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What Neesha Hathi has to say about Schwab's oh-so-slow-but-steady technology initiative

The big custodian is more concerned with error-free melding than quick milestones -- but are competitors pulling ahead while Schwab tinkers?

Author Brooke Southall November 16, 2011 at 5:11 AM
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Neesha Hathi: It would be much simpler to say: Let's make Schwab Advisor Center the center of the universe.

Mr J.L.Livermore

Mr J.L.Livermore

November 16, 2011 — 8:42 PM

The beauty of being a dead legend is being able to observe and critique with impunity. First I needed to know what an API is, so here is what Wiki says:

“An application programming interface (API) is a particular set of rules ('code’) and specifications that software programs can follow to communicate with each other. It serves as an interface between different software programs and facilitates their interaction, similar to the way the user interface facilitates interaction between humans and computers”

I also learned in my research that an API can be “public” or “private”. If it is public the access to the API is documented and provided to the participants. Public does not mean public domain. It is public only to participants that are in a working relationship with the API owner. A private API means it is not published to anyone outside of the publisher’s entity.

Taking that definition for face value tells me that Schwab has an API, it just isn’t public. TD’s API has been greatly publicized as a boon to vendors to access its platform. Based on the press over the past 18 months it seems that TD’s “open API” is only really open to the current club of vendors they approve and is likely the case with Schwab.

Other vendors noted such as Orion, SalesForce, RedTail, et. al. also have APIs. In fact SalesForce’ entire premise for its existence must be based on an API since it depends on an ecosystem of outside applications that have to talk to that API.

Based on my understanding from reading the press, talking with industry experts and talking to my spies who attend the tradeshows there are two main roads to follow; all in one platforms and individual components both of which are integrated using some API or other method to gain access.

Something known as a TAMP (Turnkey Asset Management Program/Platform) falls into the first category of all-in-one. This is a model popular with custodians (Schwab Open View, Fidelity WealthCentral, etc.) and with independent platforms such as Envestnet, Tamarac and so forth.

From what I am told the TAMP provides great scaling capability for the entity providing the services since they can share hardware, storage and even databases. On the subscriber side it can be beneficial, but there are inflexibilities and concerns of shared data resources, single point of failure and so forth.

The second choice using individual components reduces dependence on a single entity and potential failures. It also allows the subscriber to choose what application is best for their firm and business process. Of course indepedence is not without its issues. There are more moving parts and it may take a bit longer to get things moving – maybe not. Either way the choice needs to be made based on what is best for the firm.

According to my IMPACT spies the Junxure demo was a good example of Schwab’s Gateway access for vendors who are not included in the captive Open View platform. Based on the explanation of what Junxure was doing, Gateway is Schwab’s API for external vendor applications.

An issue that all custodians have is not so much pushing out information like CRM data – that is easy according to my technology consultant acquaintances. Things become very complicated when it comes to feeding information back into their systems. An example that comes to mind is submission of trading information. The risk of botching CRM data has far less impact than allowing trades to enter a custodial platform directly from an outside system other than from the custodian provided system. I don’t expect to see trade submission being made available by the custodians anytime soon due to their risk mitigation requirements.

From my limited perspective with regard to technology what I see is a lot of confusion and everyone pulling in directions that suit their own ends. How terrible would be if there was a common dialect for information transfer between all entities – custodians, broker/dealers, data providers and the consuming firms and vendor applications?

There are no standards bodies within this realm of the industry that govern or even direct any of this behavior. Advisors get what is thrown at them by the custodians and the vendor community. Why should a retail client at TD have better tools than an RIA?

The entire planet’s telecommunications and networking system is advanced as it is due to standard both ratified and de facto. It exists because of working groups and requests made to the community of interested parties for comments on new ideas. All of that collaboration is what built the greatest communications platform known. Perhaps we’re not ready for that but until we are we can only blame ourselves.

And I am not suggesting a vendor only sponsored group either. Groups such as those (who will remain unmentioned) use these venues to load their own guns with alliances that serve their benefit rather than the community of users. A solid and functional working group must consist of users, vendors and custodians and without political agenda or it will fail.

In the end like with any other space we can vote with our wallets. If vendors and custodians alike are not willing to work for our business then find ones that will.


Brooke Southall

Brooke Southall

November 16, 2011 — 10:10 PM

Thank you for your explanation of API. I should have better defined it in the story.


Mr J.L.Livermore

Mr J.L.Livermore

November 16, 2011 — 10:51 PM

Mr. Southall,

You are welcome. This is an instance Wiki can be trusted. One point of clarification. With regard to my usage of term TAMP. I make reference to it in terms of technology only. A full-fledged TAMP is much more than just a single technology portal without argument. But there are similarities to all-in-one service providers that keep adding new technology warts to their existing platforms hoping to create a more efficient revenue platform with a greater level of stickiness whether by value or by decree.


J P Morgan

J P Morgan

November 21, 2011 — 4:24 PM


The entire issue over information flow in the advisor market is rubbish. If the custodians and vendors would drop their xenophobic policies the industry would flourish. The Street uses common platforms for information transfer every day. They don’t share trade secrets but they do share data formats.

Custodians are afraid of advisor attrition if they compete on a level playing field. I say that if a custodian is so worried about attrition through an information channel they have no faith in their core competency and differentiating value to the advisors they serve. Most will agree that moving custodians is difficult, not because of data access but because of all the paperwork and client interaction involved. Someday all that will change (RIA in a Box) and paper moves will be greatly simplified. Then what? What will be the barrier to attrition?

Vendors, some, not all, hold client data captive making it difficult to move off their platform, such as some very popular portfolio management systems which will go unnamed. This is at best a short-sighted plot to preserve market share. This behavior invites dissension and attrition. As a vendor you are telling your client that your products don’t stand on their own merit of value so you have to keep them locked in. This too is changing ever so rapidly and the walls of attrition are falling.

Advisors are their own worst enemies when it comes to technology. Generally speaking, advisors want everything on the cheap and to make matters worse they do not want to get involved with their own destiny. Advisors need to get involved at a national level and develop a lobbying platform to force custodians and vendors to give them what they need now, not five or ten years from now. And your reference to the telecommunications industry, specifically Internet technologies, is a good example of industry, vendors and the user community (typically university) collaborating.


Elmer Rich III

Elmer Rich III

March 8, 2012 — 8:29 PM

Technology will not make complex matters simple. It will make them more complex. Most professionals spend their time getting technology to work not using tech to get work.

We advise, and help our clients, move from a “gee whiz” approach to a more mature balance — driven by their client’s needs and our clients business goals. The tech “tail” simply isn’t capable of “wagging” the the RIA’s whole business. That’s not a commercial but what we’ve seen work.

Plus, as we have all seen, everything will change in another x # of years.

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