RIAs anticipate the total rate of return on client investments will average eight percent for the first half of 2014. And they are making slight adjustments to client portfolios to achieve this, moving toward equities at the expense of fixed income. Equities are now 54 percent of client portfolios, compared with 48 percent last year, while fixed-income allocations now average 23 percent of client portfolios, down from 27 percent from last year.Moreover, 42 percent of advisors are searching outside of the bond market for higher yields, investing in asset classes such as international stocks, real estate and energy. Seventy percent of RIAs continue to use exchange-traded funds (ETFs), and 40 percent will increase their usage of these low-cost vehicles over the next 12 months. Advisors Facing Regulatory Issues Advisors report their top business concerns are regulatory changes, firm profitability and growth. A full 71 percent of RIAs claim that the potential burdens and costs they will have to manage as a result of the changing regulatory landscape are the biggest competitive threat, followed by growing numbers of investors opting for do-it-yourself investing (33 percent) and broker-dealers offering fee-based investment management services (32 percent). Coping with regulatory change is not simply a business concern for RIAs, it’s potentially one of the biggest obstacles to firm growth in 2014. As in 2013, advisors also feel challenged by handling increased compliance requirements and dealing with an aging client base. “The biggest hurdles to advisor growth don’t disappear overnight – addressing increased compliance requirements, regulatory changes and an aging client base takes time to work through successfully,” said Nally. Gearing Up For Growth RIAs are moving forward with firm-wide strategic initiatives that were in place in 2013. They remain committed to utilizing technology to increase scale, systematizing client service and delivery, and training and developing staff. Implementing these plans will require some infrastructure upgrades, so 66 percent are committing more capital to technology and more than a quarter plan to hire junior advisors to accommodate growth. Augmenting compliance (23 percent) rounds out the top projects this year on advisors’ to-do lists.
The technology upgrades being considered most by advisors are related to:
- Performance reporting
- Portfolio accounting
- Customer relationship management (CRM)
- Document management
- Financial planning
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