TD Ameritrade Institutional Survey Finds RIAs Are Upbeat and Ready to Compete in 2015

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 Survey
The 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 Institutional
TD 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 Corporation
Millions 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 sophisticated trader. Our clients want to take control, and we help them decide how - bringing Wall Street to Main Street for more than 39 years. An official sponsor of the 2014 and 2016 U.S. Olympic and Paralympic Teams, as well as an official sponsor of the National Football League for the 2014, 2015 and 2016 seasons, TD Ameritrade 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.