TOPEKA, Kan.--(BUSINESS WIRE)--Security Benefit today released its Registered Investment Advisor (RIA) Benchmark Study, a detailed look into the perspectives of RIAs regarding client practices, economic sentiment, product diversification, the upcoming 2024 U.S. Presidential election’s impact on the markets, and more. The survey follows the launch of Security Benefit’s RIA Economic Outlook Index, which established a benchmark measurement of 58 (on a scale of 0 to 100) regarding RIAs’ current level of optimism with respect to economic conditions.
Expanding on the findings of the Index, Security Benefit’s new research – conducted in partnership with Greenwald Research and DPL Financial Partners – uncovered the following key findings:
- RIAs’ views are largely mixed on the impact of upcoming U.S. elections on the investment climate: As volatility remains a constant for RIAs and their clients, the study found that 41% of RIAs predict a neutral impact, with a similar number (39%) foreseeing a net negative impact, and 20% expecting a net positive impact.
- Perceived investment satisfaction is high as RIAs shift allocations: A strong majority of RIAs (87%) believe their clients are satisfied (50%) or very satisfied (37%) with their investments. Only 13% of RIAs cited that their clients are very or extremely concerned about a major equity downturn. Equity allocations are on the rise more so than any other product allocation, with 51% of RIAs allocating more to equities in the last 12 months. Allocations to long duration fixed instruments (47%) and short duration fixed instruments (45%) also saw strong increases.
- RIAs are allocating at least 40% or more of retirees’ assets to fixed income products, with annuities gaining prevalence. Over half of respondents (55%) noted that they are using fixed annuities or plan to use them in the next six months, and 45% noted the same for fixed index annuities.
- RIAs see an opportunity to attract client money currently in bank savings products: Half of RIAs (52%) say that a quarter of their clients have at least $100,000 in a bank savings account, and 82% of these RIAs believe they would be able to attract a significant portion of that money if they were able to offer an innovative investment with competitive interest rates for a guaranteed period.
“An anticipated decline in interest rates coupled with the election in the latter half of the year may keep volatility high, however, RIAs are considering solutions with guarantees to weather this storm of uncertainty and build confidence among clients,” said Mike Reidy, National Sales Manager, RIA Channel at Security Benefit.
Allocations to annuities are increasing among RIAs
As the U.S. Federal Reserve has pushed back expected interest rate cuts, RIAs are eyeing multi-year guaranteed annuities (MYGAs) to lock in current rates. These products offer attractive accumulation potential for clients by delivering a guaranteed interest rate that is non-correlated with equities. Many RIAs in the study agree, with 25% indicating that they have increased exposure to fixed annuities like MYGAs in the last 12 months.
“In today’s environment, many fiduciary advisors are turning to protection products like FIAs and fixed annuities to offset risk in client portfolios,” said David Lau, founder & CEO at DPL Financial Partners. “Even among advisors who haven’t historically used annuities, these products are gaining traction because they offer competitive interest rates while limiting the risk of loss. And clients value having a portion of their portfolio in products that offer downside protection. The psychological benefits of protection can be significant for clients who worry about the potential impact of a market downturn on their savings and future income.”
According to the survey, almost one in four RIAs (23%) have increased usage of fixed index annuities (FIAs) in the last 12 months. FIAs offer downside protection and a range of indices, allowing RIAs multiple ways to position client portfolios ahead of a potential equity downturn. FIAs provide accumulation in the form of interest credits that are not linked to current rates, but instead the performance of financial indices. While 30% of RIAs do not use FIAs in their practice, one-third (34%) of RIAs actively use them and another 11% noted they are familiar and intend to use them in the next six months.
Growth Strategies Remain Unchanged for RIAs
While many RIAs were quick to adapt their practices to changing client needs during the COVID-19 pandemic, some things have largely stayed the same, including how RIAs attract new clients.
Asking for referrals remains the most important strategy to attract new clients according to 52% of respondents, with networking following at 19%, and specialized marketing to a specific niche client at 9%. Additionally, in-person meetings have returned, with two-thirds of client meetings occurring in-person versus 40% of meetings held virtually.
Methodology
In February 2024, Greenwald Research surveyed 201 registered investment advisors from across the United States, each managing significant assets and directly interacting with clients. The online questionnaire collected crucial data on RIAs’ business practices, economic outlook, financial product usage, and client demographics. This method blended quantitative and qualitative insights, capturing key trends within the financial advisory industry.
About Security Benefit
Security Benefit Life Holdings (“Security Benefit”), through its subsidiary Security Benefit Life Insurance Company (SBLIC), a Kansas-domiciled insurance company that has been in business for more than 132 years, is a leader in the U.S. retirement market. Security Benefit together with its affiliates offers products in a full range of retirement markets and wealth segments for employers and individuals and held $51.6 billion in assets under management as of December 31, 2023. Security Benefit, an Eldridge business, continues its mission of helping Americans To and Through Retirement®. Learn more at www.securitybenefit.com and follow us on LinkedIn, Facebook, or X (formerly Twitter).
About Greenwald Research
Greenwald Research is a leading independent research and consulting partner to the health and wealth industries that applies quantitative and qualitative research methods to produce insights that help companies stay competitive and navigate industry change. Leveraging deep subject matter expertise and a trusted consultative approach since 1985, Greenwald offers comprehensive services to answer strategic business questions.
About DPL Financial Partners
DPL Financial Partners is the leading insurance marketplace bringing best-in-class solutions from the nation's top carriers to registered investment advisors (RIAs), their clients and consumers. DPL's products, proprietary tools and embedded technology enable RIAs to incorporate insurance and annuities into their practices to more holistically serve their clients. Clients benefit from products that offer competitive pricing and transparent, fiduciary implementation to meet a range of needs in the financial plan. www.dplfp.com
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