The RIA custodian is creating -- and third parties are applauding -- a time-saving, low-error way to trade and rebalance
August 14, 2012 — 3:47 AM UTC by Brooke Southall
Brooke’s Note: TD Ameritrade has taken two roads less traveled when it comes to technology. It bought what, at the time, was the top rebalancing software provider in iRebal — no doubt recognizing that advisors can shave months, not hours, by using rebalancing software properly. It has also embraced an open API (application programming interface), which allows — Apple Store style — for the possibility of fast, efficient, low cost integrations of various software programs with its Veo central nervous system. The jury is out on quality. Schwab, Pershing and Fidelity have gone in for a more paternalistic, top-down approach, where slow progress is almost assured. But three third parties that are well respected in the industry agree that Veo-iRebal working in synchronicity through API is a heck of a good sign —and a positive harbinger.
TD Ameritrade Institutional has linked two of the jewels in its software crown and the combination may be a multi-carat combination — at least for the relatively small cadre of RIAs who use iRebal. See: Tech Review: iRebal thrives after TD Ameritrade acquisition.
The Jersey City, N.J.-based RIA asset custodian has upgraded the efficiency of iRebal, its rebalancing software to make it more childproof and time-stingy. Several TD advisors have used it the past couple of months in beta tests. The new functionality will not result in separate fees.
“The integration between Veo and iRebal is a big advancement,” says Ben Welch, director of business development for iRebal.
Joel Bruckenstein, producer of the T3 conferences, agrees. See: RIAs flock to Dallas for the T3 technology conference.
“I think it is significant since this is the first fully integrated rebalance … trading interface,” he says.
Checking it twice
What TD has done to advance is remove a couple of big manual steps from the rebalancing process—exporting a trade file from iRebal, double-checking it, and then reimporting that file into Veo—in favor of a tight and direct one-click integration with its custody platform.
“This is what we envisioned with Veo’s open API,” says Chris Valleley, director of technology solutions for TD Ameritrade Institutional.
“TD has proven true to its promise with regard to its API, giving TD clients, prospects and vendor partners reason to believe in what they say,” says Peter Giza, vice president of business development for RedBlack Software in Bedford, N.H., which competes with iRebal.
API is easy; quality is hard
API is viewed by some industry participants as too good to be true — the idea that a network can, in effect, build itself. See: “Joining the industry-wide trend, TD Ameritrade announces its upcoming project for “open architecture technology integration.
Neesha Hathi, vice president of advisor technology solutions for Schwab Advisor Services, spoke for most people in the custody business when she said in an interview last fall: “An API is easy. We could have put that out there and said: “Go ahead market, build to it.” The downside, she explained, is that quality control is haphazard and the advisor can end up paying the price. See: Schwab shifts its strategy on its massive Intelligent Integration.
'Closer than you know’
The change is a clear advance, according to Black Diamond head of product Mike Golaszewski. It gives his company and other software firms a clearer path to integration.
“Red Black, Tamarac, Black Diamond … we can all basically create the same kind of integration with Veo from our respective rebalancing systems (i.e., a single click automatically sends all trades to Veo). That’s what makes the TDA approach so cool: if you have the desire and are willing to spend the time learning their API, you can pretty much do what you want — within reason, of course … you still have to pass all of their audits and certifications. But this is a much lower hurdle to clear than other custodial integration models.”
Golaszewski and others, however, point out that there are relatively few iRebal users out there, something that TD confirmed (though Welch, who declined to disclose how many, says there is steady growth of big RIAs using it). And iRebal users have a combined $100 billion of assets under management, including those at rival custodians.
Indeed, TD is working with these firms “in various stages” to make them work with Veo as well as iRebal.
“We’re closer than you know,” says Giza.
Bill Winterberg, principal of FP Pad, also sees the upgrade as a hopeful sign that the promise of TD’s API approach is starting to bear fruit.
“Look for this interface to expand beyond iRebal to include third-party vendors such as Orion Advisor Services LLC, which can use the latest API to streamline trading in their platform, too, just like iRebal.”
Potential issues with other rebalancers, he says, include spending development time to write and test to the latest API so trades can automatically be uploaded to Veo Open Access. Again, look for vendors to add this one by one as they make enhancements to their own software.
The bad news for RIAs is that the iRebal-Veo link is good only for assets in custody at TD Ameritrade. Welch hasn’t ruled out a shift on that but says: “It’s not on the imminent horizon.”
Valleley says that TD will soon announce similar API-aided integrations to help RIAs effect easier billing and onboarding of clients.
Mentioned in this article:
Top Executive: Tom Nally
Black Diamond (An independent business group of Advent)
Outsourcer, Portfolio Management System, Trading/Rebalancing, Performance Reporting
Top Executive: Dave Welling (SVP & GM, Black Diamond)
Technology Tools for Today
Consulting Firm, Conference
Top Executive: David J. Drucker
Top Executive: Benjamin Welch
Envestnet | Tamarac
Portfolio Management System, CRM Software, Trading/Rebalancing, Performance Reporting
Top Executive: Stuart DePina
Top Executive: Bill Winterberg
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