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Advisors Still Taking Assets From Wirehouses: TD Ameritrade RIA Survey

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A survey of 501 advisors conducted on TD Ameritrade’s behalf in the last week of March found RIAs reporting that they’re continuing to grab assets from wirehouse firms, and that they were increasing their investments in their own firms—especially in technology—to improve efficiency and improve their bottom lines.

The results of TD Ameritrade’s quarterly survey, a blind sampling of advisors who custody at TD as well as at other custodians, “speak to the fact that advisors are continuing to grow and take assets from the Wall Street firms,” said George Tamer (left) of TD Ameritrade in a Wednesday interview with AdvisorOne.

Tamer, director of strategic relationships at the Jersey City, N.J.-based custodial firm, says that the survey results support what he and his team of practice management consultants are hearing in the field. “Business continues to be good,” for advisors, he says, and while they’ve “put the financial crisis in the rearview mirror, they’re keeping in mind the lessons learned” from the 2008-2009 crisis. “They’re not resting on their laurels,” Tamer says, but  instead are focusing on investing in operating efficiencies, particularly in technology tools to provide those efficiencies, which, when tied to their reported revenue growth, allows RIAs to increase their profitability.

There’s another bottom-line sign of the RIA model’s viability. Asked about the recent spate of M&A activity in the advisor technology space—notably Advent’s purchase of Black Diamond and Insignis’ acquisition of BridgePortfolio—Tamer said “there wouldn’t be the M&A investments we’re seeing if there wasn’t optimism about the RIA model.”

The growth in assets from Wall St. firms is not new, Tamer acknowledged, with TD’s advisor surveys over the last eight quarters consistently showing that at least half of RIAs’ new assets have come from those firms. In this most recent survey, respondents reported, he said, that “56% of new assets come from commission-based firms—wirehouses and other broker-dealers.”

The investments made by advisors in technology has been evident from the beginning of the financial crisis, with Tamer saying that “advisors realized one of the ways to get through this—to reign in expenses—is to invest in efficiency; they don’t see technology as an expense, but as an investment.” Tamer noted that it “might not be sexy to buy a CRM system,” but if doing so allows a firm owner to increase the firm’s human capital yield by “increasing non-revenue generating efficiency” it can produce clear bottom-line returns.

Growth in Firms; Optimism on Markets and Economy

The survey found 73% of respondents reporting increases in the number of clients over the prior six months, a seven point increase over last year’s first-quarter survey. Fewer RIAs—5%–reported a net decrease in the number of clients, compared to 8% last year.

Other findings of note from the survey:

Market Sentiment: RIAs remain committed to equities in their asset allocations: When asked how they were allocating client portfolios, respondents reported:

RIAs Gather Assets From WiresIn last year’s first quarter, those percentages were 50% to domestic equities, 26% to fixed income, 12% international, 9% in cash, and 3% in alternatives. As for how they felt about sector performance over the next 12 months, respondents surveyed felt that the best-performing classes would be oil and gas, technology and basic materials, while the worst-performing sectors would be financials, utilities and consumer goods.

Economic Outlook: RIAs reported optimism over the economy looking ahead to the next three months, with 76% saying they were either “very” or “somewhat” optimistic about the economy, 26% neutral, and 18% either “somewhat” or “very” pessimistic. In the year-ago survey, those numbers were 53% optimistic, 26% neutral, and 22% pessimistic.

As for advisors’ reported top business concerns, regulatory issues remain the largest single issue, followed by the macro-economic environment, profitability, and managing risk, which covers legal and compliance issues. The issue that ranked fifth among advisors’ concerns, and one which has grown since last year, is marketing. “Marketing is always of interest to advisors,” said Tamer, noting that “the Wall St. firms are great at marketing, and that those firms’ “marketing sophisitication concerns them.” That’s where being able to track the ROI of a particular marketing campaign is, Tamer says, crucial.”


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