Amid Great Expectations for the Economy and Markets, RIAs Plan to
Ramp Up Marketing and Technology Spending
JERSEY CITY, N.J.--(BUSINESS WIRE)--
Independent registered investment advisors (“RIAs”) are highly
optimistic that their firms will see continued success in 2017, building
on strong growth in 2016, and will be flexing their marketing muscles to
help make it happen, according to the latest TD Ameritrade Institutional1
The survey, conducted in the weeks following Election Day 2016, reveals
that bullish RIAs plan to rev up marketing, business development and
technology spending as well as implement a number of growth strategies
to help attract new clients and sustain long-term expansion.
RIAs said they are upbeat on multiple fronts: nearly seven in 10 are
optimistic about the U.S. economy -- the highest level since the survey
began in 2009 -- and more than half, 55 percent, feel good about the
prospects for the global economy. Likewise, 53 percent expect the U.S.
stock market to rise, and an additional 35 percent see the market
holding on to its 2016 gains.
Advisors are paying close attention to interest rates and corporate
earnings for their impact on client portfolios, but those surveyed also
believe that certain market sectors will benefit from changes from
inside the Beltway. The majority expects financial, industrial and
material companies to see the biggest gains under the new administration.
“These are good days for independent RIAs, yet we can’t expect market
tides will always rise. 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,” said Tom Nally, president of TD
Ameritrade Institutional, provider of brokerage and custody services
to more than 5,000 advisors. “By investing in themselves, embracing
technology and articulating all the value they deliver, RIAs can
increase their firms’ chances for sustainable growth.”
Growing Firms See Bigger Gains in 2017
Advisor optimism may stem from finishing 2016 on a high note, with
strong gains in assets, revenue and clients in the latter half of the
year for most firms. Seventy percent had assets grow on average by 17
percent, while 60 percent saw revenues increase by 16 percent on
average. Likewise, 56 percent of advisors say new client growth averaged
With the economy seen as having has the biggest impact on growth, four
out of five advisors predict their firms’ assets will grow further in
2017, and half of these advisors predict firm assets will grow even more
than last year.
RIAs also continued to attract clients from other financial services
channels. Nearly a third of new clients came from full-commission
brokers - the largest source - and self-directed investors were the
second-largest source of new clients moving to independent RIAs in 2016.
Investing for the future
Looking ahead, advisors expect their biggest operational spending
increases to be in marketing, followed by technology. They rank
marketing and social media initiatives among their top strategic
priorities this year.
The planned increases make sense given that marketing and advertising
are the main ways they plan to attract new business in 2017, including
the next generation of potential clients. In terms of technology
spending, reinvigorating client-facing tools like websites and social
media programs are among the top upgrades planned for 2017.
In 2016, advisors had their biggest increases in spending in technology,
followed by legal and compliance. Conversely, most firms report that
hiring / human resources and real estate-related expenditures were down
Confidence is High Despite Industry Pressures
Though many anticipate 2017 to be another year where industry pressures
intensify, most RIAs seem confident they can navigate what lies ahead.
In the face of regulation, the emergence of low-cost digital upstarts,
or the need to draw up formal succession plans, RIAs expect their firms
will continue to thrive. More specifically:
Department of Labor (DOL) conflicts of interest rule. The April
10, 2017, deadline for compliance means increased compliance costs for
some RIAs, but the majority says it has been business as usual. Others
say the new standards are a growth opportunity.
Robo-advisors. Eighty-two percent of advisors say they have
minimal - if any - concerns over robo-advisors as a competitive
threat. RIAs say robos cater to a different market and their own
growth has largely not been impacted by them.
Business continuity plans. Fifty-seven percent of advisors have
business continuity plans finalized, and 31 percent have plans in the
works. Eight in 10 are aware of the Securities and Exchange
Commission's proposed Rule 206(4)-4 requiring such plans.
“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.”
Spotlight on Exchange-Traded Funds
The vast majority of RIAs today use exchange-traded funds (ETFs) in
their clients’ portfolios. Compared to other investment vehicles,
advisors turn to ETFs for their lower costs, market liquidity and a
convenient way to achieve asset-allocation goals.
The survey, though, found that advisors look first and foremost at the
quality of the underlying index when considering which specific ETFs to
purchase for clients, followed by the fund’s performance track record.
Expense ratios and trading costs were of lesser concern. When looking at
a fund’s track record, advisors should keep in mind that past
performance does not predict future results.
Despite the variety of offerings on the market, advisors largely stick
to a few types of ETFs to manage client assets. Equity index ETFs are
“always” or “sometimes” used by 82 percent of the advisors surveyed,
while two thirds say they use industry-sector ETFs.
These categories were trailed by fixed-income index funds, used by 58
percent of advisors, and real estate ETFs, 56 percent. Usage of more
esoteric products, such as inverse or leveraged ETFs or funds based on
“smart-beta” and other fundamental-weighted indexes, was far less
Actively managed ETFs, a relatively new asset class, may already be
making headway. Among the firms surveyed, 32 percent of advisors
sometimes use these ETFs.
To download a slide presentation featuring highlight results from the
survey, please visit http://www.amtd.com/files/doc_downloads/research/2017/RIA-Sentiment-Survey.pdf
Advisors should carefully consider investment objectives, risks, charges
and expenses before investing in an ETF for their clients. A prospectus,
obtained by calling 866-766-4015, contains this and other important
information about an investment company. Read carefully before investing.
About the Survey
The results of TD Ameritrade Institutional
2017 RIA Sentiment Survey are based on a phone survey conducted by
MaritzCX on behalf of TD Ameritrade Institutional, a division of TD
Ameritrade Inc., of 306 registered investment advisors (“RIAs”), between
Nov. 14 and Dec. 5, 2016. Survey participants were asked to share their
views on economy, the outlook for their firms and the RIA market
overall. Participants may be clients of TD Ameritrade Institutional and
other custodians. The margin of error in this survey is ±5.6%.
MaritzCX and TD Ameritrade, Inc. are separate, unaffiliated companies
and are not responsible for each other's products and services.
About TD Ameritrade Institutional
Institutional is a leading provider of comprehensive brokerage and
custody services to more than 5,000 fee-based, independent registered
investment advisors and their clients. Our advanced technology platform,
coupled with personal support from our dedicated service teams, allows
investment advisors to run their practices more efficiently and
effectively while optimizing time with clients. TD Ameritrade
Institutional is a division of TD Ameritrade, Inc., a brokerage
subsidiary of TD Ameritrade Holding Corporation.
About TD Ameritrade Holding Corporation
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Brokerage services provided by TD Ameritrade, Inc., member FINRA /SIPC
1 TD Ameritrade Institutional is a division of TD Ameritrade,
Inc., a brokerage subsidiary of TD Ameritrade Holding Corporation.
Source: TD Ameritrade Holding Corporation
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Source: TD Ameritrade Holding Corporation TD Ameritrade Holding Corporation