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RIAs Have ‘What, Me Worry’ Attitude About Robos

A new survey finds that RIAs are largely unconcerned by the burgeoning trend in robo-advisors.

Indeed, according to the TD Ameritrade Institutional RIA Sentiment Survey, 14% of firms are launching robo offerings to attract new clients. Of these firms, 85% say they will have these programs up and running by year’s end, though it’s well down the list of technology investment priorities. Top tech investment? Bolster cyber-security, cited by 56%.

Other investments included:

42% - Customer Relationship Management (CRM) tools
41% - Client facing tools (i.e., website, portals, social media)
40% - Performance reporting tools
37% - Document management tools
36% - Financial planning tools
32% - Tools for mobile devices/apps
32% - Portfolio accounting tools
30% - Portfolio rebalancing tools

However, 20% said they were “not planning to make tech investments.”

Growing Seasoned?

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. The 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. RIAs are pursuing new client niches to grow, and nearly half are stepping up their marketing/advertising as part of their growth plans, according to the report. As for managing that growth, nearly a third will hire more junior advisors, and 28% will add to back office staff. Just over one in five (21%) say they will hire new lead advisors.

Among the top business initiatives cited for firm growth were:

82% - Improve efficiency
75% - Enhance client service and delivery
56% - Invest in technology
51% - Train and develop staff
45% - Implement a formal marketing/social media plan
41% - Augment compliance

Succession Plans

Advisors are in no hurry to retire — fewer than 10% plan to retire within five years. That said, succession planning is underway. The report suggests that more advisors are taking succession planning seriously: Only 17% say there are no formal plans in place, compared with nearly 40% last year who said they had no formal succession plans.

Most advisors plan to name successors from within, indicating they will hire and groom advisors as needed.

SWOT Analysis

The top management priority this year? Improve efficiency.

Regulatory issues, cited as a concern by 40% in 2012, take a back seat this year (11%) as RIAs cite new concerns. In fact, the macroeconomic environment is most likely to have the biggest impact on firms in 2016. Managing firm growth/business growth was cited by 20%.

And the biggest competitive threat? Generational wealth transfer, cited by 50%. The second most cited threat (42%) was “more investors choosing DIY online investing,” though “regulators” wasn’t far behind, at 39%.

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