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How two big RIAs convinced two service providers to shift course on technology

Trust Company of America and Adhesion Wealth both listened to advisors with special requests

Tuesday, August 24, 2010 – 5:45 AM by Brooke Southall
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Jennifer Nealson: I believe this was a differentiator for us.

Brooke’s Note: The better technology gets and the easier it gets to develop, the shorter the patience span is for financial advisors when they see a glaring technological need. Gordy Wegwart made certain that Trust Company of America understood his need for better trading tools. Philip Brice made sure that Adhesion Wealth got ahead of the iPad curve. Here are the tales of how these interactions took place.

Trust Company of America has established itself as a niche custodian that has a particular edge with RIAs that want to run turnkey asset management programs and other advisors that use model portfolios.

The technology used by the company with about $9.5 billion of assets in custody from 100 advisors is what has made it the only small custodian that regularly wins the accounts of big advisors. See: Trust Company of America is modifying its approach despite lights-out growth. Portfolios can be rebalanced with the push of a button and costs can be kept low because the company is adept at placing ombibus orders and keeping trading costs well under control.

Yet Gordy Wegwart, president and chief investments officers of Verity Investments in Durham, Calif. hired a former commodities floor trader from the New York Board of Trade who wasn’t satisfied with what Trust could offer him.

The shortcoming: block trades were unwieldy and took on a life of their own. For instance, no sooner would the order get placed on one exchange than availability of shares at the right price might appear on another exchange.

Snapping it up

“Maybe a big order comes along and you want to snap it up,” Wegwart says.

Gordy Wegwart: I kept saying: it’s a good system but it doesn’t allow the trader to control the execution.
Gordy Wegwart: I kept saying: it’s
a good system but it doesn’t
allow the trader to control the
execution.

Another example: the advisor wants to make a big purchase on a thinly traded ETF but doesn’t want the sellers to see his hunger for shares. Now the order can be broken up better and put at different prices so the sellers can’t use the presence of the order as intelligence about how much to ask for.

These kinds of trading circumstances prompted Wegwart, whose firm manages about $235 million, to go to bat for his trader. He wanted Trust to provide the tools he was accustomed to using for carrying out his strategies.

“I kept saying: it’s a good system but it doesn’t allow the trader to control the execution,” he says.

Trust had just hired Dennis Noto as its chief information officer when it received the request for this improved trading functionality.

He found out that there was a more universal need for the better trading capability when he checked around.

Multi-month project

“We did it for several advisors and we’re hearing it in the industry; the advisor wants to be in control,” he says. He characterized it as a “multi-month” project.

Jennifer Nealson, chief marketing officer for Trust, says the effort was worth it. “It’s something that broker-dealers often have but not RIAs,” she says. “I believe this was a differentiator for us.”

Still, Wegwart allows that all the trading control is only good in the right hands because sometimes a conventional block order gets filled at the right price most efficiently.

“Sometimes it does you no good or you can shoot yourself in the foot,” he says.

How an RIA got Adhesion Wealth Advisor Solutions to provide iPad access.

Michael Stier, CEO of Adhesion Wealth Advisor Solutions, which has $13 billion of assets under administration, recently modified his company’s development schedule on its portfolio reporting software. Philip Brice, managing principal at Elliot Davis Investment Advisors, which manages $600 million of assets, noticed a need that couldn’t wait – iPad access for his firm’s end clients.

A little surprising

“We changed our development schedule so we could get this piece out much earlier,” Stier says. “How excited people are about the iPad as an access appliance was a little surprising – a pleasant surprise.”

The accelerated access though iPad allowed Brice and his Charleston, S.C.-base firm to meet his clients’ needs.

“While nothing is better than a face-to-face meeting with a client, we plan to leverage Adhesion’s new client access capabilities to build even closer connections to their daily lives. Our intent is to continue to stand out as a leader in a competitive environment and use the most advanced capabilities to actively grow our business.”

RIAs themselves will have to wait to get access to performance and other account info on an iPad, though their clients are set. But the rollout sequence has its own logic, Stier says.

“The access for the iPad for advisors is coming later; guys in the office have their PC,” he says.


Mentioned in this article:

E*TRADE Advisor Services
Asset Custodian
Top Executive: Joshua Pace




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