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Amid Market Volatility, RIAs Anticipate Continued Strong Growth in 2019

RIAs expect the growth trend from last year to continue, as they welcome investors seeking advice, attract new talent and adopt the latest technology, new survey results show.

Volatile markets in 2018 drove more investors to seek out the guidance of independent RIAs, with RIAs citing nearly 20% growth, on average, both in assets and revenues in 2018, TD Ameritrade Institutional found in its 2018 RIA Sentiment Survey.

Additionally, RIAs report that both their assets and firm revenues grew on average by 18% in the latter half of 2018, with the number of new clients increasing by an average of 14%. And while more than three-fourths of advisors expect growth to persist in 2019, nearly half say they will grow faster than last year.

“In times of market uncertainty, investors seek out financial guidance from knowledgeable professionals – independent advisors who focus on their goals, risk tolerance and other details of their financial lives,” explains Vanessa Oligino, director, business performance solutions at TD Ameritrade Institutional. “RIAs help clients understand their choices for weathering different market cycles so they can keep pursuing their goals.”

Growth Drivers

To that end, the survey shows that one in four advisors’ new clients had previously been self-directed or was new to investing. What’s more, nearly a third of their new clients left commission-based platforms in favor of independent, fee-based fiduciary advice, TD Ameritrade notes.

Other growth drivers include expanded usage of digital marketing to complement traditional approaches to marketing and promote new business development. Though client referrals hold the top spot, RIAs say upgrading their online presence, using social media, sharing digital content, and hosting seminars and events round out their top five business development tactics.

To manage and sustain growth, independent advisors are seeking talent from both ends of the experience spectrum by targeting experienced advisors currently working for other RIAs and who already have clients, as well as college interns just starting out.

Acquisitions also may be part of the equation, as RIAs look to expand their service offerings to meet client demand. According to the findings, one in four advisors arwe considering mergers and acquisitions as a potential growth strategy.

Investment Outlook

As to their overall outlook, RIAs reportedly are upbeat on stocks and the U.S. economy in 2019, with 62% maintaining a positive outlook, though optimism for the global economic outlook has slipped. Forty-seven percent of advisors believe stock prices will increase, on par with 2018 expectations.

RIAs also are reportedly approaching 2019 with “pragmatic optimism,” keeping the daily market drama in perspective and closely following interest rates, company earnings and trade tensions for their impact on client investment portfolios.

As for which sector will benefit most from the new 116th Congress, advisors believe it will be the health care industry, with consumer staples, IT and financials also getting a boost.

Real estate is RIA clients’ number one alternative asset held in client portfolios (31%), following by commodities (17%) and private equity (15%), with cryptocurrencies ranking last (2%). Interestingly, 48% of advisors say clients are asking about cannabis-related stocks and 55% say clients are interested in ESG investments. By contrast, just 15% of advisors say that clients showed interest in cryptocurrencies.

Technology Focus

Advisors also say that technology is their biggest management challenge. With ongoing news about data breaches, RIAs say cybersecurity is the most important issue facing the industry and should be a top concern for regulators.

In addition, technology was their biggest operational spend in 2018 and that should continue into 2019, with advisors devoting the biggest part of their technology budgets to cybersecurity, the report notes.

At the same time, advisors say that email remains the communication channel preferred by clients ages 50 and younger, though texting and video chat are starting to make inroads. Baby Boomers and seniors, meanwhile, prefer staying in touch with their advisors via phone, though they are comfortable with email.

“Many data breaches start with compromised email, which is why we encourage RIAs to understand the security risks that come with email, as well as with newer communication channels, and implement processes and procedures to protect their clients and their firms,” Oligino advises.

The findings are based on a telephone survey of 302 independent RIAs conducted by MaritzCX on behalf of TD Ameritrade Institutional between Nov. 27 and Dec. 13, 2018.