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TD Ameritrade: Advisors Most Optimistic in Six Years

By Murray Coleman January 10, 2017

The Donald Trump “reflation” trade might be spurring clients to take a more positive view of their financial fortunes in 2017. And for their advisors, efforts to engage with clients on Trump’s effects on the markets, say researchers at TD Ameritrade, are expected to pay big dividends in a new year.

At least those are the findings of the broker-dealer’s latest RIA Sentiment Survey. The report, made public on Tuesday, polled 306 indie firms between Nov. 14 and Dec. 5 – after Trump’s surprise victory in the 2016 presidential election.

Some 15% listed themselves as “very optimistic” about the U.S. economy – a big jump from a year earlier in which just 4% fell into that camp. More than half (54%) were at least somewhat optimistic heading into a new year.

“This is the highest level of optimism we’ve seen since we started doing these industry surveys in 2009,” says Vanessa Oligino, director of business performance solutions at TD Ameritrade Institutional.

But it’s not just bullish sentiment towards investment prospects, she tells FA-IQ. “In the past year, advisors have been regrouping – they’ve spent a lot of time trying to improve their efficiencies,” Oligino says. “They really expect these efforts to pay off in 2017.”

In a separate 2016 benchmarking study, indie RIAs reported to TD Ameritrade a big falloff in AUM growth and sinking revenue gains for firm-wide results in the previous year.

“In this new industry survey, advisors are letting us know that they’re starting to realize benefits from spending much of the past year refocusing on improving their outreach to new clients and segmenting their businesses to attract a younger demographic,” Oligino says.

Almost three-quarters (70%) saw increased AUM in the past six months and 52% told pollsters they’re forecasting even faster growth in the coming year. Those responding boosted their client base by 16% and revenues by 17% on average in the latter half of 2016.

Another finding is that during the past six months, the biggest source of new clients identified by advisors came from full-commission brokers. Those accounted for 31% of prospects turned into clients. The only other double-digit channel (15%) for bringing aboard newbies: clients picked up through mergers and acquisitions.

Steven Kaye

Perhaps not as surprising is that the study finds most indie RIAs – who presumably are already acting in a fiduciary manner in retirement planning – don’t see the pending introduction of an official regulation – the DOL rule – as a distraction. In fact, 83% see “business as usual” under such a mandate, according to the survey.

Still, 31% are bracing for higher legal and compliance costs for their practices. Also, while RIAs listed tech spending as their biggest expense item last year, the study finds that marketing budgets are likely to see the largest cost hikes over 2017.

That’s the top emphasis for practice managers in the coming year, along with adding staffing expertise. By contrast, finding new client niches and expanding into fresh markets slipped somewhat in the new study.

While still popular growth pillars, researchers found expectations for less focus in those two areas. That’s probably because of a much-talked about uptick in client segmentation as a means to counter competitive pressures including a wave of new robo technologies over the past year, says Steven Kaye, chief executive of AEPG Wealth Strategies in Warren, N.J., which manages about $900 million and custodies with TD Ameritrade as well as Schwab.

“When the first burst of robos came out a few years ago, we saw more advisors take a knee-jerk reaction and really become concerned about reaching out to Millennials,” he says.

But after a few years to re-examine robo technologies, Kaye believes much of the angst has gone away. So while niche marketing might be slightly ebbing, he suggests TD Ameritrade’s latest report is an indication of advisor sentiment “normalizing” as robo “hype” fades.

Indeed, the survey finds that 88% of indie advisors either aren’t worried at all or remain relatively unconcerned about robo advisors significantly impacting their books of business.

“Building more expertise in niche markets is still an effective way for traditional advisors to keep growing in unique ways,” Kaye says. “The best defense against robos in 2017 is going to remain defining how a human’s touch can add value for clients – marketing plans that can add that level of sophistication to conversations with clients will still be winning strategies.”