With Technology Upgrades Planned, Registered
Independent Advisors Expect Recent Strong Asset Growth to
Continue
Independent registered investment advisors (“RIAs”) are moving
forward with technology upgrades and remain upbeat about their
firms’ prospects in 2015, according to the latest TD Ameritrade
Institutional RIA Sentiment Survey. Though regulatory changes and
emerging tech-based alternatives to traditional fee-based services
are top concerns, roughly one-third of advisors predict their firms
will grow assets under management at an even faster rate.
Advisors are coming off another year of double-digit growth in
clients, revenue and assets, and they have a largely positive
outlook for the overall U.S. economy. Sixty-three percent added
clients over the previous six months, at an average growth rate of
14 percent. About two thirds of RIAs saw an increase in revenue,
while assets under management increased by 17 percent on
average.
Recent market volatility and a series of troubling geopolitical
events have somewhat tempered advisors’ previous enthusiasm. Half
say they are optimistic heading into 2015, but 17 percent are
pessimistic—three times as many as at the top of 20141.
Even so, advisors are mostly bullish on the U.S. financial
markets. According to those surveyed, U.S. equities represent 53
percent of their clients’ assets, a 23 percent increase from 2010,
while international holdings have dropped by two-thirds to 9
percent of client assets today2. Outside stocks, a quarter of
client assets were allocated to fixed income, 9 percent to cash,
and the remainder in other asset classes.
“The steady movement of assets into the independent wealth
management channel shows no signs of slowing.3 RIA firms that have
the ability to scale service and add capacity will be
well-positioned to take advantage of the growth opportunity in
front of them.” said Tom Nally, president, TD Ameritrade
Institutional. “Independent advisors are mindful of what’s
happening in the marketplace and this survey shows many are making
a commitment to leverage technology and invest in themselves and
their people in order to serve clients better.”
Advisors are mainly concerned about the impact of regulatory
changes on their firms, followed by the challenges of managing
risk. In fact, they perceive the additional burdens and costs
associated with such changes to be the biggest competitive threat
to their businesses.
RIAs Are No Strangers to Competition
More than half of RIAs’ new clients are dissatisfied customers
from full-commission brokers; however, when seeking new business,
advisors increasingly find themselves competing with each other, as
well as with others with alternative advisory models. Notably,
advisors are winning new clients from banks and other RIAs at least
twice the rate they did in 2012.4
Heightened competition from other sources also has the potential
to stifle RIA growth. Broker-dealers promoting fee-based services
are seen as a top threat, as are emerging national branded RIA
companies, and do-it-yourself online investing offerings.
And with all of the media attention devoted to online advisory
firms, better known as roboadvisors, RIAs are keeping a close eye
on the rise of these upstart competitors. Yet advisors generally
consider robos to be an issue for the broader industry, not
themselves. Thirty-eight percent of advisors who are aware of
roboadvisors expressed concerns about their threat to today’s RIA
industry, compared with 18 percent who have concerns about the
their impact on their own firms.
“Competition for client assets is as strong as ever,” said
Nally. “The most effective advisors are taking steps to embrace
technology to make themselves more efficient and to offer clients a
better overall experience.”
Leaning on Technology
Though client referrals remain the preferred source of new
business, advisors are stepping up their technology game in order
to fuel growth. Deploying technology that can accommodate increased
scale is their top strategic firm growth initiative, followed by
systematizing client service and service delivery. Three out of
four said they will build out their infrastructure to support
growth, primarily with technology investments.
Technology dollars will be spent most likely on performance
reporting tools, followed by financial planning tools and customer
relationship management (CRM) systems. When considering more
advanced technology services and applications, advisors are most
interested in adding e-Signature capabilities, followed by account
aggregation and cloud-based solutions.
But advisors realize that integration of tech tools and
applications is key. Fifty-six percent of RIAs want to do a better
job at integrating technology in their firms. Seventy-eight percent
of these advisors recognize that better technology integration can
improve workflows and productivity and 63 percent say it will
increase their capacity to support more clients.
Surprisingly, half of RIAs do not use social media for client
communications today. For the advisors who do, their channel of
choice is LinkedIn, followed by Facebook.
Transitioning to the Next Generation
Many independent advisors are executing on firm growth plans
even as they think about their own exit strategies from the
business. The most common succession strategy is to turn the firm
over to the next generation of leaders already in place, or else
RIAs are focused on hiring and grooming young talent to do this in
the future. Others are considering some type of sale or merger –
whether selling to another RIA or to an aggregator firm. Forty
percent of advisors surveyed say they have not done any succession
planning.
The survey shows that as a group, advisors are graying. More
than half of RIAs are 55 years of age or old, while 40 percent are
within a decade of retirement. That said, 46 percent are in their
prime earning years, ages 34 to 54.
To download detailed findings from the latest TD Ameritrade
Institutional RIA Sentiment Survey, visit:
http://www.amtd.com/files/doc_downloads/research/2014-TDAI-Sentiment-Tracking-Report_FINAL.pdf.
About the SurveyThe results of TD Ameritrade
Institutional 2015 RIA Sentiment Report are based on a survey
conducted by Maritz on behalf of TD Ameritrade Institutional, a
division of TD Ameritrade, Inc. Three-hundred and one registered
investment advisors (“RIAs”) with firm assets under management
averaging $232 million participated in a telephone survey in the
fourth quarter of 2014. Independent RIAs who custody with TD
Ameritrade Institutional, as well as other independent RIAs from
across the country, were asked to share their views on the economic
outlook for their firms and the advisor market in general. The
margin of error in this survey is ±5.6%. Maritz and TD Ameritrade,
Inc. are separate, unaffiliated companies and are not responsible
for each other's products and services.
About TD Ameritrade InstitutionalTD Ameritrade
Institutional is a leading provider of comprehensive brokerage and
custody services to more than 4,500 fee-based, independent
registered investment advisors and their clients. Our advanced
technology platform, coupled with personal support from our
dedicated service teams, allows investment advisors to run their
practices more efficiently and effectively while optimizing time
with clients. TD Ameritrade Institutional is a division of TD
Ameritrade, Inc., a brokerage subsidiary of TD Ameritrade Holding
Corporation.
About TD Ameritrade Holding CorporationMillions of
investors and independent registered investment advisors turn to TD
Ameritrade’s (NYSE: AMTD) technology, people and education
resources to help make investing and trading easier. Online or over
the phone. In a branch or with an independent RIA. First-timer or
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has time and again been recognized as a leader in investment
services. Visit TD Ameritrade's newsroom or amtd.com for more
information.
Brokerage services provided by TD Ameritrade, Inc., member FINRA
/SIPC
Source: TD Ameritrade Holding Corporation
1 TD Ameritrade RIA Sentiment Survey, January 2014.2 TD
Ameritrade RIA Sentiment Survey, January 2010.3 Cerulli RIA
Marketplace Report, November 2014.4 TD Ameritrade RIA Sentiment
Survey, January 2012.
TD Ameritrade Holding CorporationJoseph Giannone,
201-369-8705Communications & Public AffairsMobile:
201-725-8485joseph.giannone@tdameritrade.com
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