Independent registered investment advisers (RIAs) are “undaunted by rising rates and turbulent market,” according to the latest TD Ameritrade Institutional RIA Sentiment Survey.
The research project annually tests the forward-looking confidence levels of more than 300 RIAs—finding again this year that advisers feel primed for strong growth and scalable expansion. Amid their confidence about business prospects advisers have turned their focus to a number of “formerly emerging trends that have become part of the here and now,” namely the end of near-zero U.S. interest rates, the transfer of wealth from aging clients to Next Gen investors, and the challenges of sustaining growth at their firms.
“After realizing robust growth in 2015, RIAs overwhelmingly expect to build on their recent business success, with 79% projecting continued growth in assets under management this year,” the survey report suggests. “Advisers predict firm assets will increase by 17% on average in 2016.”
Of the 63% of advisers whose firms added clients in the second half last year, the average growth rate was 13%, TD Ameritrade says. Likewise, half of the firms surveyed reported higher revenue during this period, rising by 14% on average.
Tom Nally, president, TD Ameritrade Institutional, predicts RIAs will continue investing in new technology that can help them “scale and streamline low-value activities, so that they can bring even more value to clients by strengthening relationships and enhancing service.” This is because looking across all firms polled, “improving firm efficiency,” “enhancing client service and delivery,” and “investing in new technology” were far and away the top goals.
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“When it comes to technology, RIAs say bolstering cybersecurity is their top priority, followed by implementing customer relationship management systems that can help fuel growth by giving them deeper insights into their clients and helping them identify prospects,” the survey report explains.
More than half of RIAs suggest they will target new client niches this year, while 47% expect to spend more on marketing and advertising, “both with an eye toward fueling new growth in clients and assets.” Nearly a third of those surveyed plan to hire junior advisers during 2016, TD Ameritrade finds, “freeing senior partners to focus on key clients and business development.” At the same time, more than one-in-four will add back-office staff to help their firms achieve greater scale faster.
Notably, RIAs suggest they are “attracting clients from a broader spectrum of channels,” with a smaller portion sourced from full-commissioned brokers compared to prior surveys. “This year, RIAs of all sizes reported adding more investors who were previously self-directed or else clients of other RIAs,” the survey report adds, “though the trend is particularly strong among advisers managing more than $250 million in assets.”
Continuing another storyline from last year’s findings, TD Ameritrade finds RIAs “see robo-adviser technology as a solution, not a threat.” In fact, just 1% of advisers polled report being “extremely concerned” about robo-adviser technology developments. Beyond this, a small but still-significant number of RIAs, about 14%, say they are embracing online investing services as part of their growth plans and are developing new online offerings to attract a new generation of investors.
“These RIAs are taking action today, not in the distant future,” TD Ameritrade concludes. “Most [85%] plan to launch their new services by the end of 2016, including 50 percent who expect their robo offerings to be live by the end of June.
The full survey results are presented here.