For many product providers and distributors such as asset managers, insurance companies, and custodians, fee-based RIAs are increasingly important given the growth and activity of this distinct audience. RIAs are often unlike other advisors, with specific demands and expectations that make it more difficult for product and platform providers to satisfy their varied needs. Practical Perspectives has highlighted many of the different preferences and behaviors of RIAs as part of our proprietary research covering a wide range of strategic and marketing/sales subjects. In this new 102-page report, we leverage several of our recent in-depth studies to provide an updated and detailed examination of RIAs. Our goal is to offer insights and implications related to several strategic and tactical aspects of working with fee-based RIAs including:
· How RIAs build client portfolios and the changing nature of their use of passive and active investments
· The relevance of insurance solutions to RIAs and how providers can more effectively support these products
· The forms of marketing outreach and contact that are most useful in gaining the attention of RIAs
· How to engage with RIAs through digital and web-based capabilities and what enhancements to support are most important
· How RIAs are approaching implementation of the DOL Fiduciary Rule and key changes they anticipate
Key Topic Areas
How RIAs Manage Client Portfolios
· What sources influence RIAs investment decision-making and how relevant are model portfolios and style boxes to RIAs?
· Which investment vehicles do RIAs prefer to use in building portfolios?
· How do RIAs use active vs. passive investment management and for which categories do RIAs prefer passive solutions?
RIAs Use of Insurance
· How engaged are RIAs in offering insurance solutions and which categories of products are most relevant to RIAs?
· What are the key barriers to greater use of insurance solutions among RIAs?
· What enhancements are most important from insurers to increase RIAs use of insurance solutions?
Marketing Outreach to RIAs
· Which forms of marketing outreach to RIAs are most impactful and what can enhance the effectiveness of contact?
· What are the characteristics of marketing outreach that has most influence on RIAs?
· What actions are RIAs most likely to take because of marketing outreach and which aspects of relationship with providers are most influenced by these communications?
RIAs Use of Digital and Web Support
· What specific actions are RIAs most likely to perform using product provider web and digital support?
· What are the key barriers to greater use of digital support among RIAs and what changes do they value most?
· How engaged are RIAs in using social media and what key benefits do they perceive from using these capabilities?
RIAs and Implementation of the DOL Fiduciary Rule
· How well prepared are RIAs for implementation of the DOL Fiduciary Rule?
· What changes do RIAs anticipate arising from the DOL Fiduciary Rule and how will it impact key aspects of a practice?
· What are RIAs needs for additional support related to the DOL Fiduciary Rule and what sources do they rely on for support?
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The study is available in PDF format for the subscription price of $4,950 which includes a discussion of key findings.
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Introduction and Methodology
For many product distributors and platforms, fee-based Registered Investment Advisors (RIAs) are both a significant opportunity and a perplexing challenge. Asset managers, insurance companies, custodians, and other service providers view RIAs as an increasingly important target audience given the accelerated growth and activity of this market segment. Yet RIAs have special characteristics and needs that make it more demanding to serve and satisfy this audience. Practical Perspectives has highlighted many of the different viewpoints and perspectives of fee-based RIAs as part of our proprietary research reports covering a wide range of topics relevant and critical to strategic and marketing/sales subjects. In this new updated report, we build on prior studies we have conducted to share a detailed examination of fee-based RIAs, specifically those unaffiliated with a broker-dealer. Our goal is to provide product providers and distributors with insights and implications related to several strategic and tactical questions involving RIAs including:
· How can providers align with key trends in how RIAs manage portfolios, including their use of both active and passive solutions?
· How do RIAs use insurance solutions in their practices and how can insurance providers better serve these advisors?
· What are the most effective marketing outreach strategies to develop and build relationships with RIAs?
· How can digital and web-based capabilities be used to more effectively engage and serve RIAs?
· How can firms support RIAs related to implementation of the DOL Fiduciary Rule?
The growth in RIA firms has been nothing short of dramatic. There are now more than $50 trillion in assets under management among SEC-registered firms and an additional 20,000-plus state-registered firms with average assets under management exceeding $50 million. Many RIA firms are solo practitioners with fewer than 100 clients but there has been significant growth among the larger RIA firms managing over $1 billion in assets. Recent growth has largely been fueled by the ongoing trend of advisors leaving brokerage firms including wirehouses and independent broker-dealers, the combination of RIAs into larger firms, and organic expansion of the marketplace. Many advisors are now joining existing RIA firms while more entrepreneurial practitioners create new practices as a solo practitioner or team practice.
The singular focus of this report provides additional in-depth perspective that can enhance the business development, product, marketing, and support offered to RIAs by firms targeting these advisors. Our research has consistently underscored several differentiating characteristics and behaviors of fee-based RIAs including:
· A greater focus among RIAs on affluent clients, with average account balances significantly higher than other advisors
· Higher propensity of RIAs to function in a team although many solo practices exist
· Greater technology sophistication and usage of RIAs compared to other advisors
· Greater focus on providing a variety of services to clients that go beyond investment management to include activities such as holistic planning
· A different approach to using insurance solutions among RIAs, especially annuities
· Greater confidence of RIAs in their ability to serve and support end-user clients
· Less comfort with traditional marketing and sales efforts, especially wholesaling
· Greater desire for objective, unbiased information especially in managing assets
Throughout the report, fee-based RIAs are compared to broker-dealer advisors as a point of reference and differentiation. These include advisors affiliated with independent broker-dealers (Independent channel) and those advisors from wirehouse, regional, and national employer-based broker-dealers (Full Service). Advisors who are dually registered and function within an Independent or Full Service environment (i.e. do both fee-based and brokerage business) are not considered within the RIA segment addressed in this report. In reviewing this report, note that all data presented is sourced through proprietary research unless otherwise noted. Given the confidential nature of the input, none of the respondents is identified by name or firm.
Table of Contents
Section I: Executive Summary
Section II: Introduction and Methodology
Section III: How RIAs Construct Portfolios
A. To what extent is investment management a primary focus for RIAs?
B. How do RIAs typically construct portfolios and how responsible are they for portfolio construction decisions?
C. Which third party sources have greatest influence on how RIAs construct portfolios?
D. How do RIAs use model portfolios to guide investment decisions?
E. How important are style boxes to how RIAs build portfolios?
F. How widespread is the use of fee-based solutions and which types of advisory solutions are most often used by RIAs?
G. To what extent do RIAs rely on actively and passively managed solutions and how has this been changing?
H. What are the key challenges for RIAs in using actively managed solutions?
I. How do RIAs perceive actively managed solutions relative to passively managed solutions?
J. What factors influence RIAs when selecting specific actively managed solutions?
K. For which equity and fixed income categories do RIAs prefer active and passive solutions?
L. What forms of support from product providers related to portfolio construction are most important to RIAs?
M. What changes or enhancements would have impact on RIAs satisfaction with actively managed solutions?
Section IV: RIAs and Use of Annuities and Other Insurance Solutions
A. How significant a priority is it for RIAs to offer or recommend insurance solutions to clients?
B. How widely do RIAs use insurance solutions?
C. How significant are insurance related revenues to a typical RIA?
D. To what extent do RIAs have access to insurance solutions and how many do they typically use?
E. Which key categories of insurance solutions do advisors use most?
F. What are the key challenges for RIAs in considering and using insurance solutions?
G. What are the main drivers of offering or recommending insurance solutions to clients?
H. What sources do RIAs rely on most for support in selecting the insurance products they offer or recommend?
I. How do clients typically access insurance solutions offered or recommended by RIAs?
J. What are the characteristics of insurance providers that RIAs are most likely to offer or recommend to clients?
K. Which aspects of support from insurance providers are most important to RIAs?
L. What changes would improve RIAs satisfaction with insurance providers and solutions?
Section V: Marketing Outreach to RIAs
A. What are the key sources of marketing outreach directed to RIAs?
B. How much consideration do RIAs give to marketing outreach?
C. What forms of marketing outreach do RIAs typically receive?
D. How likely are RIAs to pay attention to marketing outreach from key sources?
E. How likely are RIAs to pay attention to marketing communications in various formats?
F. What actions do RIAs take as a result of marketing outreach?
G. What are the most significant barriers to RIAs paying attention to marketing outreach?
H. What factors distinguish effective marketing outreach to RIAs?
I. What changes will increase the likelihood RIAs will pay attention to marketing outreach?
J. To what extent does marketing outreach influence RIAs behaviors and perceptions?
Section VI: RIAs Engagement with Digital and Web Support from Product Providers
A. To what extent do RIAs rely on product providers for digital and web support?
B. What means do RIAs use to access digital or web support from product providers?
C. How much time do RIAs spend on digital and web support from product providers?
D. To what extent do RIAs rely on digital or web support from product providers that are restricted or specifically designed for advisors?
E. What activities do RIAs perform through digital and web support available from product providers?
F. How do activities RIAs perform through computer or desktop access compare to those actions performed using mobile devices?
G. How has RIAs use of digital and web support from product providers changed in the past 12 months?
H. How does digital and web support from product providers compare to best-in-class support from outside the financial services industry?
I. What key barriers or challenges do RIAs encounter in using digital and web based support from product providers?
J. What are the characteristics of digital and web based support from product providers that RIAs find most useful?
K. In RIAs own words, what is the most important change product providers can make to improve the usefulness of digital and web support?
L. To what extent are RIAs engaged with social media for business purposes?
M. How satisfied are RIAs with the results from using social media?
Section VII: RIAs and implementation of the DOL Fiduciary Rule
A. How well prepared are RIAs for implementation of the DOL Fiduciary Rule?
B. What key changes have RIAs made or expect to make in response to the DOL Fiduciary Rule?
C. To what extent do RIAs anticipate the DOL Fiduciary Rule will impact their practice overall?
D. What sources do RIAs rely on most for support with the DOL Fiduciary Rule?
E. What additional support related to implementation of the DOL Fiduciary Rule would RIAs like to receive?
Section VIII: Implications and Outlook