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Technology > Marketing Technology

RIAs See Bright Future in 2017: TD Ameritrade

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Advisors are optimistic about the economy and their businesses this year, according to a survey by TD Ameritrade Institutional. TDAI found advisors are planning to spend more on marketing, business development and technology in 2017.  

The annual RIA Sentiment survey was conducted in the weeks following the presidential election in November, and asked respondents to share their outlook for equity sectors under a new president. Eighty percent of respondents said the financial sector will improve under the new administration. Two-thirds expect improvement in the materials and industrials sectors, and 57% of RIAs said the energy sector will likely improve. Advisors were least confident about the utilities sector; 40% believe it will get worse in 2017.

As for issues that will affect client portfolios, advisors were most concerned about interest rates and corporate earnings, followed by the incoming administration.

TDAI suggested in a press release that advisors’ optimism for 2017 is carried over from a strong 2016. Seventy percent of respondents said they grew assets last year and 56% added clients, both by an average of 17%. Sixty percent of respondents said they grew their revenues, reporting an average increase of 16%.

“These are good days for independent RIAs, yet we can’t expect market tides will always rise,” said Tom Nally, president of TD Ameritrade Institutional, in a statement.

Over a quarter of respondents said the overall economy would have the greatest impact on their firms in 2017. The survey found 70% of RIAs are optimistic about the U.S. economy over the next 12 months, and 55% felt the same about the global economy. Over half said they expect the U.S. stock market to increase.

TDAI added some new questions to the RIA Sentiment survey last year, including questions about competition, technology and the average client age, which, as of 2015, is 62.1, according to PriceMetrix, up from 61.5 in 2014. The average age of new clients also increased in 2015, from just over 56 to 56.8.

Advisors are less concerned about the aging client base than they were last year. With over half of respondents expecting to grow AUM more quickly than they did in 2016, they’re clearly not worried about replacing retiring clients’ assets.

Advisors Shifting Investment Priorities in 2017

Advisors increased their technology budgets by a third in 2016, and spent more on compliance and marketing than they did the prior year. Looking ahead at 2017, most advisors said they would spend more on marketing. Technology and compliance are still important, but less than 20% of advisors said they would be increasing those budgets.

In fact, just 3% of advisors counted technology among the factors that would have the greatest impact on their firms. Regulators were seen as the top competitive threat to advisors’ firms, and 20% said regulation had the potential to have the greatest impact on their firm. Even so, just 14% of respondents said their compliance budget would receive the bulk of their resources this year.

Nally said that “RIAs need to deliver a great experience, build firms that are more scalable and make sure they are compensated for all the services they provide. By investing in themselves, embracing technology and articulating all the value they deliver, RIAs can increase their firms’ chances for sustainable growth.”

In addition to increasing their marketing budgets, 16% of advisors said they also planned to increase their hiring and HR budget, and only 3% said they would spend more on outsourcing. Advisors reported cutting more from hiring than any other budget initiative last year; they’re clearly feeling more optimistic about growth opportunities in their firms.

Increasing advertising was the top marketing strategy reported by advisors, the survey found. Almost half said they were looking to add expertise or new niche clients.

Over 80% of advisors said they were unconcerned about competition from robo-advisors, mostly because they don’t see them as competition. Almost 90% said they serve a different type of client from the ones who are attracted to robo-services. Despite growth in the number of robo-advisors in the market and the assets they’ve attracted over the past few years, 70% said it hasn’t impacted their own firm’s growth, and 68% said their clients haven’t shown any interest in automated advice providers.

As a result, just 4% of RIAs said adding a robo-advisor was their top technology priority as a way to drive growth. (A larger group, 16%, said a robo-advisor was one among many services they would be interested in introducing.)

“RIAs have been the fastest growing channel in the financial advice marketplace in large part because they offer investors a personalized, client-first approach. At the same time, they have to find ways to navigate the myriad market forces converging on the industry if they want to keep growing,” Nally said. “RIAs can continue to grow by facing challenges head on, whether that means developing a robust retirement plan business, attracting a new generation of clients or embracing new technology to deliver a better digital experience.”

Finally, the industry’s widespread reluctance to address succession planning may finally be changing, and all it took was a proposed rule from the Securities and Exchange Commission. Almost 60% of RIAs in TDAI’s survey said they have a formal, documented business continuity and transition plan in place. Another 18% said they had a plan in the works. A full 80% of respondents said they were aware of the SEC’s proposed rule to require such plans. Rule 206(4)-4 would require firms to have business continuity plans in place that address the unexpected loss of key personnel, as well as temporary disruptions like natural disasters or cyberattacks. 

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