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Wealth and Investment Management (WIM)

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Wealth and Investment Management (WIM) Wealth and Investment Management (WIM) David Carroll Senior Executive Vice President May 11, 2017 © 2017 Wells Fargo & Company. All rights reserved. WIM is poised for continued growth . Relationships focus on client goals and outcomes 90% of clients Client- . Plan-based offerings expand as client needs evolve believe their Driven . Services satisfy a full range of individual/institutional needs financial Approach . Internal partnerships unlock greater value for clients through plan/advice aligns with access to Wells Fargo’s breadth of products and solutions their needs (1) . Consistent financial results have continued over the long 26% Strong term Long- term Financials . Diversified revenue mix drives stable returns earnings . Large deposit base provides funding source for Wells Fargo CAGR . WIM has a long history of strong Risk Management Operating Foundation . Independent oversight functions provide credible challenge losses 83 bps of Risk to leadership and strong governance of business practices of revenue Management . Enhanced alignment, capabilities, and controls mitigate (avg. 2013 - cross-functional risk and facilitate regulatory compliance 2016) . Focused investment in technology, talent, and efficiency is Invested over Key advancing the business and long-term growth opportunities $800MM Investments in strategic . Early wins provide Asset Management a strong start on its for Growth initiatives in path towards expansion and innovation 2013- 2016 Data as of 12/31/16. (1) WIM Internal Data, Jan 2016 – Dec 2016. Wells Fargo 2017 Investor Day Wealth and Investment Management 2 Business Overview Diversified model meets a broad spectrum of needs Individuals Institutions Mass/ Affluent High Ultra Family . Pensions . Sovereigns Mass Net High Net Offices . Insurance . Corporates Affluent Worth Worth . Endowments . Intermediaries Wells Fargo Wells Fargo The Private Abbot Asset Investment solutions Advisors Bank Downing managed by specialized Management investment teams (WFAM) Advisory, Comprehensive Services for brokerage, wealth ultra-high-net- and financial management worth families Institutional Administration of 401(k), services solutions and individuals pension, other retirement Retirement plans, and custody assets &Trust Delivering the highest quality Wells Fargo Investment Institute investment expertise and advice Wells Fargo 2017 Investor Day Wealth and Investment Management 4 Serve over 7MM individuals and institutions Client Assets Client Counts Industry Rankings 3.1MM #3 U.S. Retail Brokerage firm (1) $1.5T households #3 Managed account provider (2) 80,000 $190B #4 Wealth Management firm (3) relationships Over 600 $41B “Best National Private Asset Manager” (4) relationships #20 U.S. asset manager (5) #16 Fund complex group, including 3rd $482B Over 1,000 largest bank-sponsored mutual fund assets under institutional clients company (6) management (AUM) #2 Largest manager of proprietary stable value assets (Galliard) (7) $351B 4.1MM Institutional #8 Institutional Retirement Plan institutional institutional Retirement Recordkeeper (8) and Trust retirement assets plan participants Client assets and counts as of 12/31/16. Retail Brokerage, Wealth Management, Abbot Downing and Institutional Retirement assets include deposits and Wells Fargo Fund holdings. Households (HHs) defined as an address-based account grouping with WIM product ownership. Relationships represent clients grouped by relationship manager and may include multiple households. (1) Company and peer data; based on financial advisors (December 2016). (2) Cerulli Associates (December 2016). (3) Barron’s 2016 Wealth Manager survey (based on Retail Brokerage and Wealth Management assets in accounts >$5MM). (4) Family Wealth Report Awards (2016). (5) Institutional Investor 300 rankings (July 2016). (6) Strategic Insight (December 2016). (7) Pension & Investments 2016 survey. (8) PLANSPONSOR magazine (June 2016). Wells Fargo 2017 Investor Day Wealth and Investment Management 5 Results in 2016 build on strong performance ($ in billions) Net Income CAGR = 26% $2.3 $2.4 $2.1 $1.8 $1.4 $1.4 $1.0 $0.5 2009 2010 2011 2012 2013 2014 2015 2016 Revenue Noninterest Expense CAGR = 4% CAGR = 2% $15.8 $15.9 $14.3 $15.3 $12.8 $13.3 $13.3 $12.0 $12.1 $12.1 $11.8 $10.5 $10.9 $10.9 $10.9 $11.5 2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 2016 2009-2016 CAGR for Non-Commission Expense: +1.0% 2009-2016 CAGR for Broker Commissions: +5.2% Wells Fargo 2017 Investor Day Wealth and Investment Management 6 Plan-based solutions have grown recurring revenue 2009 Revenue Mix 2016 Revenue Mix 7% 13% 20% 25% 13% 1% 24% 2% 41% 54% Asset Based Fees 41% Asset Based Fees 54% Recurring Recurring Net Interest Income 20% Revenue Net Interest Income 25% Revenue 63% 80% Other Recurring Revenue 2% Other Recurring Revenue 1% Transaction- Based Revenue 24% Transaction- Based Revenue 13% Other Non-Recurring Revenue 13% Other Non-Recurring Revenue 7% Wells Fargo 2017 Investor Day Wealth and Investment Management 7 Risk management continues to be a focus for WIM Leadership Governance Oversight . Proactive risk management has . Chief Compliance Officer role . Transparency is maintained with always been a priority established in 2009 regulators and industry groups . Key risk appetite metrics and . Compliance/Risk committees . Brokerage sales practices are “Raise Your Hand” team provide credible challenge to examined annually by FINRA, member training originally leadership and ensure strong with continued satisfactory results developed by WIM are used governance of business practices . Internal and external auditing enterprise-wide . Centralized Wells Fargo Risk in provide independent lines of sight . Enhanced risk indicators 2016 has strengthened risk . Compensation and partnership monitor cross-functional risk emphasis, alignment and controls structures undergo strict review . Client-facing teams adhere to . All controls undergo in-depth . Risk capabilities are thoroughly Know Your Customer, and engage testing and monitoring assessed and enhanced regularly in client listening and response Resulting in solid performance Net Charge-Off’s Operating Loss (% of Outstanding Loan Balances) (% of Revenue) 3.1% 0.59% 0.3% 2009 -0.01% 2009 2016 2016 Wells Fargo 2017 Investor Day Wealth and Investment Management 8 Deepening Relationships WIM partnership with the Community Bank is strong Customer -focused . Discussion starts with the customer Community WIM Connecting teams across WF to . Referral-only model for investments Branch & Hub assist customers with all of their Bank retirement, banking and Financial Premier & . All sales are reviewed and approved by investing needs Advisors Licensed Bankers supervisory principals Strong results . Averaged ~$1B/month in closed Profitability (4) Brokerage Asset Growth (5) referred investment assets in 2016, driving growth towards capturing a $2.2T affluent away opportunity(1) 5x . 59% of referred investment assets higher profit in 2016 were from customers investing growth (2) 6% 16% with Wells Fargo for first time CB/WIM vs. CB-only (3) WIM-Only CB/WIM . 95% retention for shared Community Bank/WIM households Looking ahead . Continue focus on expanding dedicated FA/banker affluent teams Goal: Achieve $2B/month in closed Referred Investment Assets . Launch of Intuitive Investor will offer an additional entry point for new investors (1) Affluent away are Retail Banking households with total deposit and investment balances greater than $100,000 but less than $100,000 of deposits and investments with Wells Fargo, as of December 2016. Total deposit and investment balances based on external data sourced from IXI, a division of Equifax, as of December 2015. Affluent away opportunity considers affluent away households acquiring the same level of penetration and average asset balances with Wells Fargo as our current affluent households. (2) Based on all assets referred in 2016. (3) CB/WIM households at December 2015 that were retained in the Community Bank at December 2016. (4) Annual profit growth impacts of adding WIM relationship to retained Retail Bank-only households from December 2015 through December 2016. (5) Growth in brokerage assets from 4Q13 to 4Q16. Wells Fargo 2017 Investor Day Wealth and Investment Management 10 Planning helps meet the unique needs of WIM clients Ultra High Net Worth • Family office ($50MM+) WIM Household • Financial administration Assets by Client • Trust and administrative $184B • Family dynamics and education Segment (1) • Foundations and endowments • Estate, tax, insurance High Net Worth • Executive compensation ($5MM - $50MM) • Multi -generational planning • Business succession $360B • Real estate strategies • Philanthropy • Complex liability planning Affluent ($250K - $5MM) ® • Investments • on $876B Goals- based cash flow i • Full balance sheet (i.e., credit) vis n E Mass/ Mass Affluent Intuitive Investor (coming 3Q17) • (< $250K) Investments • Advice by phone $143B My Retirement Plan • Retirement savings calculator (1) Roll up of all WIM client accounts with same address into single entity. Assets include all balances in investments and deposits; including retail retirement and excluding Institutional Retirement Assets and First Clearing. Wells Fargo 2017 Investor Day Wealth and Investment Management 11 Planning leads to better outcomes for clients and WIM Benefits for Clients (4) 2016 Best Practices Results . Greater asset growth Households with a plan had 5.6% asset growth vs. 3.1% for households without a plan (5)
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