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that the number of deals in the asset management sector will increase modestly in 2017 vs 2016 (56%), 32% see M&A picking up significantly, and 12% see flat activity in 2017. Nobody sees lower M&A activity in 2017 vs 2016. Chart 8: How will 2017 asset management M&A activity (# of deals) be versus 2016? 60% 766% 50% 40% 30% 20% 10% 0% Increase modestly Increase Be stagnant Decrease Decrease significantly modestly significantly Source: BofA Merrill Lynch Global Research Pricing/fee structure in retail seems to have more of a following Given some underperformance of active managers, some scrutiny around fees, as well as fee pressure from passive, we asked investors if they thought a change in active pricing could make sense, i.e. charge a lower base fee with a variable performance fee that would be earned when alpha is generated. We found a majority of respondents thought it would make sense to change the pricing structure and it could make active more competitive vs passive (67%). The rest of respondents felt it didn’t make sense either because it would be too challenging for the active industry or it would not slow the flows into passive. Chart 9: Do you think a change in industry active pricing (lower base + perf fee) could make sense? 80% 70% 60% 50% 40% 30% 20% 10% 0% Yes, it could make the product more —_No, it would be too challenging forthe — No, it would not change the flow trend competitive vs. passive products active industry toward passive products Source: BofA Merrill Lynch Global Research 6 2016 Future of Financials Conference | 17 November 2016 Bankof America 2 Merrill Lynch HOUSE_OVERSIGHT_014320