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TD Ameritrade: FAs Look Ahead to Faster Growth in 2018

By Murray Coleman January 9, 2018

As 2018 unfolds, three-quarters of U.S. independent advisors say they expect their firms’ revenues to rise in a new year. Perhaps just as telling, most are projecting even faster asset growth than a year ago.

At least those are some of the major takeaways from the 2018 RIA Sentiment Survey by TD Ameritrade published Tuesday. The broker-dealer hired an outside marketer to conduct interviews with 300 RIAs, both clients and non-clients, late last year.

“Savvy clients don’t look just at a firm’s balance sheet – they also want to see who you’re hiring and how your resources are growing,” says Tom Palecek, founding partner of Summit Trail Advisors, which manages about $5.5 billion.

Other key findings of the latest RIA benchmarking report include:

  • RIAs produced revenue growth averaging 15% in the last half of 2017. Assets under management for a typical firm improved by 16%.
  • Most advisors expect to increase their budgets for marketing, still considered the best way to drive future expansion.
  • Tech investments in 2018 will focus on front-end enhancements designed to improve client experiences.
  • Most advisors don’t expect to actively participate in mergers and acquisitions in the coming year. For those considering M&A deals, a majority are looking to acquire or make additions rather than selling or merging with others.

“We’ve got a laundry list of things we want to keep investing in to stay ahead of the pack,” Palecek says. “At this point, we’re growing so much that it’s a matter of finding enough bandwidth.”

The RIA’s assets rose by more than 30% last year, he notes. “I don’t imagine many advisors in this environment will tell you they don’t expect to keep growing in 2018,” Palecek says. He points out that long-term averages suggest a typical firm might expect to advance in the high single digits in more normal market conditions.

With 17 partners now, Palecek sees Summit Trail delegating more responsibilities by creating new committees and working groups. “We want to make sure nothing falls through the cracks,” he says. “There are just so many things you’ve got to keep moving the ball forward on in order to provide a high level of service to clients.”

Attracting top talent is also likely to be a chief RIA concern in 2018, Palecek predicts. “At our firm, we’re always looking for good people, which is why we’re organized as an open partnership,” he says. “When we started in 2015 with six partners, we developed a very clear method for new advisors to join the firm as partners and equity owners.”

An overwhelming number of advisors (70%) are bullish about economic growth across global markets, particularly for stock sectors like industrials, financials and materials, TD Ameritrade says. Meanwhile, some 55% are expecting to use ETFs more than mutual funds and individual stocks to manage client portfolios.

“Professional money managers remain bullish because the new tax laws are expected to mainly benefit corporate America,” says Jerry Slusiewicz, president of Pacific Financial Planners in Laguna Niguel, Calif., which manages about $90 million. “Most of those savings are going to be used for stock buyback programs and increased dividends, both of which will enhance shareholder value.”

While company earnings are expected to keep moving higher in the second-longest bull market since World War II, TD Ameritrade’s survey finds the tax overhaul recently passed by Congress is listed as the top driver for opening up new planning opportunities for clients in 2018.

“Advisors were inundated at the end of the year with questions about how tax cuts will impact their situations,” says Vanessa Oligino, TD Ameritrade’s director of business performance solutions. “It makes sense that moving into 2018, clients are going to need more help with their tax planning strategies.”

Along with any lack of clarity about taxes by investors, RIA survey participants also listed new government regulations as the biggest challenges to their planning business in the coming year. The survey didn’t ask about specifics such as full implementation of the Department of Labor's ficuciary rule, which is on hold, or other possible compliance concerns.

Vanessa Oligino

“These are fairly evergreen concerns,” Oligino says. “Any time there’s a change in the regulatory environment or major tax legislation, clients are going to turn to their advisors to learn more about these issues.”

Just 1% of advisors are “extremely” concerned about robo advisors as a long-term threat, she adds. The research finds 54% are “not at all concerned” about online advice-giving.

“Leading robo services are integrating humans into the process, which is more evidence that purely automated offerings aren’t attractive to high net worth investors,” Oligino says. “Advisors are planning to increase their tech spending in 2018 in part to make their online features even more engaging for clients.”