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Industry Spotlight > RIAs

RIAs See Growth Potential in Clients' Savings Accounts: Survey

By Michael S. Fischer

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What You Need to Know

  • Multi-year guaranteed annuities could help advisors attract those assets, Security Benefit and DPL Partners suggest.
  • Only 13% of advisors said that their clients are very or extremely concerned about a major equity downturn.
  • A majority of advisors said that asking for referrals remains their most important prospecting strategy.

Registered investment advisors have mixed views on how November elections will affect the economic climate, according to Security Benefit’s RIA benchmark study, released Wednesday. 

The study also found advisors are eyeing up their clients’ savings accounts for potential asset growth.

With volatility a constant for RIAs and their clients, the study found that 41% of RIAs predict a neutral effect, 39% foresee a net negative one and 20% expect a net positive effect.

The new study expands on findings from Security Benefit’s RIA Economic Outlook Index, which it rolled out earlier this year in partnership with Greenwald Research and DPL Financial Partners. The quarterly index’s inaugural edition established a benchmark measurement of 58 (on a scale of 0 to 100) for RIAs’ current level of optimism about economic conditions.

Half of RIAs believe that their clients are satisfied, the study found, and 37% that they are very satisfied with their investments. Only 13% of advisors said that their clients are very or extremely concerned about a major equity downturn. 

Fifty-one percent of RIAs allocated more to equities in the past 12 months, while 47% increased their allocations to long-duration fixed instruments and 45% put more into short-duration fixed instruments.

RIAs see an opportunity to attract client money currently held in bank savings products, according to the study. 

Fifty-two percent of advisors said that a quarter of their clients have at least $100,000 in a bank savings account, and 82% of these advisors believe that they could attract much of that money if they were able to offer an innovative investment with competitive interest rates for a guaranteed period.

For the study, Greenwald Research surveyed in February 201 registered investment advisors from across the United States, each managing significant assets and directly interacting with clients.

Annuity Allocations

RIAs in the survey said that they are eyeing multi-year guaranteed annuities to lock in current interest rates. These CD-like products offer accumulation potential for clients by delivering a guaranteed interest rate that is uncorrelated with equities. 

A quarter of RIAs reported that they have increased exposure to fixed annuities such as MYGAs in the past 12 months.

“Even among advisors who haven’t historically used annuities, these products are gaining traction because they offer competitive interest rates while limiting the risk of loss,” David Lau, founder and chief executive of DPL Financial Partners, said in a statement.

While interest among RIAs may be growing, the share of annuities that are sold by RIAs remains vanishingly small — less than 1%, by one estimate. DPL and other firms offer commission-free products and tech solutions to help RIAs overcome barriers to offering annuities.

The survey found that a quarter of RIAs have increased use of fixed indexed annuities in the past year. These offer downside protection and a range of indexes that give RIAs multiple ways to position client portfolios ahead of a potential equity downturn. They provide accumulation in the form of interest credits that are linked not to current rates but to index performance.

Thirty-four percent of advisors said that they actively used FIAs in their practice, another 11% are familiar with and intend to use them in the next six months, and 30% do not use them.

Tried-and-True Growth Strategies

According to the survey, many RIAs quickly adapted their practices to changing client needs during the pandemic, but some things have largely stayed the same, including how they attract new clients.

Fifty-two percent of advisors said that asking for referrals remains their most important strategy to attract new clients. Nineteen percent rely on networking, and 9% use specialized marketing to a specific niche client. 

In addition, in-person meetings have resurfaced after giving way to social distancing for several years. The survey found that only 40% of client meetings are now held virtually.

Michael S. Fischer

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