FA Insight data show large, top-performing RIAs
are investing in M&A, people and tech as part of a long-term
strategic plan
If you’ve ever wondered how some registered investment advisor
(RIA) firms outperform their peers as they amass new clients and
assets, it boils down to this: they are investing in people,
technology and acquisitions to generate growth and sustain that
growth for years to come.
TD Ameritrade Institutional1 set out to explore whether there
were best practices and characteristics correlated with the
largest, highest-performing firms. The review focused on "large
standout firms," those generating at least $4 million a year in
revenue as well as top-quartile revenue growth and profit margins.
These firms generally manage more than $1 billion in client
assets.
Among other things, the top-tier firms are more active
acquirers: according to a TD Ameritrade Institutional analysis of
data gathered for the annual FA Insight Study of Advisory Firms, 80
percent of large, standout advisory firms have initiated an
acquisition in the past five years, compared with 47 percent of
other large firms.2 Many of these acquirers, meanwhile, completed
more than one deal during this period.
The analysis also found that large standouts are adding human
capital at a much higher rate to fuel and sustain future growth,
increasing full-time employees by 12 percent between 2016 and 2018.
That’s more than three times the 3.5 percent headcount increase
reported at other, lower-performing large firms.
The FA Insight data show that large standout RIAs generate
higher productivity and profitability. These firms generate a 75.5
percent gross profit margin, versus 63 percent among other firms,
which measures gross revenue less all direct expenses divided by
gross revenue. Gross margin reflects the efficiency of a firm’s
revenue generator, including client mix, product mix and service
mix.
Top-performers, the analysis shows, are more efficient
converting effort into revenue and generate more revenue per
revenue-producing employee. One key driver of outperformance: large
standouts are more likely to tie employee compensation to how
individuals help the firm meet its strategic goals.
Large standouts also collect more revenue on every dollar
managed, 84 basis points compared with 74 basis points among other
large firms, and they’re more likely to collect a minimum fee: 50
percent of standouts compared with 44 percent among the rest of the
pack.
These findings were shared as more than 200 leaders from the
industry’s largest independent registered investment advisor (RIA)
firms gathered at TD Ameritrade Institutional’s annual Elite LINC
2019 conference. For an infographic illustrating some highlight
findings, visit
https://www.amtd.com/files/doc_news/research/2019/standout-advisory-firms.pdf.
“The data reinforce what we’ve long believed to be best
practices: well-managed firms are investing in themselves, their
people and platforms to build a foundation for a larger, more
scalable and successful future,” said Vanessa Oligino, Director of
Business Performance Solutions at TD Ameritrade Institutional.
Rigorous planning and analysis may also contribute to better
results. TD Ameritrade found that large standout RIAs scrutinize
their technology spending and focus on generating high returns on
their investment.
When it comes to technology, the top performers are more likely
to adopt tools that can increase efficiency and deliver a better
client experience, including financial planning software, digital
document management systems and online client portals.
“Standout performance is the product of sound strategic
planning, an intense focus on operations,” Oligino said. “And, just
as important, top-tier firms show they have the discipline to
follow through on those plans over time, through thick and
thin.”
To learn more about what TD Ameritrade Institutional can do to
help large standout RIA firms, advisors can call 800-934-6124 or
visit www.tdai.com. TD Ameritrade Institutional will produce a more
comprehensive collection of data and insights through its
first-ever large standout advisor index in the near future. Learn
more about FA Insight research at www.fainsight.com
1. TD Ameritrade Institutional is a division of TD Ameritrade,
Inc., member FINRA/SIPC, a brokerage subsidiary of TD Ameritrade
Holding Corporation.2. TD Ameritrade analysis of data collected
from The FA Insight Study of Advisory Firms, 2017 and 2018,
www.fainsight.com. FA Insight is a product of TD Ameritrade
Institutional, Division of TD Ameritrade Inc. FA Insight is a
trademark owned by TD Ameritrade IP Company, Inc.
About TD Ameritrade Holding CorporationTD Ameritrade
provides investing services and education to
more than 11 million client accounts totaling approximately $1.3
trillion in assets, and custodial services to more than
7,000 registered investment advisors. We are a leader in U.S.
retail trading, executing an average of approximately 850,000
trades per day for our clients, more than a quarter of which come
from mobile devices. We have a proud history of innovation,
dating back to our start in 1975, and today our team of
10,000-strong is committed to carrying it forward. Together, we are
leveraging the latest in cutting edge technologies and one-on-one
client care to transform lives, and investing, for the better.
Learn more by visiting TD Ameritrade’s
newsroom at www.amtd.com, or read our stories
at Fresh Accounts.
About TD Ameritrade InstitutionalTD Ameritrade
Institutional empowers more than 7,000 independent registered
investment advisors to transform the lives of their clients. It
provides powerful technology and resources that help simplify
running a business and let advisors spend more time doing what
matters most — serving their clients. Through meaningful
innovation, steadfast advocacy and unwavering service, TD
Ameritrade Institutional supports RIAs as they build businesses
that positively impact their clients and communities. TD Ameritrade
Institutional is a division of TD Ameritrade, Inc., member
FINRA/SIPC, a brokerage subsidiary of TD Ameritrade Holding
Corp.
Brokerage services provided by TD Ameritrade, Inc., member
FINRA (www.FINRA.org) / SIPC (www.SIPC.org).
Source: TD Ameritrade Holding Corporation
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version on businesswire.com: https://www.businesswire.com/news/home/20190605005082/en/
Media Contact:Joseph A.
GiannoneCommunications & Public AffairsW: (201)
369-8705Joseph.Giannone@tdameritrade.com
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