td ameritrade institutional ria sentiment...
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Independent Registered Investment Advisor (“RIA”) Views on the Markets, the Economy and Industry Trends
January 2016
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TD Ameritrade Institutional RIA Sentiment Survey
RIAs predict faster growth for themselves in 2016 After a successful second half of 2015, roughly 80% of RIAs say assets under management (“AUM”)
will grow in 2016, and half expect to grow faster than last year. Average expected increase: 17%.
More new clients are coming from a wider spectrum of channels. In fact, advisors with $250M+ AUM, say 47% of their new clients are from other RIAs.
Top management priority this year? Improve efficiency. Top tech investment? Bolster cyber-security.
RIAs are pursuing new client niches to grow, and nearly half are upping their marketing / advertising as part of their growth plans.
To manage growth, nearly a third will hire more junior advisors, and 28% will add to back office staff.
Interest rate moves mean RIAs are adjusting client portfolios accordingly RIAs are most concerned about the impact of a rising interest rate environment on client portfolios.
41% of RIAs expect the U.S. stock market to increase, versus 60% who thought so last year.
79% of RIAs already adjusted allocations, largely by moving out of bonds and other rate-sensitive vehicles.
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Regulatory issues take a back seat this year as RIAs cite new concerns Macro-economic environment is most likely to have the biggest impact on firms in 2016.
Generational wealth transfer is biggest competitive threat.
RIAs are largely unconcerned by robo-advisors. Indeed, 14% of firms are launching robo offerings to attract new clients. Of these firms, 84% will be up and running by year’s end.
Advisors are in no hurry to retire, but succession planning is underway Less than 10% plan to retire within five years.
Most advisors plan to name successors from within. They will hire and groom advisors as needed.
More advisors are taking succession planning seriously: only 17% say there are no formal plans in place, compared to nearly 40% last year who said they had no formal succession plans.
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Business Growth
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• Half anticipate their firms will grow faster this year • RIAs predict assets under management increasing by 17% on average in 2016
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2015 ended with brisk growth for most RIAs
Average Growth Rate: 13%
3% 6% 6%
34% 41% 45%
63% 53% 49%
New Clients AUM Revenues
Increased
Remained aboutthe same
Decreased
Average Growth Rate: 15% Average Growth Rate: 14%
Q80: Has the total number of clients served by your firm decreased, increased, or remained about the same over the past 6 months? Q102: ...By approximately what percentage has your firm's client base grown? Base: Those who increased clients (n=190) Q115 In the next 6 months, do you anticipate AUM to experience a slower rate of growth, faster rate of growth, or remain the same? (n=190) Q104REV: Have your firm's assets under management decreased, increased or remained about the same over the past six months? Q104: ...By approximately what percentage has your firm’s AUM grown? Base: Those who increased AUM (n=160) Q90 Over the past six months, has your firm's revenue decreased, increased or remained the same? Q91: ...By approximately what percentage has your firm’s revenue grown? Base: Those who grew revenues (n=148) Q115REV: In 2016, what is your outlook for your firm’s assets under management? Q116REV: What percentage change are you anticipating in your firm’s AUM growth rate in 2016?
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Base: Total (n=302) QNEW8: Over the past six months, from which type of competitor did the majority of your firm’s new client assets come?
The sources of new RIA clients are changing
30%
6%
7%
57%
25%
8%
12%
55%
23%
10%
12%
55%
20%
14%
14%
52%
17%
8%
10%
17%
20%
28%
2016
2014
2013
2012
** Asked for first time in 2016
Full-commission brokers
Other RIAs
Banks
Self-directed investors**
Clients who are new to investing**
Other places
2015
Sources of New Clients – Past Six Months
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Base: Total (n=302); RIAs with $250M AUM (n=36) QNEW8: Over the past six months, from which type of competitor did the majority of your firm’s new client assets come?
Sources of New Clients – Past Six Months (2015)
Larger firms say most clients come from other RIAs
14%
6% 3%
22% 47%
8%
17%
8%
10%
17%
20%
28% Other places
Banks
Clients who are new toinvestingSelf-directed investors
Other RIAs
Full-commission brokers
RIAs with $250M+
AUM
All RIAs
Growth Strategies & Management
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RIAs improving efficiency, enhancing service
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Base: Total (n=302) Q140REV: Which of the following operational business management initiatives are you currently implementing or planning to implement in 2016 to help your firm grow? Multiple Responses Accepted
Top Business Management Initiatives for Firm Growth
82% 75%
56% 51%
45% 41%
Improveefficiency
Enhance clientservice and
delivery
Invest intechnology
Train anddevelop staff
Implement aformal
marketing /social media
plan
Augmentcompliance
* Advisors could choose more than one answer
Cyber-security is the top tech priority
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Base: Total (n=302) Q180REV: Which of the following technologies are you considering investing in to help drive your growth in 2016?
Top Technology Investments - 2016
5%
20%
14%
30%
32%
32%
36%
37%
40%
41%
42%
56%
Other
Not planning to make tech investments
Online advice / robo-advisor services
Portfolio rebalancing tools
Portfolio accounting tools
Tools for mobile devices / apps
Financial planning tools
Document management tools
Performance reporting tools
Client facing tools (i.e., website, portals, social media)
Customer Relationship Management (CRM) tools
Cybersecurity
* Advisors could choose more than one answer
RIAs target new client niches to fuel growth
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Base: Total (n=302) Q200REV: In 2016, which of the following marketing or growth strategies do you plan to implement to attract new clients?
Top 2016 Marketing Strategies
28%
31%
47%
53%
Add new expertise
Add new markets
Increase marketing / advertising spend
Add new niche clients
RIAs hiring young talent to handle growth
Plans to Hire to Accommodate Growth
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Base: Total (n=302) Q175REV: Who are you planning to hire in order to accommodate business growth in 2016? Multiple Responses Accepted
10%
9%
21%
28%
32%
Other personnel investments
Open and staff new location(s)
Hire new lead advisor(s)
Add to back office staff
Hire new junior / entry-level advisors
14% of RIAs to launch robo & online advice offerings
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Base: RIAs planning online advice tools/roboadvisor services for 2016 (n=34) QNEW12A: When do you expect to launch online advice tools or roboadvisor services for your clients? QNEW12B: How will an online advice solution integrate with your firm’s existing offerings? Multiple Answers Accepted
3%
21% 18%
42% 15%
Already in placeQ1 2016First Half of 2016By End of 2016Not in 2016
Attract a different market segment
88%
Appeal to the next gen
82%
Enhance the tech
experience for clients
56%
Other 12%
Expected Timing of Robo and Online Advice Launch
Why RIAs are Building These Tools
Of those RIAs planning robo- and
online advice services, 85% say these tools will be
available by the end of 2016
Market Views
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RIAs remain upbeat on the U.S. economy U.S. Economy Outlook
Base: 2016 Total Respondents (n=302) Q34. Again, looking ahead to the next six months, what is your outlook on the U.S. Economy through the first half of 2016? Would you say it is very pessimistic, somewhat pessimistic, neutral, somewhat optimistic or very optimistic?
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10% 5% 4% 4% 3% 1% 3% 1%
27%
17% 14% 14% 21%
5% 14% 14%
25%
26% 26% 29%
36%
29%
34% 33%
35%
46% 50% 48%
37%
58%
44% 42%
3% 7% 6% 5% 3% 7% 6% 4%
2009 2010 2011 2012 2013 2014 2015 2016
Very OptimisticSomewhat OptimisticNeutralSomewhat PessimisticVery Pessimistic
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Base: Total (n=302) QMI11. What is your outlook on the U.S. stock market through the first half of 2016? Do you think it will decline, remain about the same, increase?
U.S. Stock Market Outlook
RIAs may be more cautious on the stock market
15% 18%
25%
41%
60% 41%
2015 2016
IncreaseRemain about the sameDecline
Rising rates expected to impact clients most
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Base: 2016 Total (n=302) QNEW2. Which of the following headlines are you watching for their potential impact on client portfolios? Multiple Responses Accepted
Which Factors Will Impact Client Portfolios?
62%
73%
75%
77%
81%
84%
2016 U.S. Presidential election
Strengthening of the U.S. dollar
Global impact of a China slowdown
U.S. unemployment / job growth
Muted U.S. corporate earnings growth
Federal Reserve interest rate increase(s)
RIAs have already made portfolio adjustments
Do Current Asset Allocations Account for Rising Interest Rates?
Base: Total Respondents (n=302) QNEW5 Have you already adjusted your current asset allocation to accommodate what is expected to be a rising U.S. Interest rate environment?
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79%
21%
Yes
No
RIAs are preparing for a possible downturn
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Base: Total Respondents (n=302) QNEW6 What actions are you taking, more now than in the past, to protect your clients from a possible market downturn? Multiple Responses Accepted
Steps to Prepare for a Potential Market Downturn
15%
17%
19%
24%
38%
45%
64%
Not making any changes to our current approach
Allocating more assets into alternativeinvestments, such as hedge funds
Hedging by using options
Other
Selling securities and rotating into cash
Moving out of bonds and other rate-sensitiveassets
Shifting allocations into less volatile assets
Industry Concerns & Competitive Threats
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Economy now the #1 concern, not regulation
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Base: 2016 Total (n=302) QNEW7A. Which of the following has the potential to have the greatest impact on your firm in 2016? QNEW7B: Of those potential impacts...please select the one that you think will be the most impactful to your firm. Multiple Responses Accepted
Factors or Trends that May Impact RIA Firms in 2016 *New to survey this year
15%
14%
40%
20%
24%
9%
11%
32%
23%
22%
9%
10%
29%
24%
15%
5%
4%
19%
11%
11%
8%
8%
9%
11%
12%
20%
27%
Changing technology*
Recruiting / retaining talent
Succession planning
Legal, compliance or regulatory changes
Aging client base*
Managing firm growth / business growth
Macro-economic environment
20162015201420132012
Advisors could choose more than one answer
Generational wealth transfer is the top threat
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Base::Total (n=302) QCI3REV: What are the top competitive threats to your business growth in 2016? Multiple Responses Accepted
Top Competitive Threats to Firm Growth * New to survey this year
2%
7%
31%
31%
71%
33%
4%
12%
35%
30%
56%
33%
3%
12%
21%
28%
39%
42%
50%
Other
Wirehouses / broker-dealers
Emerging nationally-branded RIAs
Asset management companies offeringadvice-embedded investment products
Regulators
More investors choosing DIY online investing
Generational wealth transfer to non-clients* 2016
2015
2014
Advisors could choose more than one answer
RIAs remain largely unconcerned about robos
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2015 Base: Those aware of robo-advisors (n=236) 2016 Base: Total (n=302) QCI7: Using a scale of 1 to 10, where 10 means "Extremely concerned" and 1 is "Not at all concerned", how concerned are you that "robo-advisors" pose a threat to your firm?
Concern that Robo-advisors are a Threat to Their Firms
80% 82% Not at all concerned
Not very concerned
Extremely concerned
Somewhat concerned
62% 51%
20% 29%
17% 19%
1% 1%
2015 2016
Next Generation/ Succession
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Less than 10% of RIAs expect to retire within five years
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Base: Total (n=302) QNG2: What is your age? QNG6REV: In how many years do you expect to retire??
Age
Within 5 years
6 to 10 years
11 to 15 years
More than 15 years
Retirement Expectation
35-44
Average current age: 53 Years
65+
55-64
44-54
18-34 9%
24%
22%
45%
1
8%
14%
30%
31%
17%
RIAs are more focused on succession, with new leaders likely to emerge from within
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Succession Plans
39%
16%
24%
32%
25%
36%
17%
30%
34%
49%
50%
60%
No formal plan in place
Hire and groom recent college graduates
Merge the firm with a financial buyer oraggregator firm
Sell the firm to another RIA
Hire and groom advisors with someexperience
Successors to come from within the firm
2016
2015
Moving in the right direction!
* Advisors could choose more than one answer
Appendix
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Demographic Profile
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Demographic Profile Total
n=302
Job Title Owner, President, Partner or Principal 83%
Financial Advisor, Investment Manager, Portfolio Manager 6%
Vice President 4%
Registered Investment Advisor, Investment Advisor 3%
Chief Investment Officer 2%
Director 1%
Certified Financial Planner, Financial Planner 1%
Demographic Profile Total
n=302
Age
25 - 34 8%
35 - 54 (NET) 44%
35 - 44 14%
45 - 54 30%
55+ (NET) 48%
55 - 54 31%
65+ 17%
Base: Total (n=302) QS1 What is your job title? Are you the firm's... QNG2. What is your age? Q37 What are the approximate total assets under management at your firm?
Average Assets under Management (AUM) = $265 Million
About the Survey The findings are the results of a telephone survey, conducted by MaritzCX
on behalf of TD Ameritrade Institutional, a division of TD Ameritrade, Inc.
302 independent registered investment advisors (RIAs) with firm assets under management averaging $265 million participated in the most recent wave of this annual survey, which was conducted during the fourth quarter of 2015.
Independent RIAs who custody with TD Ameritrade Institutional and other independent RIAs were asked to share their views on the economic outlook for their firms and the advisor market in general.
Margin of error is ±5.6 percent.
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About Us 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 MaritzCX and TD Ameritrade, Inc. are separate, unaffiliated companies and are not responsible for each other's products and services.
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