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The RIA consensus heading into 2011: hire more and invest in more infrastructure

TD Ameritrade survey shows advisors have big concerns over regulatory changes

Tuesday, December 21, 2010 – 2:22 PM by Brooke Southall
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Skip Schweiss: RIAs are at full throttle, increasing spending on staffing, professional development and technology enhancements.

Financial advisors are — despite real concerns over the murky regulatory picture — in a good mood and a hiring mode as they look to 2011, according to a survey of 500 RIAs by TD Ameritrade.

Optimism about the economy is translating into advisors planning to invest more in the kinds of things that will support growth. Thirty-three percent of RIAs surveyed report that they are planning to increase spending, up 74% from a year ago. Top areas of investment for RIAs continue to be marketing and technology initiatives to add capacity and scale as they bring on new clients, according to the Jersey City, N.J.-based RIA custodian.

For example, Portland (Maine) Global Advisors (which I visited yesterday) has made some dramatic upgrades in the past two months alone. The five-partner firm now has all new Hewlett Packard computers, new CRM software from Microsoft called Business Contact Manager, new carpeting, new iPhones for staff members and new ergonomic chairs surrounding the handcrafted wooden conference room table. Part of the motivation to make capital improvements was that the old stuff was worn out or growing obsolete but economic conditions played a hand in writing the checks.

“The market’s strength gave us the backdrop to go ahead and do that,” says Richard Strabley, a managing principal with Portland Global, which manages more than $300 million of assets.

Travel and salaries

The TD survey shows major shifts in spending on travel, salaries and bonuses and professional development from 2009 to 2010, indicating there is a renewed focus on hiring, training and rewarding staff in 2011. These optimistic actions were also present in a bigger survey done by Schwab Advisor Services. See: 9 things worth knowing from Schwab’s newest advisor study.

From 2009 to 2010 the number of RIAs increasing budgets for:

· Travel increased 21%

· Salaries and bonuses increased 8%

· Employee benefits increased 41%

· Professional development increased 41%

· Staffing increased 59%

The majority of RIAs continue to be happy with their careers, with 77% surveyed indicating they are satisfied with their jobs, the highest level in the survey’s history, and up 10% from the beginning of the year, according to the responses in the survey.

The positive responses by advisors are particularly good considering that there are still considerable concerns about the uncertainty surrounding regulatory issues, according to Skip Schweiss, managing director, advisor advocacy and industry affairs, TD Ameritrade Institutional.

Top concern

The top concern of RIAs is related to regulatory uncertainty, with nearly 60% of respondents indicating that their greatest concern is having to spend more time and money to meet the new compliance requirements.

“The survey clearly shows these unanswered questions are cause for concern,” he says. Yet “...RIAs are at full throttle, increasing spending on staffing, professional development and technology enhancements to take advantage of opportunities to grow their businesses.”

This optimism in many ways mirrors advisors’ improving views on the economy, with nearly half of RIAs (46%) indicating they are positive about the direction the economy is heading over the next three months, up 30% from the quarter ended Sept. 30 and up 5% from the beginning of the year. This shows that advisors were optimistic at the year’s beginning, suffered a crisis of confidence midway then regained ebullience as the market surged in the Fall.

Heading into a new year, 71% of the respondents said growth is the top goal again, followed by increasing client satisfaction (36%) and improving profitability (33%). When asked what obstacles may prevent them from reaching their goals in 2011, 38% of (the apparently most optimistic) advisors surveyed foresaw no obstacles. Twenty-seven percent indicated that talent management was the chief obstacle standing in the way of progress; others said operational efficiency (25%) and time management (20%).

Regarding pending oversight changes, more than 40% of RIAs prefer to continue to be regulated by the SEC, with 28% preferring the continued role of the states. Only a very small minority preferred a new or existing Self-Regulatory Organization such as FINRA or the CFP Board of Standards to play a supervisory role.


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TD Ameritrade
Asset Custodian
Top Executive: Tom Nally




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