Bank of America Corporation (NYSE:BAC)
2014 Credit Suisse Financial Services Forum Conference Call
February 11, 2014 1:00 PM ET
John Thiel – Managing Director and Head, Merrill Lynch Wealth Management
Andy Sieg – Managing Director and Head, Global Wealth and Retirement Solutions
Moshe Orenbuch – Credit Suisse
Moshe Orenbuch – Credit Suisse
Good afternoon everyone and thanks for joining us. We are very pleased to have the management of Bank of America with us today. The company overall has significantly enhanced its capital position in recent years, working on doing the same for profitability.
With us today are two representatives of the wealth management group which accounts for over 20% of revenue and profits for the company, key strategic advantage and growth area. John Thiel, the Head of U.S. Wealth Management Private Bank and Investment Group for Merrill Lynch Global Wealth Management. He manages 13,000 financial advisors and 300 private wealth advisors. He begin as a FA with Merrill in 1989 after spending time in the accounting and insurance industries.
Andy Sieg is the Head of Global Wealth & Retirement Solutions since 2009. He's been in numerous roles in Merrill since 1992 with a brief detour to I guess we would call it the dark side Citigroup from 2005 to 2009. They are going to be presenting kind of together, but we'll turn it over to John to start.
Thank you. I mean obviously it's a great honor for us to be here. We are actually going to talk about the global wealth and investment management business. We've a lot of acronyms at the organization. So understand that's Merrill Lynch Wealth Management and U.S Trust together and we'll show some delineation on the two throughout that. But obviously we feel very comfortable that we're in a business that has really good growth characteristics and we have a competitive advantage. And we'll go through over the next few minutes talking about those competitive advantages.
First and foremost we have a real diversity of revenue streams, when you think about our fee-based assets under management, our deposit book, our loan book and the work we do with our clients in planning and using trust capabilities. Second thing is that we have the most productive advisor force which obviously gives us a lot of benefits as we think about it financially but also recognizing that those advisors can grow even further.
Thirdly we have investment class platform and invest in that routinely which Andy will talk about. The enterprise presents a lot of opportunities when you think about what we do for our clients helping them individually but that allows us to intersect with our commercial banking partners, our global market partners, investment banking and the across not only wealth management but certainly in the institutional space.
And then finally we operate at scale. So there is a lot of efficiency and through that scale and expense management we think we can provide opportunities, continue to expand on the profitability that we have today. Andy, maybe a little bit.
Great. Thank you. Good morning everyone. Just to pick up where John left off and to echo what Moshe said, the wealth management business is the very significant portion of Bank of America overall. It represents about 20% of Bank of America's overall revenues and if we just look at net income before taxes, global wealth and investment management is about 28% of the overall bank.
The business, as you know, has produced very consistent returns overtime and the business also is capital light. So if we look at returns to shareholders from the wealth management business it's about 30% return on allocated capital.
On the right side of the slide you see the two brands which we're very proud of, the Merrill Lynch Wealth Management brand, which is headed by John as well as U.S Trust brand which is headed by our colleague Keith Banks. Between Keith, John and myself, the three of us as a team drive the wealth management sector forward. And importantly as you see on the slide, we are completely aligned with the overall operating principles, as Brian has said for the Bank of America as an enterprise.
So when you think about revenue, $17.8 billion of revenue we show you the characterization of how much of that is represented by the Merrill Lynch Wealth Management business as well as U.S. Trust and then if you move over to our net income before tax, you can also see that $4.5 billion. So you start to see the scale and the opportunity in the size of the business.
But more importantly if you move to the top right, what you see is that diversity of revenue expressed in the form of balances that are producing this recurring revenue. We got $820 billion of fee-based assets under management, we got a $245 billion deposit book and a $120 billion loan book. And then a large sum of that, that's over $1 trillion sitting in brokerage assets where we think there is opportunity to really drive fee-based asset management as an example.
And if you look at that in totality where does place us, we were number one in clients assets, we are number one in personal trust assets, we are number one in deposit balances, number one in lending balances, capital revenue as well as net income before tax and the margins at which you operate. So a lot of momentum in this business and a lot to build from. But obviously the market is important.
Absolutely and excited as we are about the position of the business today. Looking forward we're very excited about the opportunities that the market presents in wealth management in the U.S. Wealth management in the U.S addresses about a $40 trillion investable assets market and if you look at some of the underlying dynamics of that business it's going to be driving strong growth going forward.
Demographic trends, the retirement of the baby boomers perhaps first and foremost, second of all the wealth transfer and the dialogue that has to happen around wealth structuring and the state planning driven by that generational change. And then finally the way that opportunities in the wealth management markets are interacting with what's happening in the corporate and small business sector where we are seeing increasing private sales that are resulting in wealth management opportunities as well as companies of all sizes who are using the benefits platform much more strategically to win the war for talent.
And so we take these dynamics and then you look alongside them at lifestyle changes that are happening, the way the technology is impacting clients, changes in the tech landscape, all of these is producing a demand for advice. So together we think it's a very bullish case in terms of what the opportunities are in the wealth management arena.
So clearly the environments get opportunity, one of the first things we did over three years ago is really look at this very large business $2.4 trillion in client balances and really begin to dissect it. I like to use an old saying that to a hammer everything looks like a nail, and when we looked at our business four, five years ago, we are tailing it all towards that affluent client. And then not really looking at it on a segmented but we changed that three years ago.
So we really have a focus across these segments that you see. So on affluent segment, which we define is $250, 000 to a $1 million; high net-worth, a $1 million to $10 million; ultra-high net-worth 10 plus in institutional. What you see in the point of the slide that each have different growth characteristics and they are all big so the affluent space is $300 billion, the high net-worth space $800 billion, ultra-high net-worth 500 billion and the institutional 300 billion.
But what $2.5 million clients need, what a $25 million clients need and what $250 million retirement, defined contribution retirement plan are very different. So we've organized ourselves, Andy and I and Keith around these client segments and we are starting to see some of that work show off in that growth rates. If you look at like the institutional or the ultra-high net-worth, where the growth dynamics are really pretty staggering in and around how we have grown the balances in those business.
Our growth drivers in our strategy are simple and it's simple for reason, it's a big business, we've got a long history of serving clients and we wanted something that was repeatable and most importantly focused around clients. So our growth drivers are really simple. They are retained by our clients and our advisors, job one. With 14,000 advisors, $2.5 trillion in assets nothing I can do can have more of an impact than maintaining and growing those relationships and we can talk about what we're doing on that.
The second piece is then is around that what we call strengthening the relationship and this is pretty fundamental as you think about what wealth management is. There are a lot of people that still believe that wealth management is investment management that's one piece of wealth management. Wealth management is the investment management process, cash management lending and wealth structuring as clients began to pass wealth and all of those are opportunities, all those things are segments we serve and folks we serve as well.
And then the last is do the first two well it's really to take advantage of our leading position and grow and acquire more with strategy and the strategic initiatives that we develop. So I'd just talk about a couple. One is, what we are calling goals based wealth management, now it's the name that lot of people probably may not understand but fundamentally to me it's important as anything we're doing and really to say this plainly as possible, we've identified the fact that we have to change the dialogue with our clients.
So for so many years our value was placed on our ability to outperform the benchmark. And at the end of the day, that's not the way our clients think about their money, yes performance is important we take that it's a given but what we learned from 2000 to 2011 is that equities get some fee returning, 1.1% it's really tough to retire on 1.1% year for 11 straight years in a row. And so that we had to start talking about outcomes, because clients think their money has a job to do.
So we are reorienting our approach obviously still recognizing that performance is important, but now helping our clients identify what are their first priorities, their concerns, their goals and how can we track progress towards their success of retirement, the education of the kid, the second home and the like, which is fundamentally a very different conversation and one the clients are absolutely welcoming. And then obviously strengthen those relationships across banking and lending, make fee-based asset management core to the relationship, knowing that it would never be the only way to serve clients but clearly an important piece.
And so how that manifests itself, that diversification of revenue, the approach across wealth management you start to see here, because you can see the revenue and how it's growing and if you look at the fee-based assets under management the growth rate over the last several years, compare that to net interest income which is obviously the deposits and the loan and then our transactional balances which are growing but growing but slowly and that's very analogous across the industry.
So we know what the strategy and the implementation of the strategy, along with those simple growth drivers that we can continue to see this kind of results across our business, that's you saying okay competitively how does this stack up.
So let's just take deposits and loans and look at those. And it's interesting because many people want to suggest that this a new strategy for our organization, if any of you have followed Merrill Lynch as an example back several, many years ago the CMA account which Don Regan introduced in 1975 really was our attempt to really win the operating cash balances and begin to lend money to our clients.
What happened was in 2008 we came together with Bank of America and we've got a set of capabilities, we got a set of -- we were ubiquitous, we had deep experience in structured lending and we were able to take that client base of ours that we were doing pretty well with and really leverage the strengths of that organization and the great history that US Trust has had doing that. And you can see where we stack up to our competitors, with $245 billion of deposit balances, $125 billion of loans gives us a distinct advantage especially in the light of what some day should happen with rates.
The last thing maybe I'll talk about is this productivity advantage, because it's important, people will have written about the fact that hey isn't the [Wire House] industry losing advisors and are you losing share and the fact is that we've lost a slight amount of share to registered investment advisors. But if you look at what happened to the average productivity of our advisors, you see it moving up to where we near the lead and if you look at all our advisors and we're absolutely in the lead in experienced advisors.
The difference you see there is our development program, which we are unique in our industry we have over 3,000 advisors in our development program. Said another way it's our way to organically continue to build our sales force as our advisors age. But more importantly as the complexity of our clients grow across these many different sets of solution that we provide, we can put those advisors on to a team and they can distinctly cover specialty around the teams advisor clients base. So that's a clear advantage.
The great thing if you look at that so how is it done over time. In 2009 we had about 3,450 advisors who did a $1 million in revenue and we ended last year with over 5,160 advisors that did that. So you can see that productivity advantage and that manifests itself obviously in our work around our margins, and our [inaudible] because those fixed costs are fixed around those advisors.
And then the last thing real quickly we talked about a little bit about goals based wealth management. I would just mention that the other big investment that we had is in and around our teams and their productivity and supports what I just explained with this optimal practice that we've identified which is really our attempt to put function and process around key parts of our advisors' business. What are some of the parts business? You add up all of our advisors and that's what our business is.
So our goal is to help them run their businesses effectively, efficiently and as client focused as they need to be continue to capture the opportunity. So significant investment in that over $40 million a year to really invest in those advisors which is fundamental to retained strategy because the advisors know we are investing them in the business, their productivity is growing and obviously their income as well. Andy you address from here the platform.
That's great. Thank you. If we just focus for a minute where John led us which is talking about our platform, we see our platform capabilities as our real source of competitive advantage for us not just the breadth of capabilities but also work that we have done through programs such as goals wealth management that take our capabilities and better match them with the needs that our clients have shown to us. We have the capacity financially to be making investments across the cycle and many of our competitors have not and those are in areas of our traditional investment products as well as other aspects of the platform such as wealth structuring and our institutional retirement business.
And as John said Merrill Lynch's commitment to making the brokerage business and the banking business connect with each other goes back for the better part of four decades. If we look today of what Bank of America and the combination of the Merrill Lynch and Bank of America has meant in terms of bank brokerage integration it is truly striking. In any given month 48% of Merrill Lynch clients use the capabilities of Bank of America, either in the banking centers, ATMs, Bank of America Online, Bank of America mobile services.
We see our Merrill Lynch clients make 1.7 million banking transactions a month they drove 2 million ATM transactions a month, they deposit about $7 billion a month at the bank and so Don Reagan's vision about what CMA could mean in terms of brokerage integration the combination of Bank of America Merrill Lynch has made that a reality in our business.
If we then think about our core business that our clients know us for one of the most substantial investments that we are making is essentially an overhaul of our entire investment or set of investment advisory platforms. On the upper left side of this slide you see alphabet soup of acronyms. These are legacy investment advisors programs, they are separate account managed programs, the unified managed account program whose inception goes back I think to my senior year in colleges when the first of these programs is introduced.
We are as a firm spending about $100 million over several years to pull up this legacy program and replace them with new state-of-the-art integrated investment advisory program which we call Merrill Lynch 1.
At this point in time the platform has been build. It's been introduced to our financial advisors. It started with a pilot at the end of last summer. There are now about $2,600 financial advisors that are using the Merrill Lynch 1 platform, there is little over $9 billion of planned assets on the platform, the receptivity from our advisors and clients has been very, very high. You are going to continue to see the roll out of the Merrill Lynch 1 platform go through the Merrill Lynch system over the next six months and by the end of 2015, all of those legacy programs on the upper left of the slide will sunset and all of our investment advisory activity will be happening on Merrill Lynch 1.
Why is this important? We think that growth in fee-based assets that you see on the lower left will be able to accelerate from these levels given the strength of platform. And what we are also seeing and frankly I think both John and I are struck by it is how much efficiency our financial advisors and their support teams are picking up from the new platform. They are literally telling us that in some cases their client associates have a third of their day that they are able to then reinvest in client service to support the deepening and the strengthening the relationships as John talked about as well as spend more time around client acquisition. So there is a good deal of our strategy that's revolving around this introduction of Merrill Lynch 1.
When I mentioned earlier, that we are very much driving this business in a coordinated way with Brian's operating principle and the rest of the broader bank, one of the most vivid ways of this that this is coming to the fore is that the fact that we are pursuing growth opportunities which we think are very differentiated when we look at other wealth management firms, because we are leveraging the scale and the reach overall of Bank of America to drive the wealth management business.
Two areas where the results have been very, very strong. The first if we look at the Merrill Lynch legacy institutional retirement business and so this is where we are providing 401(k) plan services, equity comp plan services, we service defined benefit plans and some other benefit types for companies that business embodies capabilities which are relevant to essentially 100% of Bank of America's corporate clients ranging from the largest customers of the investment bank and the corporate bank down to small businesses.
Over the last two years, this activity working together between the Merrill Lynch retirement business and the bank has essentially tripled over the course of two years in terms of planned wins that we have. We won about 200 401(k) plans and other benefit plans with the commercial banks and the small business banks in 2012.
In 2013 that number rose to a little over 700, as you see here on the slide and we think that growth trajectory will continue. It's an example of bringing capabilities that we have to a much broader range of clients through the reach of the bank and we love the retirement business not just because it plays to the demographic trends that we talked about earlier and the delivery overtime in plan services and profitable in its own rights, it is also a feeder engine for our core wealth management relationships at Merrill Lynch and U.S Trust as individuals have needs outside of the plan or roll out overtime in plans and need individual brokerage accounts or investment advisory relationships.
At the bottom of the page we've summarize some work. But we are also beginning to leverage the reach that the 5,000 Bank of America consumer bank locations can have in terms of building our wealth management business. Over the course of the last couple of years we've began positioning what we ultimately be about 2,000 financial advisors that are either aligned to our mass affluent Merrill Edge or to John's business the core Merrill Lynch business who are working in banking center locations and are addressing wealth management needs of the eight million clients that come in and out of our banking centers overall in any given week.
We are very encouraged about what this is going to mean for future flows to the wealth management business, as you see last year this meant about $1 billion of additional flows of net new money, we see that number rising substantially from that level going forward and in addition this is providing a very meaningful and strategic training ground for future wealth management advisory talent. We think this is where many of the Merrill Lynch financial advisors and U.S Trust PCAs of the future will get their foot on the latter in of our business and become to get situated, become trained and also we move on to handle more complex client situations.
Let me just conclude at a couple of different points in the last 20 minutes or so. John and I have both talked about the strong profitability of our business and what this is enabling us to do in terms of ongoing investments in frontline talent as well as platforms to drive our business. If we look at 2013, the global wealth and investment management business overall posted a 26.4% pretax margin. We are proud of that number. It's just about 550 basis points ahead of our closest competitor. There also is in that number some non-cash items we're amortizing some expenses that came into the business as a result of Bank of America's acquisition in Merrill Lynch.
If we remove some of those non-cash items, we are actually posting an operating margin that's in excess of 30% today and we think that overtime a 30% margin is an achievable operating margin for this business when you take into account what the interest rate a more normalized interest rate environment as well. So we feel very good that we can balance profitability as well as ongoing investments in this business to take advantage of the growth opportunities that we see in the marketplace.
So I just end with where we begin right that we think as you heard the diversity of the revenue stream, the productivity of our advisors and the platform and the continued investment in the platform, the opportunity across the organization as well as the efficiency and obviously our focus on managing expenses diligently in our mind provides a very good story and a business that we're very excited about in this future. So Moshe…?
Moshe Orenbuch – Credit Suisse
Okay. So I'll kick it off you talked about the profit margins can you talk a little bit about your revenue growth objectives for the business and kind of are there any things you have to do new and different to kind of get there?
Actually what we're very focused about is what we just talked about. We have this enormous client base. I'll give you an example that if we looked at how many clients have their operating accounts with us, saving accounts with us and some type of lending product we had a fraction of our $1 million households is an example. We have a lot of opportunity so as we continue to strengthen our relationships and then obviously leverage the entire organization to get the acquisition back above where it has been for everyone over the several years we think that provides a lot of tailwind for us in a growth perspective.
Moshe Orenbuch – Credit Suisse
And in terms of kind of revenue growth that would translate into together?
We don't make forward comments about our revenue growth but there is a lot of potential.
Moshe Orenbuch – Credit Suisse
Okay. Thank you. Any questions from the floor?
And you talked a little bit about the platform. So kind of John to about a little bit things you have to do and what that actually entails and how that benefit kind of comes back to the business?
Sure. I think the platform investments providing strategic advantage to us, it's really in two areas. First, I touch on Merrill Lynch 1 and we can stress in that how meaningful investments are in the Merrill Lynch 1 platform, because it is setting a foundation block for the continued growth of the investment advisory business which is driving that growth in fee-based revenue they saw on one of the earlier slide that John covered.
It is also as we are building and delivering Merrill Lynch 1, we are also trying to incorporate our best view of what future fiduciary standards are going to mean in the wealth management business and we are using that as a way to hopefully be ahead of that trend and to move much of the client management activities from what has happened it in account level to a client level where we are looking at clients as clients rather than an individual disconnected series of brokerage accounts and that transition while it sounds very simple and straightforward is an enormous lead for us where we take legacy infrastructure, supervisory processes and other activities like client reporting, and so all of those investments are kind of happening in the context of Merrill Lynch 1.
The second thing just to answer question about where we see advantage coming from the platform, we have had a very sharp focus as I said demographic changes and in particular the changing nature of retirement, because when we look at how our clients, the baby boomers in particular are living in retirement, it bears no resemblance to the way their parent's generation experience retirement they are far more active they have aspiration to be active tropically, they are making decisions about moving from work to a period of retirement and back to work.
They find themselves in a salvage generation where they are thinking about their parents and their parent's healthcare as well as many cases adult children who are still with them. And as we have analyze this and sort of seen the kind of conversations that we need to have with clients, we realize we need to take a step back in the spirit of gross wealth management and bring a much broader range of capabilities and perspectives together for our advisors so that they can have a dialogue frankly around topics that historically they didn't address with clients and to pick one for example is healthcare.
The implications that healthcare costs today are paramount to just about every retirement planning conversation that we have with our clients 15 years ago, 20 years ago, 25 years ago when John out in the business, no one connected healthcare topics with retirement planned conversations. So we're making and using our platform investments the intellectual capital that we have in our platform to position our advisors we believe to have more relevant conversations, more timely conversations of what's happening in the marketplace that anyone else in the business can today.
You talked about the branches kind of like prime system for advisors how you are able to manage that any risk of conflict, how do you compensate the people that are?
Yeah it's a very good question. What we've done which is very different is that we have put folks who have made it through the first year of our training program. So we feel confident about their skillset but we don't leave it that, they are all associated with and attached to a senior advisor team.
So while they are in that in the branch helping clients with the banking needs and then trying to uncover investment opportunities, when that opportunity unfolds it's less than $250,000 we send it to our colleague in Edge, but it comes back with that we call it banking financial advisors and that senior team are the one meeting with that client. So we are very comfortable with that the client gets the kind of experience that we want to represent our brand.
Are these advisors sitting in like a carve out within the branch or are they?
Yeah, in discrete business.
Okay. You talked a little bit about the balance loans and deposits. What strategies do you have to generate kind of higher loans in that business, that seems to be one of the key goals here?
Yeah 12% of our clients have a mortgage with us and 80% of the volume in the fourth quarter that we produced was for non-confirming mortgages. When you look at our client base they mostly are going to live in a non-confirming home and so there is real opportunity with very innovative product so the mortgage piece is one. We have an industry leading platform around our security space lending which we call the loan management account which is very simple way to get access to funds, Libor based.
So when we think about back to gold space, if people want to maintain their investment track that need liquidity that's a great sources of liquidity or they see in a prudent manner but there is lot of opportunity because some of our clients haven't been expose to it.
So one other thing just to build on what John said if we went back before Bank of America acquired Merrill Lynch and we looked at the way of which the growth of loans and deposits were supported at the legacy Merrill Lynch organization, we probably had in the neighborhood of 40 to 50 specialist who were supporting banking products out moving around at that point 15,000 or so Merrill Lynch financial advisors.
Today, we have 700 wealth management bankers and credit specialist who are aligned against Merrill Lynch financial advisors, those branches and their clients, which is when you combine that level of strength with regard to distribution and coverage of financial advisor and end user clients with the breadth and completes set of capabilities in the platform, we think that adds up to a tremendous ability to fulfill that growth opportunity.
And John you talked a little earlier about the competitive environment, can you just expand on that a little bit just what are you seeing now obviously some of your competitors are kind of refashion how is that shaking out?
So I think what you are seeing is people aligning around client interest and needs. So it's a very attractive business, especially in a world of supplemental leverage ratios and liquidity ratios where our business becomes very attractive to a lot of financial institutions. We also can do great things for people and the demographics as Andy described are in everyone's favor.
The thing that we're so proud of is I think is the big challenge as you got have the wherewithal to invest in the operational excellence, because where this whole falls down is when something goes wrong operationally. We never stopped investing through this cycle in technology and in our operations piece. So we take for granted that statements are always right and trades get processed correctly, but that's the competitive advantage we have, the others are going to have to face. You want to interact with us in your way and a lot of this is going to be a tablet based and mobile phones.
So you got to continue to create that interface that's just a secure, just a seamless that as accurate that takes the great deal of mine and Andy's team along with our technology team leads that.
And kind to deepen that standpoint, how is how do you protect the franchise the people kind of trying to approach those?
Yeah we are focused on helping our advisors build their team and build leverage, create simplicity around an operational efficiency, around how they do business Merrill Lynch I being a great idea innovation around this retirement idea.
So it's a combination of doing the dailies really well and efficiently and improving that efficiency allowing them the flexibility they need to serve their clients, but then as well as innovate for them with ideas that helped address clients concern the way the clients think about it. We have as an industry gone to them the way we think about it and that's the reverse engineering that we have done.
Moshe Orenbuch – Credit Suisse
Any questions from the floor?
I guess maybe the last thing that I can have was maybe you have talked about the retirement plans in general, but talk a little bit the 401(k) business I know that's been an area that you are seeing some good growth there?
No thank you. The 401(k) business as I alluded to earlier has been a true beneficiary of the reach and the scale of Bank of America and the corporate and business clients of Bank of America. And so this business we've had multiple record or near record sales seasons in a row now. We're seeing wins ranging from the largest part of the institutional market down through very high levels of activity among mid-sized corporates and small businesses.
And as I said earlier, we like the 401(k) business very much because while first of all it's a need that our corporate and business clients have, but it's also a business which ultimately results in the opportunity to provide wealth management services to many of the employees of the client companies that we serve.
And so I think many investors candidly have been surprised by the scale of this business and the fact that if we look at 401(k) our equity plans business, our healthcare savings account business, we are talking about 5 million underlying participants across all of those programs, it becomes an important driver of growth for wealth management overall and again the way that we connect to pieces across the enterprise in a way that's very meaningful to clients.
Moshe Orenbuch – Credit Suisse
Yeah, I mean for those of you who couldn't hear the question or over the webcast. The question was whether across our client base we see any pockets that stand out in terms of different perspective or with regard to risk in the market. Let me answer it two ways. One, we have over the last several years we published research on this, we have seen with regard to the age of our clientele and we've been surprised to see a level of risk aversion which was higher than what we classically expect among younger investors who seem to be impacted by the flat equity markets that we've all lived through over the last 10 years and I think we were wondering as I am sure whether as you are whether this is going to produce a lasting impact on the way that they view markets overtime.
If we look overall at the Merrill Lynch wealth management business, and so this is setting aside US Trust for a minute we do see today about 58% of our client assets invested in equities. This is roughly a higher watermark with regard to exposure of the equity market over the last 10 years. We don't have candidly strictly comparable data pre 2000, 2001 time period just given kind of changes with regard to underlying pieces of our business, the institutional retirement business is much larger, et cetera. So it's hard to compare back.
If we look at that 58% exposure to equities, that compares to kind of a bottom with regard to equity exposure toward the end of 2008 which was 41% of client assets invested in equities. So we have seen frankly individual money be very smart money with regard to the rally in the equity markets over the last couple of years and I think more anecdotally in client conversations that John and I have, our clients continue to be quite optimistic in particular around the U.S marketplace and what they see in front of them being driven by a manufacturing renaissance, energy and the technology sectors in particular in the U.S.
So they maintain -- flows continue to move, it may not be the great location in its biggest broadest manifestation but it is clearly a rotation that's being happening among our clients towards equities and way from fixed income over the last 18 months.
And the only add is that we've been very deliberate to talk to our clients about what's going on 30-year market, fixed income and where the risk lies ahead from that and to position that properly based on what they have which is a much longer life. So we've been very diligent about of getting in front of that conversation with our clients and that's had an impact.
Moshe Orenbuch – Credit Suisse
Great. Please join me in thanking John and Andy for their presentation.
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