Advisers relying on new talent, technology in a growing field

by Jeff Della Rosa ([email protected]) 221 views 

Registered investment advisers have experienced steady growth in Arkansas and the United States over the past three years as a nationwide brokerage firm has been encouraging the younger generation to join the field.

 In 2013, TD Ameritrade Institutional established a scholarship and grant program as part of its NextGen Initiative, launched in part to prevent an adviser shortage as baby boomers start to retire.

Since then, it has awarded nearly $250,000 in scholarships to almost 50 students seeking degrees in financial planning and given grants of up to $50,000 to seven schools building programs to educate future registered investment advisers.

“A wave of baby boomer advisers are nearing retirement age, but there is not expected to be an equal number of young people joining the ranks of investment advisers and brokers,” said Joseph Giannone, spokesman for TD Ameritrade.

“TD Ameritrade Institutional has been raising awareness on this issue for several years, and we have encouraged the principals of RIA firms to hire from the next generation,” he said. “We also are encouraging universities to build and expand financial planning degree programs, to increase the pipeline of future advisers.”

When asked about the program’s success, Giannone said it’s too early to tell. “It’s a topic of conversation now at ours and other conferences.”

Since 2014, the number of investment advisers registered with the U.S. Securities and Exchange Commission has risen 9 percent to 11,847, up from 10,895, according to an August report from Investment Adviser Association and National Regulatory Services. Those registered with the Arkansas Securities Department has increased 5 percent to 1,020, up from 972 in the same period, according to the state agency.

U.S. firms that manage $100 million or more in assets must register with the SEC, while those that handle less than that amount are registered with the state.

As good news pours in for the industry, SEC-registered investment adviser Garrison Financial Corp. in Fayetteville has not needed to hire new advisers and has ample capacity to build upon its investments and seek out new clients.

Kerry Bradley, president of Garrison Financial, explained that advancements in technology have allowed one adviser to perform the amount of work that once required five employees. For example, its financial information terminal provided by Bloomberg has allowed investment information to become more easily accessible.

Bradley, Glenn Atkins, executive vice president, and James Bell, vice president, are all chartered financial analysts and have worked together for the past 14 years at Garrison Financial.

“We’re very much a team,” said Bradley, who’s worked in the industry for 24 years. “I think people like that unbiased, independent advice.”

The firm manages a total of 614 accounts with $294.6 million in assets, according to its investment adviser application filed with the SEC on May 10.

“We continue to grow,” Bell said. “You can add a lot of new business without needing to add another new person.”

Eighty percent of the firm’s clients are high-net worth individuals, having a net worth of at least $1 million. Clients also include churches, small institutions, endowments and pension plans.

With high-net worth individuals, Bell explained that its role as a company is to offer the client “human interaction.”

“That’s the role we fill, and I think we do a good job at it,” Bell said. “I don’t see that changing.”

Another part of their job is to seek out new investments. Advisers watch the news, follow data and look at trends, for example, in clothing.

At the same time, they “learn how to sift through the noise,” Bradley said. The firm’s business model is finding good bonds and stocks, and they determine the success of a good investment over a cycle of three to five years.

“We do all our investment research in-house,” Atkins said. “I’ve been doing it in one form or the other for the past 31 years.”

“The good and the bad is you know what the score is when you go home,” he said. “We look at it every day. It’s in your head all the time. It’s in your DNA.”

And Bell, who said he enjoys stocks and the stock market, would probably follow them even if he wasn’t working as an adviser. “It’s nice to get paid for what you’d do as a hobby anyway,” he said.


Significant Growth

Nationwide, 11,847 SEC-registered firms manage $66.8 trillion in assets, a slight increase from $66.7 trillion in 2015, and up 8 percent from $61.7 trillion in 2014, according to the report from Investment Adviser Association and National Regulatory Services.

Karen Barr, president and CEO for Investment Adviser Association, said an interesting fact in the report was that assets were flat from 2015. “The markets were challenging,” she said. But the “investor adviser community continued to grow significantly.”

Since 2013, the number of advisers working at investment adviser firms has risen 13 percent to 386,532, up from 342,010. In the same period, the number of advisers living in Arkansas has increased 6 percent to 1,648, up from 1,550.

“These are good jobs,” Barr said. “Job growth in the industry has been very healthy.”

Jobs in the field are expected to grow 30 percent through 2024, according to the U.S. Bureau of Labor Statistics.

“Our field is only growing,” Barr said. “It’s definitely dynamic and innovative.”

Also, investment advisers are serving more clients, she said. Advisers reported in 2016 that they served 36.4 million clients.

“This represents a 22.4 percent increase over last year and continues a very strong trend in the past several years that underscores the continuing health and growth of the advisory profession,” the IAA report showed. “In fact, SEC-registered advisers have reported an increase of almost 11 million clients in the past three years alone.”

The report attributed the growth to automated investment advice, such as computer-generated information and web-based and app-based savings and investment models. Advice is developed based on information entered into the system like demographics and how each client chooses to invest.

“These kinds of models have been around for a while but have been more for education for the consumer,” Barr said. “This next generation takes it one step further,” using it as an “automated tool.”

While the numbers paint a rosy picture for the industry, Barr cited several concerns for the future, including “volatility in the market, the complex and costly regulatory environment and ensuring firms have a fiduciary culture.”

Bradkey said regulations such as the Department of Labor’s fiduciary rule won’t have much of an impact at Garrison Financial because the firm’s advisers have always put client needs before their own.

“That won’t really affect us because we’ve already gone by that standard,” Bradley said.


Bright Future

To start in the industry, an investment adviser firm must register with the SEC, file a form, have a compliance program in place and be fully compliant with all the rules and regulations, Barr said.

“It’s a very broad group of policies and procedures,” she said.

Those who provide investment advice would not only be trained and tested on the detailed regulations in the industry, but also receive in-house training at a firm.

If they choose, advisers can receive a training designation, such as certified financial planner or chartered financial analyst.

Those certified as a chartered financial analyst, like the three advisers at Garrison Financial, must have three years of experience and pass three exams. With the certification, advisers can “clep out” of exams, such as the Series 65 exam, required to become an investment adviser representative, Bell said.

Atkins said the firm recommends its interns to earn a certification as a chartered financial analyst, which is internationally recognized. And if Garrison Financial were to hire a new adviser, the employee would be trained in-house and placed on track to become a chartered financial analyst.

After passing the exams, no further testing is required to remain an investment adviser, but courses are offered, Bradley said. They have attended courses; however, continuing education is something advisers receive on the job daily.

So how will the industry continue to attract young talent and avoid an adviser shortage in the future?

“We have to make our field attractive,” Barr said. “We’re helping people achieve their most cherished goals. It’s a very rewarding field.”

Atkins said it’s a “fulfilling business because you feel like you are going to have to make a difference.”

The best thing is “being able to help people and help people feel secure,” Bradley said. “I think the outlook for the industry is pretty bright.”