Despite the short-term hiccup due to returning volatility in the markets, RIAs on the whole are upbeat and optimistic for a prosperous 2016.
TD Ameritrade Institutional’s 2016 RIA Sentiment Survey provides an intriguing glimpse into the mindset of the fastest growing segment in the financial services industry. These independent firms that collectively control over a couple of trillion dollars in client assets are putting on their forecasting glasses and expect, on average, a positive 17% increase in their assets.
A key driver of that growth this year will come from a directed effort on the part of RIAs to go after new niche markets. Over half of RIAs surveyed said they would be looking to expand their businesses by reaching out to focused client segments, including female executives, divorcees, widows, and medical practitioners. By focusing on these growing segments, RIAs with their independent, nimble and flexible business models, can tailor their messages and service offering to better attract and retain these types of clients.
“Advisors seeking a niche, however, need to determine where they would like to focus and then narrowly define their target market,” advises Vanessa Oligino, Director of Business Performance Solutions at TD Ameritrade Institutional. “For example, ‘doctors’ is not a niche. It would be better to target ‘radiologists in the Boston area.’”
Other emerging trends highlighted in the TD Ameritrade Institutional RIA Sentiment Survey were a focus on next-generation investors and changes RIAs are making to enhance their probability for success with this critical segment. For many RIAs, their aging client base is ringing alarm bells causing them to think of new ways to set themselves up for success when the soon predicted inter-generational wealth transfer starts to kick into high gear.
“To better engage and build relationships with these investors, advisors are hiring next-gen advisors and investing in technology to enhance the client experience,” Oligino explains. According to the survey, nearly a third of RIAs plan to take on junior advisors this year.
On the technology front, cybersecurity is now the number one priority for RIAs, no doubt due to the heightened regulatory focus and ever more frequent high profile hacking incidents in news headlines. Following cybersecurity on RIAs’ technology minds are CRM tools, client facing platforms, performance reporting systems, document management technology, financial planning analyses, portfolio management, and robo advisory services.
Speaking of robo advisors, the survey revealed that only a small percentage, 1%, are actually “extremely concerned” with the presence of these online disruptors. Along these lines a small, but not insignificant percentage (14%) of RIAs plan to launch a robo in 2016.
So, as 2016 gets off to a fast start, look for these themes to be top of mind for RIAs as they continue their success in working with clients, growing their businesses, and leading the way in financial services.
Timothy D. Welsh, CFP® is President and founder of Nexus Strategy, LLC, a leading consulting firm to the wealth management industry, and periodically blogs for Advent’s On Point blog. He can be reached at email@example.com or on Twitter@NexusStrategy.