RIAs Predict a Sweet '16 Amid Market Challenges, Focus on New Opportunities

Undaunted by rising interest rates and turbulent markets, independent registered investment advisors (“RIAs”) are setting their sights on continued growth in 2016. The new year will bring new investments in technology and people to enhance service, bolstering cyber-security and laying a foundation for scalable expansion, according to the latest TD Ameritrade Institutional RIA Sentiment Survey.

Many RIAs start the new year from a position of strength. After realizing robust growth in 2015, RIAs overwhelmingly expect to build on their recent business success, with 79 percent projecting continued growth in assets under management this year. Advisors predict firm assets will increase by 17 percent on average in 2016.

Of the 63 percent of advisors whose firms added clients in the second half last year, the average growth rate was 13 percent . Likewise, half of the firms surveyed reported higher revenue during this period, rising by 14 percent on average.

"Building on years of outstanding service to investors, our latest survey shows independent RIAs continued to grow last year and are poised for further gains in the marketplace,” said Tom Nally, president, TD Ameritrade Institutional.1 “RIAs should keep doing what they do best: deliver objective, comprehensive, personalized advice to clients. We also expect advisors will continue investing in 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.”

RIAs are Preparing Their Firms for Continued Growth

For the past several years, business has been good for RIAs. And with even more opportunity ahead, advisors are investing in their firms to better serve existing clients and attract new ones. Top management priorities, according to the survey, include improving their firm’s efficiency, enhancing client service and delivery, and investing in new technology.

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.

More than half of RIAs said they will target new client niches this year, while 47 percent expect to spend more on marketing and advertising, both with an eye toward fueling new client growth in clients and assets.

Advisors are investing in people to help their firms sustain business growth. Nearly one third of those surveyed said they plan to hire junior advisors this year, freeing senior partners to focus on key clients and business development. More than one-in-four will add back-office staff, to help their firms achieve greater scale.

Notably, RIAs said 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, though the trend is particularly strong among advisors managing more than $250 million in assets.

RIAs see Robos as a Solution, Not a Threat

Roboadvisors, firms offering automated investment advice through online channels, dominated the news last year, yet traditional RIAs are largely unconcerned. Only 1 percent are "extremely concerned" about the threat of robos to their businesses, consistent with last year’s survey, though 51 percent of advisors this year are "not at all concerned," versus 62 percent last year.

A small but still-significant number of RIAs, 14 percent, said they are embracing online investing services as part of their growth plans and are developing new online advice tools “robo” offerings to attract a new generation of investors. These RIAs are taking action today, not in the distant future: 85 percent 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.

A More Cautious Outlook for Clients

Overall, RIAs say they remain upbeat about the U.S. economy and their outlook for the stock market, yet when it comes to client portfolios they are hedging their optimism with some caution. Only two-in-five advisors surveyed expect the U.S. stock market to rise in the first half of 2016.

RIAs said they are intently focused on the impact of interest rates on stocks and bonds, but they also say that muted U.S. corporate earnings growth and unemployment could significantly influence client portfolios in the coming year.

As a result, 64 percent of RIAs are shifting clients into less volatile assets. Moving out of bonds and other rate-sensitive vehicles, followed by selling securities and rotating into cash, rounded out the top three protective measures advisors are taking with regard to client portfolios.

Advisors Cite New Concerns as Regulatory Worries Fade

RIAs say they are focusing on 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.

Indeed, the survey found that advisors are far more concerned about macro-economic trends and evolving client needs than they were about legal, compliance and regulatory issues, the No. 1 concern among advisors since 2012. And for the first time, the generational wealth transfer is the new top competitive threat for advisors, followed by investors choosing to manage their own finances online.

Succession Events Seen as Far Off

With so much growth expected, most RIAs surveyed say they are in no hurry to retire. Even so, advisors are taking a number of steps to prepare their firms for a succession event. At an average age of 53, less than 10 percent of the advisors surveyed expect to retire within the next five years, while two-thirds of advisors say retirement is at least a decade away. At the same time, though, 24 percent say they may retire within the next six to 10 years.

Advisors did indicate that they are taking a multipronged approach to succession planning. Most say their successors will come from within the firm, and many expect to hire and groom experienced advisors to take over.

To download more detailed findings from the latest survey, please click here.

About the Survey

The results of TD Ameritrade Institutional 2016 RIA Sentiment Survey are based on a survey conducted by MaritzCX on behalf of TD Ameritrade Institutional, a division of TD Ameritrade, Inc., of 302 registered investment advisors (“RIAs”) whose firms on average managed $265 million. These RIAs participated in a telephone survey between Nov. 23 and Dec. 11, 2015.

Independent RIAs who custody with TD Ameritrade Institutional, as well as other independent RIAs from across the country, were asked to share their views on the economic outlook for their firms and the advisor market in general. 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.

1. TD Ameritrade Institutional is a division of TD Ameritrade, Inc., a brokerage subsidiary of TD Ameritrade Holding Corporation.

About TD Ameritrade Institutional
TD Ameritrade 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
Millions of investors and independent registered investment advisors turn to TD Ameritrade’s (Nasdaq: AMTD) technology, people and education resources to help make investing and trading easier. Online or over the phone. In a branch or with an independent RIA. First-timer or sophisticated trader. Our clients want to take control, and we help them decide how - bringing Wall Street to Main Street for more than 39 years. An official sponsor of the 2014 and 2016 U.S. Olympic and Paralympic Teams, as well as an official sponsor of the National Football League for the 2014, 2015 and 2016 seasons, TD Ameritrade has time and again been recognized as a leader in investment services. Visit TD Ameritrade's newsroom or amtd.com for more information.

Brokerage services provided by TD Ameritrade, Inc., member FINRA /SIPC

Source: TD Ameritrade Holding Corporation

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