The COVID-19 pandemic apparently has dampened the near-term outlook of Registered Investment Advisors, but they remain optimistic heading into next year, according to two new surveys.
The most recent wave of E*TRADE Advisor Services’ Independent Advisor Tracking study finds that more than half of RIAs surveyed (52%) said they are bearish looking ahead to the next quarter—up six percentage points since March.
Concerns about political instability have also gained traction since March. More than half of advisors surveyed (56%) are actively managing risks associated with political instability for clients—jumping up 24 percentage points since March and matching recession concerns, which also registered at 56%. And even though the level is down four percentage points since March, managing market volatility for clients remains the top risk (at 81%) that RIAs say they are managing right now.
Attempting to time the market remains the top mistake advisors see their clients make, with slightly more than half saying so (51%)—up six percentage points since March.
At the same time, many indicate that their client portfolios have already recovered. Two out of five RIAs (41%) said their client portfolios have fully recovered since the downturn, while 15% of respondents believe they’ll recover in 4 to 6 months, and 19% believe they’ll recover in 7 to 12 months.
Against the backdrop of an election year, Matthew Wilson, President of E*TRADE Advisor Services, notes that client anxiety is likely to remain high. “An open line of communication between client and advisor can go a long way in ensuring clients stay the course during potential choppy waters,” he suggests.
E*TRADE’s survey was conducted in-house Aug. 4-7, 2020, among a convenience sample of 299 independent RIAs.
Optimism and Growth Hold Steady
Meanwhile, TD Ameritrade Institutional’s 2020 RIA Sentiment Survey Mid-Year Update reveals that although RIAs have a more somber outlook for the rest of the year, more than 60% of respondents are optimistic about the prospects for the economy in 2021.
And despite the challenges created by the pandemic, 58% of RIAs report that they continue to onboard new clients, with client bases increasing nearly 6% during this time. What’s more, 43% report AUM increases of 8% on average, and 40% have seen revenues increase at a similar rate.
“The saying, ‘Keep calm and carry on’ has served advisors well during these unprecedented times, as they help their clients—and themselves—make sense of, and adapt to, current events that are impacting their long-term goals,” says Vanessa Oligino, managing director of business performance solutions for TD Ameritrade Institutional. “The results show that investors want financial guidance they can trust, which is why RIAs are growing even as they are having to pivot rapidly and, in some cases, rethink large portions of their operations.”
TD Ameritrade also finds that RIAs are paying close attention to headlines on the U.S. economy, the presidential election and corporate earnings for their impact on client portfolios.
Back in the Saddle
Though it is not back to “business as usual” for most firms, more than 60% of RIAs are already back in the office, but COVID-19 concerns and precautionary measures have changed what this looks like for many. According to the findings, 36% of firms are splitting in-office and remote work schedules to allow for social distancing, while 28% are providing staff with PPE.
And 42% of advisors say concerns about a rise in COVID-19 cases are holding their staff back from returning to the physical office, while an additional 31% worry about their staff morale, health and general safety.
Technology Holds the Key
Thirty-three percent of RIAs report that since the pandemic, they have upgraded their technology to facilitate team and client engagement. During this period, 68% of RIAs have increased the frequency of their client communications and 88% report that the quality of these interactions is as good as before the pandemic, if not better.
As one might expect, video conferencing has taken off among RIAs this year, with 84% now videoconferencing regularly with clients. Personalized videos and secure texting are also popular client-facing applications now favored by RIAs. Looking ahead, 91% of advisors say their use of virtual meeting and virtual chat tools will remain at a high level once social distancing restrictions have eased.
And while they’ve ramped up their technology spending, advisors say they have hit the brakes in other areas for now. According to the findings, RIAs are spending less than they anticipated in areas like marketing and professional development budgets. And they have eased up on hiring, with 66% indicating that they are not actively recruiting right now.
Advisors hold a similar view of deal-making when it comes to their own firms. Though 42% expect others to pick up the pace on mergers and acquisitions, just 36% are considering some kind of transaction for themselves in the near future.
The survey was conducted by True North Market Insights on behalf of TD Ameritrade Institutional July 14-29, 2020, among 158 independent RIAs averaging $234 million in AUM.
This article originally appeared on NAPA.
