New Research, published by TD Ameritrade, Shows
That a Superior Client Experience and In-Depth Strategic Planning
Also Are Important to Generating Sustained, Standout
Performance
Keeping a sharp focus on operational efficiency and delivering
the best possible client experience are among the keys to stronger,
sustainable growth for financial advisors, according to The FA
Insight Study of Advisory Firms: Growth By Design, an annual
research report that’s now published by TD Ameritrade
Institutional.1
More than two-thirds of firms said they will emphasize
operational efficiency to drive future growth, improving
consistency and productivity levels to impact the bottom line. FA
Insight, a research and consulting firm specializing in the
financial advice industry, was acquired by TD Ameritrade in May
2016.
"After 2014's record profitability and explosive growth2,
advisors now must be more disciplined -- and that's not a bad
thing," says Vanessa Oligino, director of Business Performance
Solutions at TD Ameritrade Institutional. "Firms need growth plans
that go deeper than just riding the rising market tide if they
expect their success to carry through different cycles."
The study shows that lackluster markets did little to boost
growth in 2015 and advisors generally expect more of the same this
year. The pace of asset growth last year slowed by 56 percent and
firm revenue growth slowed to half of its 2014 rate, while median
overhead expenses per client rose 31 percent. The resulting squeeze
on profitability serves as a reminder that proactive planning must
replace relying on markets to generate growth.2
Key Performance Metrics for All Study
Participants 2
2015 2014
Change AUM growth rate 4.7%
10.6% - 56% Revenue growth rate
7.3% 14.4% - 49% Client base growth
rate 6.0% 7.1% - 16%
Median operating profit 20% 26%
- 23% Median income / owner $318,000
$416,000 - 24%
Standouts Shine With Greater Efficiency
Advisory firms with solid growth plans and strong execution
fared better. Among “standout” firms, defined by FA Insight as
those in the top quartile measured by revenue growth and income
generation, annual revenue grew roughly two to three times faster
than their peers in 2015. Standouts converted 40 to 50 percent more
owner income per dollar of revenue.
Operational efficiency may be the single most important factor
in determining a firm's growth and profitability, particularly in
challenging markets. Standouts spend a much lower percentage of
revenue on overhead expenses, resulting in greater profitability
and higher income per owner.
Though most advisors said they are willing to automate
processes, to what degree varies across different tasks. Portfolio
management is the area where firms have the greatest tendency to
automate. Technology integration remains a challenge with 3 percent
of firms saying they are fully integrated, which means users can
access data from a single sign-on and work seamlessly across
different applications.
Client Experience is a Growth Driver
Among standout firms, 56 percent reported that their client
experience is a key growth driver, compared with 41 percent of
their peers. Delivering a consistent, high-quality experience
remains a challenge. Standout firms keep it simple and master a
more limited service offering, resulting in a better service
experience and freeing time for asset gathering.
Though 41 percent of firms vary the level of service across
clients, standout firms realized benefits by standardizing
services, creating opportunities to deepen expertise and improve
the consistency of service delivery. Standout firms were twice as
likely to implement client onboarding and service delivery
consistently across the board.
Pricing and M&A for Growth
In the face of rising costs and slower growth, advisors are
reluctant to increase or diversify their pricing. Only 34 percent
of firms increased pricing in the past two years, compared with 42
percent in 2014. This reticence may be misguided: firms that
clearly articulate and demonstrate the value they deliver to
clients should revisit their pricing to help ensure each client
relationship is profitable for the firm.
Pursuing a merger or acquisition is one of the more aggressive
growth strategies explored within the study. One in five firms
point to deal-making as a key driver of their recent growth, with
the most common transaction being the acquisition of a solo
practitioner.
"Advisors today have many possible paths to growth. That's
exciting, but it’s also potentially distracting for firms without a
well-designed plan," said Oligino. "For growth to be systematic and
sustainable, advisors need to focus on delivering a trademark
client experience and then have confidence to price that service
accordingly."
To Learn MoreTD Ameritrade Institutional clients
can obtain a copy of the 2016 Growth By Design study by visiting
our Education Center. Advisors who aren’t clients but want to learn
more can visit www.fainsight.com.
The 2016 FA Insight Study of Advisory Firms: Growth by Design is
based on online survey responses from 325 advisors on a range of
firm management topics, including strategic planning, client
experience, operational efficiency and marketing. Participating
firms had a minimum $100,000 in annual revenue, while half had
annual revenue of at least $1.5 million. About 75% of firms were
independent RIAs while an additional 11% were primarily RIAs.
Surveys were fielded between Feb. 15, 2016, and April 29, 2016
About TD Ameritrade InstitutionalTD Ameritrade
Institutional is a leading provider of comprehensive brokerage and
custody services to more than 5,000 fee-based, independent
registered investment advisors and their clients. Our advanced
technology platform, coupled with personal support from our
dedicated service teams, allows investment advisors to run their
practices more efficiently and effectively while optimizing time
with clients. TD Ameritrade Institutional is a division of TD
Ameritrade, Inc., a brokerage subsidiary of TD Ameritrade Holding
Corporation.
About TD Ameritrade Holding CorporationMillions of
investors and independent registered investment advisors turn to TD
Ameritrade’s (NASDAQ: AMTD) technology, people and education
resources to help make investing and trading easier. Online or over
the phone. In a branch or with an independent RIA. First-timer or
sophisticated trader. Our clients want to take control, and we help
them decide how - bringing Wall Street to Main Street for more than
40 years. An official sponsor of the 2016 U.S. Olympic and
Paralympic Teams, TD Ameritrade has time and again been recognized
as a leader in investment services. Visit TD Ameritrade's newsroom
or amtd.com for more information.
Brokerage services provided by TD Ameritrade, Inc., member FINRA
/ SIPC
FA Insight is a product of TD Ameritrade Institutional and is a
trademark owned by TD Ameritrade IP Company, Inc.
1 TD Ameritrade Institutional is a division of TD Ameritrade,
Inc., a brokerage subsidiary of TD Ameritrade Holding Corporation.2
The 2016 FA Insight Study of Advisory Firms: Growth By Design
Source: TD Ameritrade Holding Corporation
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version on businesswire.com: http://www.businesswire.com/news/home/20160829005039/en/
TD Ameritrade Holding CorporationJoseph A. Giannone,
201-369-8705Communications + Public
Affairsjoseph.giannone@tdameritrade.com
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