The Empire strikes back. As the first wave of robo-advisers retreats, their technology innovation is used against them. They continue to be sold or morph into white-labeled B2B platforms. Retail giants such as Vanguard, Schwab and Fidelity use their scale to hoover up the low-end of the advisory market. Meanwhile, traditional wealth managers, such as Morgan Stanley, Merrill Lynch and UBS, continue to move up-market, adopting robo technologies and evolving into cyborg-advisors. DOL's fiduciary ruling catalyzes a new era for wealth managers as their product-pushing brokers soon become extinct. Digital financial planning becomes fully integrated into a technology-rich private banking model covering assets and liabilities. Client engagement and advisory technologies define the new battleground.

1. November 2016
Digital Strategy 2.0 — Robos vs. Cyborgs
Who will win the war for digital advice?

2. – 1 –© Cambrian Consulting Draft: for discussion purposes only
Digital Strategy 2.0 — Executive Summary
We believe wealth management services will follow a similar trajectory to the tax-prep market, where
the majority of high-income filers still use a trusted advisor.
The winner between human (traditional advisor) and machine (robo advisor) will be a combination
of both (cyborg).
Goals-based financial planning will become the central core capability for advisors to integrate
across households, life events, assets, liabilities, taxes and cashflows.
Cambrian can help you define your Digital Strategy 2.0 — from market positioning to value
proposition; from financial planning architecture to implementation management.
Robo advisors are already facing strong competitive, client-acquisition and regulatory headwinds.
Most robo advisors offer simplistic solutions for asset allocation, but fail to provide holistic financial
advice integrating mortgage, credit debt, insurance, social security, college savings or taxation affects.
The Empire strikes back: established players have moved quickly to implement their own robo
innovations (online account opening, rebalancing, account aggregation, mobile access, etc.).
Robo advisors, such as Betterment and Wealthfront, are attempting to disrupt the traditional wealth
management firms with lower costs and innovative technology.
Robos have two choices: compete directly against retail giants or become B2B platforms.

3. – 2 –© Cambrian Consulting Draft: for discussion purposes only
Disruptive Technology Upstarts?
• Clay Christensen details the way
successful companies focus on their
customer’s current needs but still lose
dominance in their core markets.
• New entrants, with nothing to lose,
adopt new technologies and innovate
quickly starting with simple products
that can quickly scale-up, e.g.: steel
mini-mills, PCs, earth movers,
computer chips.
• Their nimbleness and low-cost
structures allow them to operate
profitably where well-entrenched
incumbents cannot compete.
• Christensen’s examples clearly
work for product-based
industries, where innovations
allow low-cost providers to
quickly enter commoditized
markets.
The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail.
• Robo Advisors are currently attempting
to disrupt the traditional, large wealth
management firms with lower costs and
innovative technology.
• But services-based industries, where
human advice is highly valued, present
a very different challenge to typical
industries analyzed by Christensen.
• Complex advisory markets may not
be so easily disrupted by these
new entrants.
Who will win the war for digital advice?
Product companies Service companies
Vs.

4. – 3 –© Cambrian Consulting Draft: for discussion purposes only
Robo Advisors Provide Little Real Advice
Most robo advisors provide basic solutions for asset allocation, but fail to offer holistic advice integrating
mortgages, credit cards, insurance, social security, retirement, college savings or taxation implications.
• Should I file and
suspend when I
hit my age of
eligibility ?
• Should I
roll-over my
401K?
• Should I open a
529 college
account?
Under the proposed Department of Labor (DOL) fiduciary rule, advisory firms
(including robo RIAs) must consider the “investment objectives, risk
tolerance, financial circumstances, and needs of the retirement investor.”
• Should I buy
term or whole-
life insurance ?
• Should I
remortgage my
house or take a
HELOC ?
• Should I pay off my
credit cards or invest
in bonds?
?

5. – 4 –© Cambrian Consulting Draft: for discussion purposes only
Robo Headwinds
Robos are already facing strong competitive, client-acquisition and regulatory headwinds.
Contrary to normal disrupter dynamics, the average contribution per user (ARCU) for B2C robos is
shrinking, making it difficult to scale up profitably.
Competitive
Dynamics
• Most older customers already have
too many investment accounts
• Millennials have fewer assets
• Simple ETF portfolios are available at
bigger firms at lower costs
• Robo rebalancing services have
quickly become commoditized
Client Acquisition &
Value Proposition
• Client acquisition costs are $300-1,000
per new account
• Other robo services such as account
aggregation are already offered by
mainstream providers
• Tax-loss harvesting is not a big
advantage for clients with few assets
and a low tax bracket
Regulatory
Threats
• Apart from a simple questionnaire,
very little goals-based wealth
planning is performed
• The robo “no-touch/low-touch”
engagement model has been
challenged by some state regulators
where a fiduciary duty of care needs
to be demonstrated

6. – 5 –© Cambrian Consulting Draft: for discussion purposes only
Will Robo Advisors Become “TurboTaxed”?
We believe wealth management services will follow a similar trajectory to the tax-prep market,
where the majority of high-income filers still use a trusted advisor.
Pure digital, e.g.
IRS-Free file,
H&R, TuboTax
(38%)
IRS paper
forms
(9%)
Local
accountant, e.g.
a CPA firm
(31%)
Trusted friend/
family member
(12%)
Bricks-and-
mortar firm, e.g.
H&R Block
( 9%)
Source: Go Banking Rates Survey January
Experian Simmons (2016)
Since TurboTax was launched in
1993 it as captured ~20% of the
overall tax prep market but is
now under threat from free
solutions offered by the IRS and
greater pressure from H&R block
and other digital competitors
offering simpler tax-prep
solutions.
The vast majority of
households with income over
$200k a year still use a
trusted local CPA/advisor.
These are the same HNW
households that robos may
find difficulty penetrating.
Traditional tax planning firms automated many of their own processes to compete with TurboTax
using a “man+machine” business model.

7. – 6 –© Cambrian Consulting Draft: for discussion purposes only
The Empire Strikes Back
Industry developments during
2015-16:
• Charles Schwab launched Schwab
Intelligent Portfolios
• Vanguard debuted Vanguard Personal
Advisor Services (VPAS)
• Northwestern Mutual acquired
LearnVest
• Interactive Brokers purchased
Covestor
• John Hancock bought Guide Financial
• Invesco acquired JemStep
• BlackRock acquired FutureAdvisor
• Merrill Lynch and Morgan Stanley
announced they would build their own
robo platforms
• UBS teamed with SigFig to build their
robo solution
• Fidelity launched GO - their own robo
advisor platform
• WisdomTree invests $40m in Vanare
Established retail firms, such as Schwab and Vanguard, have moved quickly to implement their own
robo platforms with online account opening, rebalancing, digital signatures and mobile access.
Source: SEC ADV filings and Investment News
Leveraging their scale, brand and distribution, established firms have dominated growth in this crowded
market. In one year Vanguard took on more robo assets than all the other robos combined.

8. – 7 –© Cambrian Consulting Draft: for discussion purposes only
B2C or B2B: That is the Robo Question?
B2C robos are
subscale players
competing against
fully scaled ‘nearly
free’ custodial
platforms like
Schwab, TD and
Fidelity
Wire-houses are
focused on
millionaires and
service lower-end
accounts through
call centers and
their own robo-
style offerings
Private bankers
focus on the UHNW
segment using
sophisticated tax,
investing and
estate planning
solutions
Established mass-
affluent players have
launched similar
robo-style offerings
at much lower costs.
Self-Directed
Wealth Management Offerings
Mass Affluent HNW UHNW
Scale
B2C?
Robos have two choices: compete against retail giants or become B2B platforms.
B2B?
Robo advisers underestimate the cost and complexity of the B2B market: integrating to legacy
account-opening, bookkeeping, rebalancing, compliance, reporting and risk processes is very difficult.

9. – 8 –© Cambrian Consulting Draft: for discussion purposes only
Cyborg = Robo + Private Banker
“The family
trusted advisor”
High Net Worth
RIA Fiduciary
(series 66)
“The fiduciary”
Financial planning &
managed accounts
Family Office
Private Banker
Banking, tax & trust
services
Millennials
Robo algorithms &
technology
Limited product
shelf
“Self-service robo
model”
The future advisory model will combine the best of all four current approaches.
Mass Affluent
Comprehensive
product choice
Wire-House broker
(series 7)
“The product
distributor”
The winner between human (traditional advisor) and machine (robo advisor) will be a combination
of both (cyborg)
Target
Market
Advisor
Contact
Product
Platform

10. – 9 –© Cambrian Consulting Draft: for discussion purposes only
Customer Engagement & Holistic Financial Planning
Firms that can wrap (at scale) the comprehensive services of a private banker with the advanced
technologies of a robo will form the next generation of wealth advisors.
Holistic Products
• Complete shelf of investment, insurance
and banking products
• Educational-retirement solutions
• Trust and estate planning
• Asset-liability management
• Concentrated/hedging solutions
Advanced Technology
• Biometric access
• Web-based workflow & digital
signatures
• Customer collaboration
• Mobile delivery
• AI/machine learning
• Account aggregation
Data & Analytics
• Product, client, household and
channel profitability
• Client and channel metrics
• Risk and research analytics
• Real-time compliance checking
and post-trade metrics
• Goal achievement metrics
Customer Engagement &
Financial Planning
• Digital financial planning,
including goals-based and
cash-flow methods
• Predictive analytics for life
events: college, births,
deaths
• Integrated communications/
CRM
• Multi-channel delivery
(including live video, chat,
text)
• Digital marketing and client
behavioral tracking
Advisor-Branch-HQ Integration
• Multi-channel integration (web-
call center-branch-FA-CSS)
• Business, product, client and
channel profitability metrics
Goals-based financial planning will become the central core capability for advisors to integrate
across households, life events, assets, liabilities, taxes and cash-flows

11. – 10 –© Cambrian Consulting Draft: for discussion purposes only
Implementing a Cyborg Strategy
?
Cambrian Consulting can help you accelerate your Cyborg Strategy
Our Cyborg assessments take ~10 weeks and provide actionable ideas which will help you
make decisions on legacy investments and the implementation of new digital capabilities.

12. – 11 –© Cambrian Consulting Draft: for discussion purposes only
Cambrian Consulting’s project credentials, technology vendor map and
partnerships

13. – 12 –© Cambrian Consulting Draft: for discussion purposes only
Wealth Management & Digital Strategy Credentials
We have established a successful track record of business-critical change across multiple disciplines
for leading wealth management and asset management firms.
Wealth Management Project Sponsor Deliverables
Robo Implementation
Head of
Advisory
Definition of target business model, process design, operating
model, business requirements, implementation phasing and
conversion planning
DOL Fiduciary Strategy COO
Documentation of “revenue at risk” analysis by channel, product,
client segment. Assessment of business options costs and risks
presented to executive management
Private Bank-in-a-Box CIO
Business requirements, target architecture, RFI-RFQ-RFP process
management, joint-design sessions, business case and program
management
Client Facing Technology (CFT) Strategy CIO
Advisor assessment for wealth management market including client
buyer values analysis (voice of client). Assessment of alternative
technologies
Business Architecture Review CIO
Determination of the business capability model and mapping of
strategic initiatives, costs, business impacts and regulations
Channel-Branch Review COO
Review of the multi-channel provision of service through branches,
home-office, service centers and technology devices (PC, tablet and
mobile)
Digital Financial Planning CEO
Product strategy for VC backed start-up entering the digital financial
advice market to combine goal-based and cash-based planning
techniques

14. – 13 –© Cambrian Consulting Draft: for discussion purposes only
Cyborg Strategy: Build Vs. Buy?
The fiduciary era will drive a rapid adoption of new technologies as banks add wealth management
capabilities and traditional brokerage houses add banking solutions.
Although third-party solutions can improve speed-to-market
often at lower costs than internal builds, they can create
additional risks. Sample build-buy questions include:
Investment portfolio decisions
1. Do you fully understand your total cost of ownership for
your own technology?
2. In which areas does it make the most sense to buy or
rent an external solution?
3. Does your firm actively keep track of external vendors
and internal technology solutions (including SWOT)?
4. Has a rigorous business case been prepared?
Vendor selection decisions
1. Has a thorough vendor selection been performed?
2. Is the vendor economically viable?
3. What are the scaling issues that need to be considered?
4. What are the integration issues: people, process, data,
compliance, reporting?
5. Has the vendor contract been properly structured?
Implementation decisions
1. Can the vendor support a large implementation?
2. Who will perform data conversion/client onboarding?
3. Can vendor solutions be deployed in a SAAS or cloud
configuration?
4. How will support issues be handled: level 1-2-3?
5. How will compliance oversight be managed?
6. What are the DR or BCM options?
7. What are the data retention options?
8. Have security and data privacy issues been resolved?
Cambrian Consulting can help you screen external and internal solutions for your digital strategy 2.0
Digital Engagement &
B2B Robos
Digital Financial
Planning Providers
Wealth & Banking
Technology Platforms
Aggregation &
Analytics Providers

15. – 14 –© Cambrian Consulting Draft: for discussion purposes only
NextGen Technology Partnerships
Robo marketing
and content
analytics for
RIAs
Digitizing
financial planning
NextGen
retirement
platform
Digital investor
and cost basis
solutions
Data driven BPO
solutions
Streamlining
private placement
issuance
HTML5
acceleration
Financial modeling
We have deep relationships with leading-edge technology firms who offer innovative solutions for
wealth managers.