you to get more qualified prospects who look like top customers, drive targeted email campaigns and integrated marketing strategies, get more referrals based on knowledge gained and prospect more effectively.

Wealth Attributes Used to Develop Scores

T Asset and income (real estate, income, stock holdings, pension)

T Investment interests (equities, bonds, real estate)

T Personal household (husband, wife, children, age, education, ethnicity)

T Demographic

T Lifestyle interests (i.e. golf, tennis, skiing, boats, horses, etc.)

T Charitable contributions

T Family foundations

T Nonprofit boards, clubs and awards

T Political affiliations and contributions

T Boat ownership

T Aircraft ownership

T Contact (home & business address, email, phone number)

An Analytical Approach to Wealth Intelligence 3

Overview of Wealth Scores

Ratings & Scores Definition Values Provided Practical Application

Net Worth The difference between total assets and total debt for a household

Ranges based on dollar value

Use when targeting products and services to high net worth customers and prospects

Total Assets The total value of all financial and non-financial assets held by a household

Ranges based on dollar value

Use when targeting products and services to customers and prospects when liabilities do not factor into decisions

Cash on Hand Estimates the amount of available cash for the household. This is based on readily accessible, discretionary funds (e.g., checking, savings, money market accounts, etc.)

Ranges based on dollar value

Use to identify individuals that have cash on hand to make a large purchase or deposit

Propensity to Give (P2G™)

A score to assess an individual’s means to give and the inclination to do so. It is based on exact household matches, overall wealth and financial ability

1-5 scale Use to segment your list and prioritize efforts by focusing on those with better wealth profiles and more accurate matching

WealthEngine’s scores were developed around many different population segments, resulting in 60+ algorithms that account for population differences. Moreover, these scores were developed on the individual level, not an aggregated, Zip +4 level, which offers several key benefits:

T Prevents one household with a multi-million dollar income from skewing the average incomes of other households in the tract

T Asset behavior varies dramatically by age. Zip+4 level averages age, diminishing the impact of varying behavioral characteristics.

T Avoids classifying renters as homeowners and subsequently inflating actual assets

WealthEngine’s scores have been validated against ‘truth’ files that statistically represent the U.S. population to ensure maximum accuracy. In fact, our testing showed that most scores predicted 95% of actual range or +/- one range. WealthEngine recalibrates its scores on an on-going basis to account for economic and individual changes. This strategy is exceptional—many wealth intelligence companies validate their scores while in development but do not reevaluate the scores regularly for accuracy.

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WealthEngine’s scores are incredibly accurate, statistically significant and employ a sophisticated analytic approach.

✓ Developed on ‘truth’ files using actual wealth data on individuals

✓ Developed 50+ algorithms using robust statistical methodology of segmented statistical algorithms

✓ Validated algorithms against independent truth file

✓ Results showed strong accuracy

Draw Greater Insight with Custom Predictive Analytics As financial professionals, finding new ways to generate business is an ongoing process. Advisers often spend all day, every day, talking to current or potential clients. So it’s important to make sure that you are talking with the right people – those that are most likely to become your next top clients.

To define a target client or ideal client, you need to get a picture of who you are really serving. When you know the wealth, demographic and psychographic details of your ideal client, you can leverage that information to generate new referrals and close new business.

WealthEngine offers customized data analytics solutions that allow you to uncover trends and crucial insights to inform your marketing or business development strategy. They are based on your specific goals and an understanding of your specific target audience, rather than industry-based assumptions.

Using a combination of predictive and descriptive analytics, we help you answer critical questions about your customers and prospects so you can build an informed marketing strategy. When creating a model, WealthEngine analyzes your customer data along with WealthEngine’s wealth data to expose patterns that can predict customer behavior. This approach gives you the insight needed to significantly optimize your customer interactions and build targeted, effective customer-focused campaigns.

Past

Descriptive AnalyticsStatistical Pro�lingMulti-dimensional Statistical AnalysisCustomer or Prospect Segmentation

Predictive AnalyticsOptimizationPredictive ModelingForecasting

So what?Future

What happened? What might happen?

Analytics can give you the answer

An Analytical Approach to Wealth Intelligence 5

This process involves five crucial steps:

1. Needs assessment and review of client’s goals and fundraising strategy

2. Screen data across WealthEngine’s platform to assess the wealth potential for all individuals and uncover insight on their demographics, lifestyle and interests

3. Create custom analytic solution, for example, by determining the optimal set of predictors among various lifestyle, wealth and geo-demographic variables to predict a certain behavior

4. Onsite delivery of results to use as a strategic roadmap for success

5. Ongoing consultation throughout the year for training, measuring return, etc.

In delivering a predictive analytic solution, WealthEngine first conducts a screening, or Wealth Append, to uncover insight on the wealth potential of your customers and prospects and better assess their demographics, lifestyle and interests. WealthEngine leverages data from 60 actual and influenced sources to develop our solutions and determine if the individual qualifies as a high-net-worth individual. WealthEngine’s scores are then used to further analyze, segment and rank order your list, and the statistician then applies the custom analytics to derive greater value from your data.

Assess Needs Screen Data Create Models Deliver Results Consult Regularly

“There are so many opportunities for marketing and relationship professionals to benefit from WealthEngine. We’ve leveraged WealthEngine analytics to get a complete wealth picture of those clients and prospects that have the potential to drive our business. It’s a great solution for uncovering opportunities to gain a greater share of wallet, and it enables us to focus on those clients that will be the longest lasting and most productive.”

- Chief Marketing Officer, Leading Commercial Bank

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WealthEngine Custom Analytics & Predictive Modeling

Custom Analytics & Predictive Models Definition Practical Application

Customer Segmentation Identifies distinct customer profiles and target segments in order to achieve a better understanding of your customers. One tool used for customer segmentation is Clustering.

T Develop marketing and business development strategies

T Target new geographies or new market segments

T Identify cross sell and upsell opportunities

Customer Profiling Model Predicts the likelihood of a prospect having the characteristics of a top customer and identifies look-alikes, or prospects with similar characteristics as your top customers.

T Developing and prioritizing a prospect list T Segment and prioritize your business

development efforts on your highest value prospects

T Execute targeted marketing campaigns and sales promotions

Circle of Friends Analytics Identifies the attributes that best fit your top customers and then determines similar attributes among your customer’s professional and social connections

T Developing and prioritizing a prospect list T Segment and prioritize your business

development efforts on your highest value prospects

T Execute targeted marketing campaigns and sales promotions

Marketing Campaign Strategy Develop strategies to get more qualified prospects who look like top customers, drive integrated marketing and email campaign strategy, and apply best practices in wealth intelligence to get more referrals

T Segment and prioritize your business development efforts on your highest value prospects

T Develop and refine targeted marketing campaigns, email campaigns and sales promotions

Post- Campaign Analysis Determine who was intrigued enough to open your message, and how many were still curious enough to click through to visit your site for more information. Identify who your most responsive audience is to help you better target future campaigns.

T Assess your business development efforts to determine impact and ROI

T Develop and refine targeted marketing campaigns and sales promotions

“We are reaching the people we want to reach. We recently sat down with a couple of people, and one of them had just sold a business for $50MM. I’d say that is someone we want to work with. We would not have known he existed, if not for WealthEngine.”

- Principal, Wealth Management and Investment Advisory Practice

An Analytical Approach to Wealth Intelligence 7

Best Practices for Applying Custom AnalyticsWealthEngine takes a best practice approach to develop a predictive analytic solution that helps you achieve your marketing and business development goals.

1. Clarify the GoalWealthEngine works closely with you to understand your needs and concerns, identify areas of concern and formulate a hypothesis as necessary, before conducting the analytic study. It is this strategic, consultative approach that distinguishes our service and ensures that the client gets the answers they need.

2. Understand Your DataWealthEngine works with you to understand what data is available for use, whether it comes from internal sources, through WealthEngine, or both. With this foundation, we establish the variables in the dataset, determine the dependent variable, and identify possible independent/predictor variables in order to assess the statistical relationship between the variables.

3. Understand Your AudienceWho is using the results and how will the results be used? Are they being used by the marketing and business development teams? Are they used by business leadership when making strategic decisions? With an understanding of who the audience is within your organization and what type of information is important to them, WealthEngine can help you correctly identify the goal to be achieved and glean insight from the model findings.

4. Employ a Proven ApproachWealthEngine’s custom analytics team follows an industry-proven approach, collaborating with you at each step to make sure your needs are being addressed in the modeling project. The process includes these six key phases, although the exact sequence of the phases is not rigid, and moving back and forth between different phases is important:

T Business Understanding

T Data Understanding

T Data Preparation

T Analysis (e.g. predictive modeling)

T Evaluation

T Deployment

Example Variables

T Customer type (current, past, prospective)

T Wealth indicators (assets, net worth, cash on hand, income)

T Demographics (age, marital status)

T Contact info (phone, email)

T Charitable interests and affiliations

T Lifestyle attributes (own luxury goods, autos, horses, boats, etc.)

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We make every effort to make clear what parts of the process require client input and what data inputs are required from the client in order to make the model valid. Our experience shows that the lessons learned during the process and the outcomes of each phase can trigger new and often more focused business questions. Data mining is not over once a solution is deployed, but is a continual process that adds insight.

5. Build Analytics-driven StrategiesWealthEngine provides both a summary of the findings as well as recommendations and next steps as they relate to the client’s marketing or business development strategy, as well as next steps for future research, modeling or analytics projects. Armed with this information, you can build an effective marketing and business development strategy that will drive revenue growth.

Analytics in Business Development

6. Measure Return on InvestmentDelivering results to your board, senior management and other stakeholders is essential. But to deliver results, you need to first be able to measure them. WealthEngine helps you measure return on investment through post-campaign analysis and ongoing consultation.

Applying an analytical approach to your marketing strategy can greatly increase ROI. By monitoring analytic results over time, you can identify if there are issues with your current marketing or business development efforts. This also enables you to see if the predictive model needs to be recalibrated or redeveloped to strengthen subsequent campaign performance.

By applying analytics in your strategy and decision-making on an ongoing basis, and coupling them with marketing analytics such as campaign and digital marketing metrics, you can ensure that your efforts have maximum impact.

A Collaborative Approach

More customers Purchasing more often

Higher value per sale

Better decision making

Higher ROI

Example Business Problems for Financial Markets

T Who among my customers are likely to churn? Statistically identify characteristics of those customers who left and find customers that share those similar characteristics.

T Who among my customers are likely to become less active/more active with their investment behaviors? Conduct geospatial evalu-ation of economic/wealth trends as they react to economic shocks (tech-nology & price shocks, for example) and apply these insights to customer base that is likely to be affected.

T How long before my customers reach a certain level of investment classification? Apply hazard modeling techniques to predict when a customer will have an overall investment portfolio at or above a certain level, based on those that have this classification and their corresponding trends in investing over time relative to their wealth dynamics.

An Analytical Approach to Wealth Intelligence 9

A Best Practice Guide to Applying Custom Modeling & Analytics for Effective Wealth Identification

Person(s) Responsible

Task You WealthEngine

1. Clarify Your Problem

State your goals and share them internally

Establish a plan, objectives & budget for a custom analytics solution

Get feedback and perspective from others within your department, others within your organization and senior management

Document your plan

2. Understand Your Data

Determine what data is needed, both internal and external

Determine the dependent variables

3. Understand Your Audience

Determine who will use the results of this analytics project and how they will use them.› Users within your department › Users from other departments within the organization › Organization and business leadership

4. Employ a Proven Approach

Follow a proven methodology to data mining and analytics

Select model approach and design model(s)

Prepare data and conduct a wealth append (screening)

Build model

Evaluate all variables and select the most predictive and complementary based on your statistical analyses

Conduct analysis

Evaluate model and test validity

Prepare and deliver summary of analysis and results of modeling

Evaluate results

5. Build Analytics-Driven Strategies

Share insights with people in your department, organization and leadership

Develop recommendations for marketing strategy, including:› Strategies to target customers & prospects › Strategies to reach new audiences or new market segments

6. Measure Return on Investment and Plan Next Steps

Compare predictive analytics against actual results to see which aspects of your marketing campaigns are working, and which may need to be refocused

Combine wealth and marketing analytics, such as campaign and digital marketing metrics

Combine analytics with professional experience and sound judgment, and you cannot go wrong!

wealthengine.com info@wealthengine.com 800.933.4446