Tom Bradley pollinates TD Ameritrade branches and RIAs get sweet referrals in return

Brooke’s Note: One thing to admire about TD Ameritrade is just how interchangeable are Tom Nally, Tom Bradley and Fred Tomczyk. They show up together quite regularly at various events without any sense of silos — never mind a turf war — and genuinely enjoy seeing each other succeed. It’s an intangible that you might discount were TD not growing so effectively. Tom Bradley’s role in building a referral bridge between retail and RIA, a notoriously precarious task, is a good example of how it can play out with tangible results.

Tom Bradley is having an effect on TD Ameritrade’s RIA custody business — from his perch as head of the retail branch network.

The leader of TD Waterhouse and then TD Ameritrade institutional businesses for 25 years, and RIA-channel evangelist, has focused his proselytizing on brokers in the Omaha, Neb.-based company branch network to jack up cross-channel referrals since taking the retail reins in 2012. See: What Tom Bradley’s 25-year reign at TD Ameritrade says about the RIA business.

The firm’s retail advisors from 121 branches and call centers increased their referrals to RIAs by 18% in the last year to $25 billion from about $21 billion. The referrals flowed to 170 RIAs in the firm’s fiscal year ended Sept. 30, 2013.

That forward motion shows no signs of slowing down. The company’s first fiscal quarter ended in December shows $7 billion was referred from the retail stores to RIAs, a 37% jump from the year-ago quarter. See: Advisor spotlight: TD Ameritrade referrals help turn quiet advisory into a fast-growth operation.

It is less clear how many assets ended up being won by RIAs. About 33% of referred business becomes new business for RIAs, according to TD.

RIA education

“What’s changed in the last few years is Tom Bradley comes from the RIA channel and he knows the benefit that the advisor space brings and he’s certainly keen on providing the right tools for his team to effectively bridge the gap to those who need the services of an advisor,” says Benjamin Welch, director of advisor business development for TD Ameritrade.

Referral programs can be tricky to run because retail branches and RIA offices are two different planets. See: How an RIA can capitalize on referral programs offered by Schwab, TD and Fidelity.

That’s where Bradley has made a key difference, Welch says. Since Bradley left the RIA channel he’s pushed to make certain that brokers gain a better grasp of what services RIAs provide and when it makes sense to pass along accounts to them.

Retail advisors at TD now typically refer a client to an RIA if that person has $500,000 or more. The average referred client has about $1.3 million in assets.

“I’m incredibly proud of these numbers,” Bradley says. “I’ve worked a lot with the retail team and taught them about what it’s like for clients to work with advisors on the institutional side.”

Benjamin Welch: The biggest ongoing advantage
we have is the RIAs on
the platform are our go-to-solution for
our branches.

More time with clients

At TD Ameritrade’s national conference in Orlando, Fla. last month, Bradley explained that one of the systems his firm has been using in the past few years is dubbed Blue Pumpkin, a desktop software intended to help call centers be more efficient.

Clearly, going from answering to 4,000 RIAs to overseeing a 1,000-person strong retail sales force with a universe of about 5 million total retail clients is a huge transition, Bradley says. He has worked to inculcate RIA qualities in those 1,000 employees, making certain they spend more time with clients and that they are better informed and equipped to give better guidance. TD remains steadfast that its advice from branches will never impinge on RIAs’ core competency of financial planning and sophisticated investment management.

By improving the training of these consultants, the longevity of these staffers has increased and they’re staying with the firm longer, which also assists RIAs in the referral program, Bradley says.

“It’s a lot of the things on the RIA side that we’re doing on the retail side. But most of it is around being efficient and effective. What’s very important when you have a sales team of any size and especially with that size is that we want to make sure they’re spending as much time as possible with clients.”

Other custodians see increase

TD Ameritrade is not alone in its successful referral program — its custodian competitors are growing, too.

The referral program of Fidelity Institutional Wealth Services has increased by nearly 40% in the past year, says spokeswomen Erica Birke, who declined to offer the amount of assets referred.

“One of the key components of the program is an investment in events that connect RIAs and Fidelity retail customers. In 2013, we held over 90 events across the country and reached more than 1,000 end clients,” she says. See: How an RIA can capitalize on referral programs offered by Schwab, TD and Fidelity.

Schwab Advisor Services has long worked effectively with Charles Schwab & Co.'s staff in its 300 branch offices and the company’s referral program has accumulated roughly $50 billion in assets during its multi-decade history, an increase of nearly 20% for Schwab Advisor Network from a year ago, says its spokesman Greg Gable.

Many firms have literally grown to be giants by effectively working with local branch operators. See: How a $2 billion LA-based Schwab RIA doubled in size in five years with a laid-back California style.

One reason the Schwab program has set the standard has been its focus not only on volume but on making certain that referrals don’t get fumbled or squandered.

“One of the specific strengths of our program is the high rate at which referred investors ultimately end up becoming clients of advisors in our program,” Gable adds.

Happy RIA

One advisor who is pleased with the TD program despite a low closing ratio is Ron Brock, principal of Sheaff Brock Investment Advisors LLC, which manages $650 million in assets. He has noticed Bradley’s effect in making retail advisors better understand RIAs than they used to

Ron Brock: Now you’ve got the
guy who understood the institutional business
backwards and forwards and he can
explain why the advisor program is
so important.

Brock, who works with a TD branch in Indianapolis and a few others in the Midwest, says that of all of the referrals the branches give out in a year, he gets about 14%. These branches are offering referrals to many other advisors as well. It’s common for branches to work with 12 RIAs or more. Brock reckons he completes about 24% of those referrals into closed business.

“It’s a huge advantage that Tom Bradley is working with retail. Now you’ve got the guy who understood the institutional business backwards and forwards and he can explain why the advisor program is so important,” he says. See: Advisor spotlight: TD Ameritrade referrals help turn quiet advisory into a fast-growth operation.

Enough boots on the ground

Bradley says that for now, educating the retail branches takes precedence over growing the retail footprint and that he’s happy with TD’s 121 national locations.

“We have no mass expansion planned. Our model shows we’ve got enough brick-and-mortar branches. For folks who don’t like brick and mortar we’ve got the online options. We find that you don’t need a lot of boots on the ground. It’s a different model. Most of our clients have a strong self-directed approach. Our investment consultants are there to provide them with guidance and get them to the right place.”

Retail-custodian synergy

Even though Bradley is on the retail side, he spends a great deal of time talking with his successor on the RIA side, Tom Nally, and applying technology from the RIA side on the retail side. See: What two things Tom Nally says 'no’ to in managing his $270-billion RIA empire.

“There’s quite a bit of overlap,” Bradley says. “Our teams talk all the time. We’re taking technology from the advisor side and enabling things like e-signature.” See: Tom Nally to take the reins of TD Ameritrade’s RIA business from Tom Bradley.

TD is also in the process of upgrading its advisor website to make it more similar to its popular retail website. See: TD Ameritrade wins a $2.5-billion RIA custody client on the strength of its delivery of B-to-B capabilities using Orion, Veo and API.

“The biggest ongoing advantage we have is at TD is the RIAs on the platform are our go-to-solution for our branches,” says Welch. “When a client has a need for ongoing financial advice, we refer them to RIAs. Unlike other firms we don’t have our own asset management arm and conflicting services.”

Select few

Welch attributes part of the referral program’s success to the fact that some retail workers dubbed investment consultants get compensated for referring clients to RIAs.

Even though TD has 4,000 RIAs, just 170 advisors have been chosen to participate in the program and the decision is based on criteria such as the firm’s business model. To be considered for the referral program, RIAs must have at least $100 million in assets and allow TD to exert heightened compliance controls over their practices. See: Where RIAs should draw the line in rewarding clients for referrals.

An advisor who wins business from TD in the program pays about 25% of its management fees on assets that close to TD in perpetuity.

Each branch works with a roster of 12 to 18 RIAs.

“We have to know a lot about the firm and vet the business,” Welch says. “Also, an additional level of compliance review. The retail branches want a wide mix of advisors so they can refer retail clients to them.”

Slow going

Bradley is still absorbed by pure custody-side issues that are near and dear to him, like crafting succession plans for advisors. See: Have an aversion to succession plans? Consider a continuity pact as a vital baby step.

Bradley also remains passionate about improving diversity in financial services arena — specifically, upping the numbers of women as clients and advisors. He admits this is not an issue in which the industry had mad great deal of headway, but says things have improved. See: Top RIA business executive recruiter chides 180 women gathered in a New York ballroom for second-guessing themselves.

“It’s slow going but I think it’s still a lot better than when I started 28 years ago,” he says. “There are more and more women who are choosing financial services. But I think it’s still male-dominated. Women control a significant amount of wealth in America. We’re trying to learn how to effectively attract women into a franchise. We’re not striking gold yet but we’ve found a few things to be effective.”