Registered investment advisers are deeply concerned about new regulations and are sensitive to the impact of the financial downturn on their personal lives and finances, but they remain surprisingly upbeat about their jobs and their outlook on the economy, according to a new survey.
Registered investment advisers are deeply concerned about new regulations and are sensitive to the impact of the financial downturn on their personal lives and finances, but they remain surprisingly upbeat about their jobs and their outlook on the economy, according to a new survey.
Asked to name their major business concern, 42% of respondents in TD Ameritrade Holding Corp.'s latest RIA Sentiment Survey cited regulatory change — up almost 25% from their responses in the poll taken three months earlier. That concern, reflecting the attention paid to the Obama administration's plan to impose a fiduciary standard on all financial advisers during the Aug. 28-Sept. 8 survey period, far outpaced the second- and third-most-cited concerns: increasing client satisfaction (39%) and improving profitability (31%).
However, almost half the 501 advisers surveyed (43%) said that their finances were the aspects of their lives most negatively affected by the financial downturn, with mental health given as the second-most-frequently-cited response (16%). Somewhat paradoxically, job satisfaction was cited most frequently (46% of respondents) as the aspect of their lives most positively affected by the financial downturn, followed by 30% who said that their finances improved.
Those responses may show the value of the independent-advisory model, something that is championed by the institutional arm of TD Ameritrade, which has conducted the quarterly surveys since early this year. The stresses of the job remain strong, with 42% of advisers saying that their top personal goal in 2010 is to spend more time with family and friends, 31% citing improving their health, and another 31% saying that they want to enjoy more leisure time.
Although fewer than 30% said that they aspire to reach a new level in their career as their chief goal and just 18% said that they want to acquire new professional skills, advisers said that their practices are prospering as measured by at least one metric.
More than 60% said that they added clients on a net basis during the downturn, and 90% said that their total client numbers remained steady or rose during the past six months. The bulk of the additions (72%) have come from wirehouses or independent broker-dealers, while the smaller number of clients leaving RIAs are moving their assets to banks or other independent advisers, Brian Stimpfl, managing director for advisor advocacy and industry affairs at TD Ameritrade, said in an interview.
Personnel issues continue to be the operational challenge cited most frequently by RIAs, and technology is the area where most (62%) are spending in order to build their business. Just 28% of respondents said that they are cutting back on technology costs.
Marketing was the second-most-cited area of expense growth, while travel was the most frequently cited target for expense cutting, followed by salaries/bonuses (46%) and client appreciation activities (44%). Seventy-two percent of respondents said that their business spending increased or remained unchanged in the third quarter.
The much-debated question of whether the fiduciary standard that governs independent advisers should be applied to stockbrokers who give advice continues to garner attention. Sixty-nine percent of respondents said that the Obama administration's fiduciary proposal is positive, with 39% calling it a small step in the right direction and 30% a major step toward financial reform.
And 55% said that they disagree with the theory that a level playing field — if that can be achieved without diluting the standard — would rob RIAs of a key competitive advantage against broker-dealers. Almost one of every three, however, thinks that it will rob them of marketing power.
Not surprisingly, as equity markets picked up steam, advisers said their clients were invested in 4% less cash than in the previous three months as assets were shifted increasingly to fixed-income and international investments. Larger RIAs, with assets under management of $100 million to $250 million, expressed more optimism than their peers that the economy will continue to improve over the next three months, but 48% of all respondents said that they are upbeat about the prospects.
Those anticipating recovery by yearend expect to see a 9% to 10% average rate of return on their clients' portfolios over the next 12 months, the survey found.
The survey, conducted by Maritz Inc., has a margin of error of 4.4%, meaning that in 19 of 20 cases, results will differ by no more than 4.4 percentage points in either direction. The RIAs surveyed included both clients of TD Ameritrade Institutional and of other custodians.
