There are evergreen issues that advisors worry about—like the state of the economy, the future movement of the markets and the ongoing struggle to stay compliant—but the latest TD Ameritrade Institutional Advisor Index study shows some surprising trends and counterintuitive strategies practiced by advisors.
For example, the Index’s survey of 502 RIAs (who custody at TDAI and other custodians) found that they were most concerned with regulatory changes, profitability and managing risk, defined as legal and compliance issues. But the areas of concern that showed the most growth since the second-quarter 2011 survey was business growth, operational efficiency and profitability.
Zohar Swaine, the RIA custodian’s managing director of institutional strategy, said in an pre-release interview on May 18 that concerns over business efficiency reflected the “fragmented industry,” and that RIAs themselves tend to be “relationship managers, not COOs.” There’s also an “interesting dynamic” exhibited by RIA firms as they reach the $300 million to $500 million in AUM range, Swaine points out: profitability drops off as they bring on additional personnel to cope with growth.
The concern with people issues was seen in another survey finding: 52% of respondents to the survey, which took place by phone from March 29 to April 9, said they use other advisors as a source to facilitate their HR management. Almost 40% of respondents said they were considering hiring additional staff within the ensuing 12 months, and 25% of those said they were specifically looking to hire a female advisor in a bid to attract and retain women investors.
In addition to bringing in more people as they grow, however, the role of technology is crucial, said TDAI’s new director of practice management, Christine Gaze (left), in the same interview. She cited a recent consulting engagement with a Philadelphia-area RIA firm that custodies with TDAI where Gaze’s team was called in to help with the firm’s marketing efforts. By helping to map out the client onboarding experience, she reported, and placing it into the firm’s SalesForce CRM system, which monitors the client experience and notifies various members of the firm on when and what their roles are in the onboarding process, the firm is becoming more efficient.
“Advisors are looking at technology to drive growth,” said Swaine, and increasingly using technology to drive their practice management operations.
Swaine and Gaze suggested that custodians in general and TDAI in particular saw part of their role as helping advisors to recruit new employees and in the hiring (and firing) process and to provide, in Swaine’s words, tools and templates to RIAs to do so. Later this summer, he said, TDAI will roll out a suite of HR solutions from Paragon Resources designed to help RIA firms go through a four-step assessment process when it comes to HR.
Gaze also mentioned an “end-to-end succession planning program” TDAI launched in February with FP Transitions under which David Grau’s firm will work with RIA firms for up to 12 months gathering data on the firms and coming up with valuations for the firms. Following up, TDAI’s in-house consultants will work with those firms on implementing any identified changes; 40 RIA firms are in the program currently, reports Gaze, while 60 more are on the waiting list.