Adding to the list of RIA custodians headed by execs with Schwab schooling, Scottrade promotes Brian Davis

Scottrade Advisor Services has named Brian Davis director of advisor services, ending a 12-month period in which the unit had no formal head.

Davis has informally been serving as the unit’s leader since June. Scottrade announced his promotion today. Davis had been the manager of business development for the St. Louis-based company’s RIA unit since 2003.

During that time, he not only helped found the RIA custodian but also oversaw a couple of banner years for breakaway broker recruiting in 2008-09. The company has been seen as the heir apparent of [pre-merger] Ameritrade as the hot discount broker with the national brand, the intensive service of small advisors and the deep-discount commissions.

Yet growth in the number of new advisors has slowed – the company added 50 advisors over the past year to reach 750 — but Davis says his company’s RIA business is still growing. Scottrade rakes in small RIAs

Simplistic measurement

“A numbered listing of clients tends to be simplistic measurement of growth and it’s a bit limiting to focus purely on that. While we don’t disclose AUM, we are on a steady path of growth,” Davis says. “The breakaway broker business is in full swing as far as we can see and we continue to be a great fit for those advisors.”

Davis is taking over the job held by Doug Talir, who left last October. The executive, who was in his 40s, was successful and well liked, and his departure remains unexplained. His LinkedIn page still lists him as working for Scottrade as director of advisor services. See: Doug Talir, director and founder of Scottrade’s RIA custody business, departs

RIAs that are clients of Scottrade said they approved of Davis’s appointment.

“That’s extremely positive,” says Derek Kennedy, principal of Kennedy Wealth Management LLC in Knoxville, Tenn. “I always like to see that hiring from within. I think he really gets it.”

Davis has the kind of mind that keeps exploring new solutions, advisors say. And many of them signed up with Scottrade under his care. See: Some Scottrade RIAs think the company’s giant branch network is ripe for referrals

Davis says he has a two-prong mission: to continue to build out Scottrade’s relatively young RIA platform for the existing 750 firms and to increase the number of advisors who use it.

“Business development is absolutely a priority and is a big reason for our growth over the last few years. Due to my experience in business development, I will continue to oversee those initiatives for the time being.”

He says that for now, he won’t hire a replacement for himself in business development.

“We are appropriately staffed for business development going into 2011,” he says. “Business development is a passion of mine and there is nothing better to keep the ship on course than frequent interaction with current and potential clients.”

Schwab officer

Davis learned his craft partially as a business development officer for Schwab from 1999 to 2002. He also worked as an investment advisor representative at Lakeland, Fla.-based Pennsylvania Financial Group, which sells health and life insurance, in 2003. He has been with Scottrade since then and helped found the RIA custody unit.

[Ex-Schwab personnel are now heads of the RIA units at Folio Institutional, Greg Vigrass, Trust Company of America, Frank Maiorano, LPL Financial, Derek Bruton and Scottrade with Davis. Until the fall of 2008, Fidelity under Charles Goldman and Merrill Lynch’s Broadcort under John Tyers were also headed by ex-Schwab personnel.]

Scottrade wins business from a variety of advisors, including lawyers and CPAs who want to do some advising on the side. It also wins breakaways – often with small books of business – from wirehouses or other brokerages. It has been acclaimed by RIAs for providing a designated service rep for all advisors – regardless of size — without assessing big fees.

Scottrade also wins RIAs who put a premium on keeping commissions at rock bottom on behalf of clients. At $7 a trade, it beats the other custodians in this category.

John Burke, principal of Starboard Asset Management of Palm City, Fla., says he developed a relationship with Scottrade in 2005 as an adjunct to his primary relationship with Raymond James. His firm has $50 million of AUM.

Raymond James alternative

“[Scottrade] was a good addition for [clients] who don’t want to pay Raymond James’ commissions,” he says. “As an RIA, we have the requirement to get the best costs for our clients. Some clients have under $100,000 of assets and they really shouldn’t be with a higher charging custodian.”

Scottrade strives to be a low-price leader both in terms of commissions and other service costs, according to Davis. It has no minimum asset level or fees for low balances.

“Scottrade’s commission schedule is already lower than most custodians servicing RIAs. Service is and always will be our bread and butter and as a part of this service we stay away from nuisance fees.”

Scottrade benefits when larger custodians raise fees, according to the company. For example, Fidelity Institutional Wealth Services raised its custody fee to $2,500 per quarter two months ago, boosting Scottrade’s prospects. See: Fidelity will soon charge a big fee to small advisors

“Fees are a huge area of concern for many advisors,” Davis says. “Anytime there is an increase to fees in the market, interest in [Scottrade Advisor Services] does tend to tick upward because advisors know we are a low cost custodian with an emphasis on service….We feel that we’re a competitive alternative to those who are fed up with fees but still want quality custody services.”