Independent RIAs Bullish on Their Future

The majority of registered investment advisers believe their businesses will grow at a faster rate than the market.

Independent registered investment advisers (RIAs) are very optimistic about the industry, their firms and their future, according to Charles Schwab’s “Independent Advisor Outlook Study.” Nearly a quarter (23%) say that the bull market of the past six years has helped them attract new clients, provide higher adviser compensation (16%), enabled them to invest more capital to grow their firm (13%) and consolidate client assets (13%).

Nearly all, 93%, of RIAs believe the industry will continue to grow, with 90% saying the RIA industry has not yet fully matured and 53% believing the industry will outpace the growth of the investment markets. Eighty-two percent also believe the U.S. economy is improving.

The survey also found that 70% of RIAs believe technology helps them improve customer services, creates efficiencies that make them more profitable (67%) and enables them to spend more time with clients (64%). Nearly half, 48%, said they would use an automated investment management system to target younger investors or investors with less than $100,000 in investable assets (43%).

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While most firms (77%) believe they offer holistic wealth management, they typically concentrate on only three areas: investment management (97%), tax-efficient planning (77%) and long-term financial planning (76%). A number of other financial services are considered secondary, value-adds—including financial planning for children, estate planning, charitable giving, health care planning, real estate management, tax preparation and filing, and advice on alternative investments.

“The independent model is resonating with both investors and with advisers, and this is driving the dramatic growth we have witnessed to date and expect to continue in the decade ahead,” says Bernie Clark, executive vice president and head of Schwab Advisor Services. “It’s clear that the environment in which we operate is changing. From emerging clients and the next generation of advisers, to new technologies that change the way firms work, RIAs have the opportunity to capture an increased share of the affluent market and to take decisive actions now to lay the groundwork for their firm well into the future.”

Technology will continue to play an important role in RIAs’ businesses, Clark says, not only to attract new clients but to expand their practices and create efficiencies.

The report is based on responses from 629 RIAs with $229 billion in assets under management custodied with Schwab. The full report can be seen here.

State Retirement Desirability Ranking Reveals Surprises

Being considered a top state to retire in is desirable for any number of reasons—but only one state gets to brag about being No. 1.

A report from LPL Financial ranks all 50 states and Washington, D.C., on their relative “retirement desirability,” finding some surprising regional trends and disparities around the U.S.  

Perhaps most interesting, the top state to retire in, on LPL’s analysis, is Virginia—a state that falls fairly well down on the list of the fastest growing or healthiest state economies by more traditional measures looking beyond the interests of retirees. In fact, according to the U.S. Bureau of Economic Analysis, Virginia’s economy remained essentially flat in 2014, with zero GDP growth, putting it near the bottom of states on that metric.

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LPL acknowledges the index rankings may raise eyebrows, but they reflect the fact that retirees’ best economic interest can differ somewhat from the best economic interest of a local or regional economy. As noted in the report: “The Retirement Index is also intended to spark discussion on how to improve desirability for pre-retirees, as no state received top grades across all six categories. The holistic nature of the index powerfully demonstrates that no state is perfect.”

Unsurprising in some respects, New York (50th) and New Jersey (49th) bottomed out the list because of factors such as high prices for housing and goods, along with higher tax rates and relatively strained public services due to higher population density. South Dakota, Minnesota, Wyoming and Wisconsin rounded out the top five, LPL says, for basically the opposite reason. Just holding the images of those states in the mind gives one a sense of what the important factors are for a state to rank well on LPL’s list.

NEXT: What makes a state “retirement desirable?”

Reflecting its experience working with real-world retirement savers and retirees—LPL came up with a shortlist of factors to use in ranking states’ retirement desirability. The full report contains detailed A through F letter-grade rankings on each of these factors for each state—making for a telling picture of the U.S. retirement landscape as a whole:

Financial: LPL says the financial health of pre-retirees as a group and the fiscal health of their states of residence are each linked to a fulfilling retirement. While lower growth states aren't precluded from high rankings on the list—for example, South Dakota had 0.6% GDP growth for 2014 but an LPL ranking in the Top 5—a persistently weak economy can drive higher taxes and general economic hardship.

Health Care: Clearly important for a smooth retirement, access to and cost of health care are key determinants of retirement satisfaction, LPL finds. Along with financial factors, health care perennially comprises a top concern in retirement industry research.

Housing: Affordable housing, both while active, during retirement, and, if needed, for nursing care, is of vital importance and can be a major expense, LPL observes.

Community Quality of Life: A more qualitative factor, LPL finds social connections and even the weather are other key determinants of retiree happiness and satisfaction.

Also included in the factors list are Employment and Education, especially for those people in the 15 to 20 years before retirement range, when savings should be at their peak, along with general financial and physical Wellness. 

Important insights for retirement plan advisers emerge from the rankings—not least that the most popular regions for retirement relocation are pretty well down on the desirability rankings.

Notably, popular retirement states Florida and Arizona ranked 37th and 43rd, respectively, while less populated South Dakota and Wyoming were both positioned within the Top 5.

“It’s not all bad for the Northeast though,” LPL says, “as its states received the largest concentration of high health care, wellness, and employment and education grades … Only two other Southern states join Virginia among the top 20, with Tennessee at No. 10 and Georgia at No. 16.”

Anthony Valeri, senior vice president for research and the study’s co-author, notes retirement planning is very personal, so these types of rankings should be taken in context.

“Bearing in mind the personal nature of retirement planning, an examination of the index allows an individual to consider what matters most to him or her, and can facilitate a discussion with a financial adviser about how best to prepare to meet those goals,” he says. “Academics, policymakers and advisers increasingly recognize that retirement readiness includes not only finances, but a broad range of economic and quality-of-life factors.”

The full rankings are presented here.

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