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RIAs Look to 2020, Say 'Bring It On'

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Some two-thirds of RIAs in a new survey said they were optimistic about the U.S. economy going into the new year, and three in five were upbeat about the global economy.

TD Ameritrade Institutional’s RIA Sentiment Survey, released Tuesday, found that more than half of advisors expected stock prices to continue to rise.

MaritzCX conducted the survey by email between Nov. 22 and Dec. 1 among 301 RIAs, both clients of TD Ameritrade Institutional and non-clients.

Their bullish outlook for the new year notwithstanding, RIAs said they were keeping an eye on headlines for how the U.S. economy, trade and corporate earnings might affect client portfolios. They expect outperformance this year by the IT, health care and financial sectors.

“Though headlines during 2019 may have whipsawed markets, independent RIAs maintained their steady focus on doing the right things for their clients and investing in their firms,” Tom Nally, president of TD Ameritrade Institutional, said in a statement. “Year after year, more investors turn to RIAs for financial planning guidance.”

Even as they saw compliance and regulatory issues as their top management challenge in 2020, 75% of RIAs in the survey said they expected to grow this year, and 41% planned to grow faster than in 2019.

Survey participants reported that 56% of their clients were interested in environmental, social and governance investments, and 50% wanted more information about cannabis-related stocks.

Twenty-nine percent of advisors said they had turned to third parties to manage client portfolios, nearly triple the number that did this in 2018. Model portfolios are RIAs’ third-party manager of choice, according to the survey.

What about the fanfare around the industry’s move to $0 trade commissions on ETFs?

Sixty-four percent of advisors said commission-free trade offers did not currently influence their decisions to use ETFs over mutual funds. At the same time, 46% said they would allocate more to ETFs in the future.

2019 and the Year Ahead

The past year delivered growth on all fronts for RIAs. Three-fourths of advisors said revenues rose in 2019, by 14% on average. Eighty-two percent reported a rise in assets under management, with 16% percent growth on average.

Seventy-one percent of advisors surveyed said they had brought in new clients last year. National brokerage firms, both wirehouses and independent broker-dealers, continued to be the main source of new clients.

When it came to investing in their own firms in 2019, independent advisors increased their spending the most on technology and on legal and compliance, 38% and 20%.

This year, marketing will experience the biggest increase in spending, followed by technology, thus acknowledging that a healthy blend of both can benefit RIAs’ bottom lines, according to TD Ameritrade.

Advisors’ main initiatives to drive growth in 2020 include increasing client referrals and using social media more. Their biggest technology investments planned this year will be on performance reporting and tools to manage customer relationships.

TD Ameritrade said advisors today are spending more time with clients than they did five years ago, but are focused on more than their investment portfolios. The average RIA spends nearly half his or her time with clients on topics outside of investment management, it said.

Advisors are doing this by employing newer technology tools that enable them to stay in closer touch with more clients than ever before.

Thirty-six percent already use video conferencing, and 31% are considering doing so this year. Secure texting is also on the rise, from 14% at present to 41% projected in 2020.

RIAs are also exploring new ways to communicate with clients and strengthen relationships, such as producing flash briefings on smart devices and personalized client videos.

Increased M&A

Two-thirds of advisors surveyed said they expected the pace of industry mergers and acquisitions to accelerate in 2020, but the majority said they were taking a wait-and-see approach with respect to their own firms.

Forty-five percent of advisors reported that they had been approached by a potential acquirer. However, 91% said they had no plans to sell their firm in the next two years.

Survey participants expressed ambivalence about using M&A as a growth strategy, and about a third insisted that they would not consider a merger or acquisition at all in order to boost firm growth.

“Innovation and automation have made the RIA path more beneficial for more advisors, making this a great time to be an RIA,” Nally said. “Advisors have more tools and capabilities at their disposal than ever before.

“It’s no wonder so many firms are achieving remarkable growth while providing an exceptional experience to investors.”

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