The #3 custodian is choosing its own path

February 8, 2010 — 5:36 AM UTC by Elizabeth MacBride and Brooke Southall

Brooke’s note: Any company can pry open its wallet and throw a big party. Clearly TD Ameritrade went big on its national conference for advisors last week in Orlando, Fla. The Bush-Clinton speeches may have cost $300,000 themselves, experts say. The question then becomes whether the lavish marketing event is a leading indicator of a company on the rise or just a company that likes to have some fun. Time will tell, but there are signs – some out in the open and others more subtle – that TD Ameritrade is working harder and with a bigger budget on behalf of RIAs up and down the organization and that its conference is part of a comprehensive growth plan.

Becuase its two biggest competitors, Schwab Advisor Services and Fidelity Institutional Wealth Services, are several times its size and have a big head start serving big advisors, TD Ameritrade will need to take a different tack, work and invest more — and hope that its competitors afford it some competitive openings.

Here are some signs that TD Ameritrade is indeed not going to be content to play third fiddle in the custodial RIA race forever and that it may be finding ways to shine in this competitive industry.

1.) TD’s Orlando conference was not only big but it was well-received. At a time when most companies are scaling back, the number three custodian pulled a contrarian move – and didn’t come across as an arriviste. It not only paid two presidents to speak but rounded out the program with Terry Bradshaw and other quality speakers.

It made the conference free and next year’s will be, too, said Fred Tomczyk, CEO of TD Ameritrade.

Tom Bradley, president of TD Ameritrade Institutional, told the media that TD’s conference was now the largest in the business, with 1,200 RIAs and 200 exhibitors.

That claim about the standing of TD’s conference may be a stretch, according to Lindsay Tiles, spokeswoman for Schwab Advisor Services.


IMPACT is still the largest conference in the industry,” she said. “In 2009, there were 2,700 total attendees, including 1,200 advisors. We expect to see similar or greater numbers in Boston this year.”

2.) Though it’s a hardly a secret in the industry that the new big thing in attracting breakaway RIAs is to have them join an existing firm, TD is betting heavily on this approach. Nearly 75% of the roughly 200 breakaways in the trailing 12 months have linked up to an existing firm, Bradley says. For competitors, it’s more like 40%.
“It’s easier for the breakaway, it’s easier for TD and it’s great for the advisor,” he adds.

TD has a program – Advisor Link – that connects RIAs that would welcome breakaways to potential breakaway brokers. TD makes the initial connections based on geography, size and culture of both the RIAs and the breakaways.
Its conference session for breakaway brokers last Wednesday was focused on the logistics of those moves. Bradley said 66% of the custodian’s net assets transferring from other firms are coming from full-commission sources.

3.) TD continues to make big investments in making sure its advisors are equipped for competition. The company will make sure that thousands of RIA become better business people. Bradley added one new detail in an interview from the conference, saying that TD plans to start a mentoring program this spring, through which it will match advisors with a mentor one tier up in terms of size.

“We hope they’ll be able to coach (their mentees) to avoid all the traps they might have fallen into,” Bradley said.

Gloves off

4.) TD continues to build on its reputation for taking the gloves off to take on Wall Street and the Washington regulators that prop it up.

Taking a stand against brokers will take courage and finesse by TD Ameritrade and the rest of the so-called discount brokerage business because they may face a conflict at some point in the public arena. It is possible what’s good for the discount brokerage business is not so good for RIAs: for instance, a strictly written fiduciary standard might help RIAs, but impose high costs on discount brokerages.

Asked if there was ever a point that TD’s interests split from that of RIAs as a profession, Tomczyk said, “The RIA channel is a key part to our business model and we will continue to do what’s right for independent advisors and their clients. We don’t see that changing.”

Tom Bradley came out swinging on behalf of RIAs against wirehouses. Though he didn’t name Sallie Krawcheck, he took loud exception to the statements of a “wirehouse executive” who he said implied that wirehouse brokers were superior to RIAs because they had the backing of strong companies – ie., the wirehouses.

In an interview later, he said, “We’ll be stepping up more to advocate … for the independent advisory industry.”
TD has already made regulatory affairs the bailiwick of one of its top executives, Brian Stimpfl. Expect more. It has also added Kelly Caffrey as a marketing person dedicated to advocacy and practice management.

TD’s push into more practice management will include helping advisors to get the word out about the independent model to local media.

Stable leadership

5.) Events at Fidelity and Schwab in the past two weeks underscored one of TD’s strong points: its stable leadership. Bradley and Tom Nally, managing director, institutional sales, have both been in charge since the 1990s.

Fidelity and Schwab recently made another round of changes in the senior executives overseeing their RIA operations.

The week before TD’s conference, Fidelity had announced that it president of institutional platforms, Charles Goldman, a champion of better service for RIAs, was leaving “for other opportunities.”

On Thursday, Schwab revealed its senior managing director of strategic business development, Barnaby Grist, was leaving for Cetera Financial Group.

That came on top of a restructuring that put more power over RIA service and technology into the hands of Schwab Senior Vice President Bernie Clark.

Pershing Advisor Solutions has only had its leader, Mark Tibergien, for a couple of years. Scottrade is looking for a leader for its RIA custody unit.

Marketing machine

6.) TD is making big investments in building a sophisticated marketing machine specifically for its RIA business. In the past two years, it has hired five key personnel – all from competitors, according Steve Goering, managing director of Chicago-based Laramie Group, which has an executive search practice in the RIA custodial arena. TD is one of its major clients.

The hiring spree started with Paul Zettl, managing director of institutional marketing and corporate events for TD, who was hired away from Fidelity Investments to oversee marketing two years ago. Since then TD has hired Kate Healey from Merrill Lynch to oversee product marketing; Matt Bryan, marketing manager for breakaway brokers, who was hired away from Van Kampen; Kelly Caffrey came from Pershing to market RIA advocacy and practice management; and Mari Pagliughi, who will oversee an effort to make better use of the internet as a marketing tool, came from Merrill Lynch.

“It’s about being different,” Goering says. “What is your market position?”

On the radar

7.) What’s also notable about this process of hiring to TD’s executive ranks is just how much drawing power the once humble discount broker has for the industry’s elite, Goering says. “They might not have been on the radar screen before but they’re on the radar screen now,” he says. “Things are happening there.”

Also impressive is just how many of executives are calling his executive search firm from wirehouses, Goering says. “There has been a tremendous amount of interest,” he says. “The breakaway thing is really affecting their business. Every executive on the inside thinks this is the way of the future. I would say they are very worried.”

Mentioned in this article:

TD Ameritrade
Asset Custodian
Top Executive: Tom Nally

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