RIAs Ready to Rock in 2014

Referrals, technology driving growth as confidence hits a 5-year high, TD Ameritrade says

RIAs are feeling good and looking to grow, according to a report released at the end of January by TD Ameritrade. The Advisor Index Study found advisors are more optimistic about the economy than they have been in the past five years.

Nearly half of advisors see the market leveling out and ending 2014 with little change, but 38% think stocks will continue to rise. More than 40% think bond prices will start to fall.

Consequently, advisors are moving their clients out of fixed income and into equities. Equities accounted for 54% of client portfolios, up from 48% a year ago. Bond allocations fell from 27% of portfolios to 23%.

Three-quarters of RIAs expect to increase their assets under management at least as fast as they did last year, when AUM increased 20%. More than 30% think AUM will grow even faster.

“After another year of double-digit growth on all fronts, advisors have greater enthusiasm about their prospects,” Tom Nally, president of TD Ameritrade Institutional, said in a statement. “They’re building on last year’s momentum and serving clients better by making strategic investments in people and technology.”

Advisors are depending on client referrals and investment in technology to grow their business. Two-thirds of respondents are spending more on technology, with most considering upgrades in systems for performance reporting, portfolio accounting, customer relationship management, document management and financial planning. Although 58% of respondents expect no changes to their current marketing budget, advisors are focusing on increasing referrals from clients and centers of influence.

Advisors recognize that growth will come from attracting the next generation of investors. As such, about 60% say they’d consider offering Web-based services to draw in younger investors.

Most RIAs agree that the biggest challenge to their business is regulatory change. More than 70% of RIAs said changing regulations would be their biggest competitive challenge, easily overtaking do-it-yourself investing and fee-based management services from broker-dealers, which were cited by about a third of advisors as big competitive challenges.

“The biggest hurdles to advisor growth won’t go away overnight," Nally said. "It will require persistent effort over time and a long-term view to successfully work through increased compliance requirements, changing rules and a graying client base.” .

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