The RIA custodian built by taking token accounts from Schwab malcontents then scrambling for the rest is now leaving the peashooter at home

October 26, 2012 — 3:49 PM UTC by Guest Columnist Timothy Welsh


Brooke’s Note: Think Tom Nally is Tom Bradley but with more Texas drawl in his voice than New Jersey irony? Think again. Here is the longtime protege of the legend is speaking like a guy with his own philosophy and expressiveness. Remember us writing this article: Once good for a few million, TD Ameritrade’s foot-in-the-door strategy is starting to net billions. In this interview, Nally declares that TD door-footing strategy outmoded — and perhaps counterproductive — and describes a grander vision for a custodian coming of age just as his career heads into overdrive. Pity the IBD owners at whom he seems most intent on directing his competitive fires.

In June, at the TD Ameritrade Institutional Elite Advisor Summit, I had the chance to sit down with the TD custody unit’s new president, Tom Nally. See: Ten questions for Tom Nally as he gets going filling Tom Bradley’s shoes. Now, with eight months on the job, Nally has clearly hit his stride in setting the leadership tone for not only TD Ameritrade Institutional, but also for the broader RIA industry. He was kind enough to make time for me Tuesday to pick his brain about the latest trends in the marketplace and where he sees the puck going. See: TD Ameritrade plants its flag in sunny SoCal, playing host to $100 billion worth of RIAs.

Halfway to independence

Tim Welsh: What are the characteristics of the breakaway market these days? Is it IBD reps or wirehouse, and how are the two different?

Tom Nally: When it comes to targeting the breakaway broker market, we tend to spend more time playing in the independent- broker-dealer sandbox. Those advisors are more in tune and understand the independent model. They’ve already taken that step to join an IBD, which provides them with some level of tools and support.

These types of advisors learn about what is available, and as they grow, they quickly realize that there are better options out there. See: TD Ameritrade makes a clean sweep of five IBD reps in New England with about $1 billion of combined AUM.

They also tend to realize that the resources and technology they are using may not be as good as what’s available to RIAs and also start to ask questions like, “What am I paying for this? or “Is the cost/benefit not making sense anymore?”

As for the wirehouse breakaways, there is still a tremendous opportunity and we continue to do well. However, it is a much longer process as wirehouse reps have a longer road to travel in going from employees to truly independent business owners.

Trust issues

TW: Where is your trust company fitting in to your plans and what is Skip Schweiss doing to give it wider application?

TN: We are very fortunate to have Skip on the team. He wears two hats for us, one as the president of our trust company and the other as head of advisor advocacy. He’s done a terrific job at helping shape the message to support the RIA model at the various associations and lobbying groups to ensure that advisors are heard. See: How RIA industry execs took on the ultimate teamwork challenge: Conquering the highest summit in the lower 48.

Our trust business is growing quite nicely and plays an important role in helping us compete at the core level for retirement business. However, we are in the advisor business first and therefore we will use the trust company to help support advisors in their quest to gather retirement assets rather than just as a custodian for general retirement assets.

Right now, there is a tremendous regulatory and demographic wind at advisors’ backs, stemming from the need for transparency. Advisors can sell against the bundled platforms with their fiduciary model, and under Skip’s leadership, it is becoming a very powerful offering. Ultimately, our goal is to not just be a custodian for retirement plans, but to really be a partner to advisors in giving them what they need to grow through this channel. See: Bernie Clark and Skip Schweiss head to Washington next week to fight on behalf of RIAs in Bachus bill showdown.

Open access to tech

TW: What is the latest with the Veo API? Are new capabilities coming on, and are you, like Schwab, now putting CRM at the center for most RIAs?

TN: There has been tremendous progress with our Veo integration initiative. We currently have over 60 different vendors that have various levels of integration, from single sign-on to multidirectional data exchanges.

Our goal with Veo Open Access is to make advisors’ lives as easy as possible and provide them with a great experience, so that they can focus on spending their time with clients and growing their business. Advisors use different systems and approaches to running their firms, so we are not going to dictate to them how they should work. See: TD Ameritrade showcases what API can do with slick Veo-iRebal harmonization.

As a result, we are keeping an open-architecture approach and therefore CRM is not necessarily at the center of it, but of course plays a large role. We do have a number of CRM platforms integrated into the platform, including Junxure — the leading CRM for advisors — which was announced on the platform this week.

Nod to the masses

TW: We keep seeing new efforts to target the mass market. What is behind this movement for advisors to target the lower end of the wealth spectrum? See: What lessons can Barron’s #1 rated financial advisor teach us?.

TN: Historically, most advisors positioned their firms to serve the wealth accumulator and were limited by their scale and efficiencies to profitably service only wealthy investors. Now, given the dramatic increases in operational efficiencies being driven by technology, firms can take on smaller accounts and use that as an offensive strategy. See: A big Schwab RIA in Florida launches a mass-market venture with Placemark and Schwab as the key pieces.

Frankly, if an advisor has scalability to deliver in this space, they should be thinking about how they can expand their scope of target market. Advisors can’t fight the demographics. The next generation of investors will soon be in the driver’s seat when it comes to selecting their advice provider. So not only will advisors need to play offense, they’ll also need to play defense to protect their current market share. See: How a $1 billion Atlanta RIA is getting fellow RIAs to funnel it their small-ticket clients.

Things are changing so fast and it is really exciting stuff. I see all of this coming together — changing demographics, emerging technologies, disruptive innovation — and I think it is a wake-up call to advisors to start strategizing now, so they are prepared for the new advisory business landscape of tomorrow. They need to reframe the problem, rethink how they will run their businesses in the future, as well as examine the situation from multiple lenses. And when you look at our agenda this week here in Dana Point, it was all about leadership in this area and I think you’ll see a strong correlation to the content and speakers that we brought in to help them do that.

Piece of the action

TW: How is TD’s so-called foot-in-the-door strategy of winning small tranches of RIA assets then winning a lion’s share over time by providing service going? Is this still a primary strategy for growth?

TN: That may have been the case a number of years ago, but not now. We are positioning TD Ameritrade as a business partner and consultant to help firms be successful. If we just have a small piece of their business, we won’t show up on the radar of senior management, and internal operations staff will just look at you with resistance as yet another form to fill out or process to re-engineer. Our goal is to have a meaningful relationship with our clients and make sure that we can add real value to their overall mission and strategy.


TW: How important is it to provide the aggressive technology deals, e.g., a year of free Orion Advisor Services, LLC and other vendors, to land these accounts?

TN: Well, it certainly helps (laughs), but in reality, every custodian is doing that. This is really an industry-wide practice and not just limited to TDA. If we can help off set some costs for firms in establishing their business, or help them transition to a better technology platform, we’ll do that where appropriate. But it goes beyond just winning deals. Advisors need to adopt the best technology out there and when you look at what Orion has, with iPad apps, custom integrations and more, it is really incredible stuff. See: TD Ameritrade will continue to provide free software to breakaways on an ad hoc basis.

Months to hours

TW: Is iRebal still used by just a handful of RIAs or is it finding its way to a broader audience?

TN: We have a few hundred firms using the platform, but keep in mind that iRebal is an incredibly powerful system, what I like to call the “BMW of rebalancing tools.” By design it is not meant for the small shop, but really for larger firms who have more complexity. But what we’ve seen in the benefits for firms is quite incredible; literally taking processes that took firms months to accomplish and simplifying them to a matter of hours. See: TD Ameritrade showcases what API can do with slick Veo-iRebal harmonization.

Two Toms

TW: What has been your biggest eye-opener about being the new Tom Bradley — both for the better and worse?

TN: First of all, I am not Tom Bradley — we are two separate people (laughs). Along those lines, what I will say is that we have been philosophically aligned from the beginning. When we first started out 20 years ago, it was Tom, me and four or five brokers doing everything, from trading, to service, to operations, sales, and more. We built this business together by listening to what our clients ask for, listening to understand what solutions we need to deliver and how to best help advisors be successful. As a result, the transition has been an extremely smooth one and I am proud to say that now TD Ameritrade is leading the industry across the board in white-glove service for advisors, advisor advocacy, technology integration — really all of the things that truly matter to advisors. See: What Tom Bradley’s 25-year reign at TD Ameritrade says about the RIA business.

Sizing up the competition

TW: Both Schwab and Fidelity say they have new programs for small advisors on the way. Where do such advisors fit into your plans?

TN: We’ve always had a multisegment strategy by building an incredibly powerful technology infrastructure to serve advisors. Whether firms are small or large, they are able to tap into our platform to access the things they need to run their businesses on a daily basis. Because larger firms have more complex needs, our approach to servicing them is different. We can be more pro-active and customize service delivery to meet their unique requirements. See: Schwab shifts its strategy on its massive Intelligent Integration.

Everyone starts somewhere in this business and we are not going to turn our backs on the next generation of advisor. We will continue to be an industry leader in serving both small and large firms.

San Diego in the new year

TW: How is your national conference shaping up?

TN: The planning for the annual event is coming along very nicely. We’ll be returning Jan. 30-Feb. 2 to San Diego, which has always been an advisor favorite. We’re committed to delivering the top-notch speakers, breakout sessions, and networking opportunities that advisors have come to expect from one of the marquee events in the industry. Additionally, what makes our conference unique is that we don’t charge advisors to attend. We’re very excited and looking forward to hosting the industry’s best in San Diego early next year.

Timothy D. Welsh, CFP® is president and founder of Nexus Strategy LLC, a leading consulting firm to the wealth management industry and can be reached at or on Twitter @NexusStrategy.

Mentioned in this article:

Nexus Strategy
Consulting Firm
Top Executive: Timothy D. Welsh

TD Ameritrade
Asset Custodian
Top Executive: Tom Nally

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