TD Ameritrade: Gen X is Taking Over Investment Advisory Community

Generation X is now increasingly at the helm of investment advisor firms, taking the torch from Baby Boomers.

The leadership of registered investment advisor firms (RIAs) is getting younger, that’s according to new research from TD Ameritrade’s institutional arm, published this Tuesday.

According to the FA Insight benchmarking research, Generation X is now increasingly at the helm of investment advisor firms, taking the torch from Baby Boomers. In fact, the report found as a whole, that the advisory community is getting younger.

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The median age of the advisory community has dropped down to 49 years, three years younger than in 2015. Not only that, but out of 10 firms, on average, six have at least one owner who plans to be around for another 12 years.

For firm associates, the median age has overall fallen from 44 in 2015 down to 42, and the average age of lead advisers is now 46, whereas previously it was 50. In addition, the number of firm owners who are 40 years or younger, is the same as the number of firm owners who are older than 60.

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RIAs note solid performance in 2018 despite market conditions

Despite the fact that 2018 was a rocky year, overall, firms managed to continue on their growth trajectory. According to TD Ameritrade, a Nebraska-headquartered firm, this was in large part thanks to efficient operations management and increased productivity in revenue-generating roles.

“At 21 percent, a typical firm’s operating profit margin last year rose by more than a percentage point from 2017, and overhead expenses as a share of revenue fell slightly in 2018. This translated to rising income for firm owners, whose median total income rose 3.6 percent in 2018 to $633,000, the highest since 2014, or 55 cents for every dollar or firm revenue,” the statement said.

Although advisory firms had to deal with market declines towards the end of 2018, they managed to achieve strong financial performance during the year compared to the average of the previous five years.

Namely, the rate of revenue growth increased from 12 percent, up to 14 percent in 2018. Operating profit margin also rose to 21 percent, up from 20 percent. Revenue-generating roles recorded an uptick in revenues of 14 percent to $547,000 in 2018.

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