Where TD Ameritrade has come since its 2006 merger and where it is headed in 2010

Editor’s Note: This is our first installment of the RIABiz Asset Custody Project. We hope this summary and the ones that follow give you a useful overview of the most important companies that hold clients assets for RIAs.

2010 may go down as the year RIAs start to think of TD Ameritrade as a big custodian after three years of merger-related storms and rough markets. In 2006, Ameritrade merged with TD Waterhouse and then added Fiserv ISS and its $25 billion of assets in 2008.

Now, the company, which has $100 billion in assets for 4,000 RIAs, is much more substantial in size after having $42 billion as of April 30, 2005 and $58 billion as of April 30, 2006.

TD Ameritrade has achieved this growth without having to pull rabbits out of hats.

Good solid shop

“I just view them as a good solid shop with a plan in place and they’re executing on that plan,” says Sean Cunniff, research director of the brokerage and wealth management service of TowerGroup of Needham, Mass.

It is continuing to launch initiatives designed to help it gain ground on its much larger competitors.

Whether its mature technology platform and its strategy of closer ties to advisors through consulting services helps it win business from and against Schwab Advisor Services, which is nearly six times bigger, and Fidelity Institutional Wealth Services, which is about four times bigger, remains to be seen.

“We hit a road bump [in 2007] but we’re much stronger that what we were in that storm,” says J. Thomas Bradley Jr., president of TD Ameritrade Institutional.

Schwab and Fidelity are both investing in better levels of service in a breakaway environment where there’s much to be gained by offering advisors ease-of-doing-business.

TD Ameritrade Institutional is taking them on with a handful of initiatives:

Free reports

• To help advisors win clients in an environment of distrust, TD is ramping up its consulting efforts. TD was able to provide free reports to about 700 of its larger RIAs in 2009, but it wants to expand the program to include many more of its 4,000 custody clients. Read: “TD Ameritrade takes on Schwab with big consulting push”:https://www.riabiz.com/a/103255

Right now RIAs mostly access consulting knowledge through TD employees. The expansion plans center on ways of creating more of a do-it-yourself model with the aid of technology, says Brian Stimpfl, managing director of advisor advocacy and industry affairs for TD Ameritrade.

The custodian is also offering to train advisors in using sophisticated trading techniques. This includes more intensive use of options.

“We think that’s a big one,” Bradley says. “We think it’s a real differentiator.”

Double the size

• TD is poised to take is to double the size of its advisory panel from 20 individuals to 40, he adds. As part of that effort, TD will re-segment these advisors so that they are grouped more by business model than by assets.

“We’re looking to get money managers into a room and get wealth managers into a room and family offices in a room to further refine our offering,” Bradley says.

• The company is also taking advantage of timing when it comes to its technology platform, Veo. TD Ameritrade Institutional recently released the latest version of Veo, and there are plenty of financial advisors who laud it as the best of the pack for their purposes. It is bug free and different applications work well with each other.

“It was a two-year process,” says Bradley. “Advisors absolutely just love it.”

Data download on TD Ameritrade Institutional

Name of custodian: TD Ameritrade Institutional

Address: 1 Plaza Four A Jersey City, N.J. 07311

Phone number: 1-800-934-6124

Founded: Ameritrade, 1975. It acquired TD Waterhouse in 2006.

Parent company: TD Ameritrade Holding Inc.

Total Assets in custody: $100 billion

Number of RIAs using platform: 4,000

Head of RIA custody business and executive’s starting year with the company: J. Thomas Bradley Jr., 1985

Head of RIA sales and starting year: Tom Nally, 1994

Name of RIA technology platform: Veo

Date of last major update on tech platform: 2009

Minimum assets for advisors: none

Size of biggest advisory client by assets: $4 billion

Custody fees [including fees for RIAs that fall under the minimum]: none

Brand names of [now defunct or soon to be] custodians absorbed by custodian: Jack White, TD Waterhouse, Ameritrade and Fiserv

I asked tech experts in the industry how TD could compete on technology so effectively with bigger players. One reason is that its competitors are attempting full overhauls, which inevitably come with bugs. Veo is a mature platform that includes smooth integration, analysts say. Its maturity also insures that it is already in the hands of all TD RIAs. By comparison, Fidelity and Pershing are still early in the process of long roll-outs. Schwab is in the early stages of revamping its web site.

TD Ameritrade also continues to rely on its core strengths. Though it is now competing for advisors with billions of assets, it maintains its edge as a friendly place for smaller RIAs. It has a tradition of providing service teams with designated contacts that makes it competitive with its main rivals, Schwab Advisor Services and Fidelity Institutional Wealth Services.

Back on a par

Its service scores are back on a par with where they were in 2006 prior to the merger between TD Waterhouse and Ameritrade — and Fiserv ISS.

Like all the custodians, TD also has the advantage of a market in flux. Because TD has grown too large to rely for growth on winning assets directly from competitors, it’s now looking to win assets from wirehouses and – though the company keeps specifics to itself – it has experienced significant growth in this area.

TD Ameritrade’s pipeline of potential breakaways has grown 50% from this time last year. The Jersey City, N.J.-based custodian figures that its pipeline today stands at $210 billion, up from about $140 billion a year ago, according to the company.

TD defines its pipeline as brokers with whom it has had some sales contact. Its closing are up 30% from a year ago, according to the company.

Set up well

“It was a good year in general for the independent advisor space,” Bradley says. “We were very, very pleased with how we did across our advisory service business, and we’re set up well for 2010.”

The company benefits from a stable management team. Tom Bradley and Tom Nally have both been in charge since the 1990s, a management tenure that competitors don’t come close to matching.

TD is bolstered by its lean structure as a custodian and also its association with TD Bank. The Toronto-based bank is one of a handful of AAA-related banks and it owns 45% of the custodian’s shares, Bradley adds.