‘Tis the season for advisor outlooks for the coming year (and market outlooks, and economic outlooks and political outlooks, and on and on). One we always heed is TD Ameritrade’s quarterly survey of 500 RIAs, and especially the one conducted at year’s end. Skip Schweiss, managing director of advisor advocacy and industry affairs for TD Ameritrade Institutional, walked us through the latest numbers, and what they mean for advisory firms in 2011.
Q: What was the biggest surprise to come for the survey’s results?
A: Nearly half of RIAs indicated that they know little or nothing about the impact the Dodd-Frank Act will have on their business. That was shocking. Among RIAs with at least some knowledge of the [law], nearly 75% said that they would rely on third parties, such as attorneys, consultants and their custodians to help them manage their new responsibilities. This points to the role that education and outside resources will play for advisors.
Q: But so much of its implementation is up in there air. Why would you find that shocking?
What Your Peers Are Reading
A: True, Congress has kicked the job of clarifying the legislation over to the enforcement agencies, in large part. And it’s creating so much uncertainty for advisors heading into the new year. The only item that’s really been clarified so far is the switch from federal oversight to state oversight for mid-size RIAs with under $100 million in assets under management. However, nearly 70% of RIAs surveyed agreed that they will have to add resources to manage the new regulatory requirements. Nearly 85% figure they’ll personally need to dedicate more of their time to compliance issues, taking them away from face time with clients.
Q: What about their overall levels of optimism or pessimism for 2011?
A: Advisors are more optimistic. They’re investing in their businesses, increasing spending on staffing, professional development and technology. This in-turn is driving revenue. So that is good news to come from the survey. Almost three-quarters indicated their firms experienced growth in the last six months, up 15% from the year prior. The majority of this growth continues to come at the expense of traditional full-commission firms; 64% of RIAs reported that the source of their new business is coming from broker-dealers and wirehouses, which is up 7% from the year prior.
Q: Where are they placing their resources?