TD Ameritrade hosts a posh 'billion-dollar club' summit at a seaside Ritz Carlton

Welcome to the billion-dollar club — at least that how it appears when long division is applied to some statistics emanating from a very posh TD Ameritrade Institutional event that just wrapped up in Dana Point, Calif.

“Here in this room there are 190 advisors from 164 of the biggest firms in the industry, representing over $215 billion in assets,” said Pete Dorsey, managing director for TDAI in his welcoming remarks. “When you do the math, that is an average of $1.3 billion per firm.” See: Tom Bradley pollinates TD Ameritrade branches and RIAs get sweet referrals in return.

The largest of those firms included Fairfax, Va.-based Edelman Financial; Clarfeld Strategic Wealth Management in Tarrytown, N.Y.; Focus Financial Partners LLC in New York; San Jose, Calif.-based LWI Financial; South Nyack, N.Y.-based Creative Planning Inc.; Newport Beach, Calif.-based United Capital Financial Advisers DiMeo Schneider & Associates LLC in Chicago; Good Harbor Financial Inc., also in Chicago; Geneva Investment Management of Chicago LLC.; Pinnacle Associates Ltd. in New York; Omaha-based CLS Investments LLC; Coldstream Capital Management based in Bellevue, Wash.; and Mercer Global Advisors in Santa Barbara, Calif.

Keep growing

In the business of registered investment advisors, the importance of size on the rise as competition grows for dominance of the business of delivering goals-based investing cheaply and effectively.

The point was driven home unambiguously by Ron Carson, chief executive of Carson Wealth Management who has long been associated most closely with his broker-dealer LPL Financial, but who has grown closer to Omaha hometown RIA custodian TD Ameritrade over time.

“Advisors are either on a growth path or a glide path,” said Carson in an M&A session at the event. “If you are on a growth path, then you need to get to $1 billion in AUM so you can have the free cash flow to continue to invest in the business, hire the best people and build enterprise value. If you are on a glide path and are unwilling to invest in your business, then you should merge your firm or tuck in to a larger firm to realize any value at all.” See: TD Ameritrade chief calls RIA growth a significant factor in 44% 4Q surge.

Next steps

Ben Bernanke kept it real with
Jim Dario. [Tim Welsh photo]

The TD Ameritrade Elite Summit contained three days of industry content, business building ideas and networking at the stunning Ritz Carlton resort, tucked tightly on the cliffs of Dana Point, California, with spectacular views of the tranquil Pacific Ocean hundreds of feet below.

This year’s theme was all about encouraging advisors to step out of their comfort zone. “Capitalism does not hand out lifetime achievement awards,” advised Dorsey. “Firms need to step beyond what they have traditionally done to continue to thrive and meet the challenges ahead in a more complex and competitive marketplace.”

As part of that theme, the Elite Summit brought together high profile keynote speakers, most notably former Federal Reserve Chairman Ben Bernanke. In a dramatic presentation, Bernanke spoke about his experiences in managing the country’s economy during the 2008-2009 financial crisis and Great Recession that followed.

Long way to fall

Toms Nally and Fred Tomczyk queried
by Diana Britton.[Tim Welsh photo]

Bernanke zeroed on the “bank run” by institutional investors that left Lehman Brothers insolvent. “Lehman was the trigger that created the fear that caused the crisis,” Bernanke said. “There we were with a firm that wasn’t solvent, had no buyer and no collateral to lend against. While we never wanted to let Lehman fail, we had no choice.”

He continued: “It was a very scary and troubling time, particularly when we learned soon after that AIG was on the brink,” Bernanke explained. “The good news was that AIG was really a hedge fund sitting on top of an insurance company, so while the AIG financial products group was taking on massive derivative risk without prudent re-insurance practices, we could still lend against the assets of the insurance company. Otherwise, it most definitely would have brought down the entire global financial system if we didn’t, as AIG was the last backstop.” See: AIG’s Advisor Group introduces a 100%-payout for big RIAs as part of a massive revamp of its fee-based platform.

Applied history

During the Q&A with TDAI’s managing director Jim Dario that followed, Bernanke spoke of the value in studying history and learning from past panics.

“The Great Depression was caused by misguided policies of tightening the money supply and the willingness to let the banking system fail,” he said. See: Bernanke antes up recession’s end and Sonders raises him a solid recovery.

Ben Bernanke: We need a better
balance in managing the economy. The
Fed is doing all of the
work, we also need fiscal policy
as well. [Tim Welsh photo]

Bernanke noted that, “During the financial crisis, we benefited from the experience of the Great Depression and were able to do the things we did by providing capital through the TARP program to stabilize the banks, increased guarantees from the FDIC for deposits and disclosures of stress tests of the banks. All of this went a long way to restore confidence, and is the main reason why the U.S. recovered so much faster than Europe.” See: Column: Europe is the opportunity of a generation and the time to invest is now.

Bernanke summed up his message by saying that going forward, “Our worst enemy is complacency. There is currently too much reliance on monetary policy. We need a better balance in managing the economy. The Fed is doing all of the work, we also need fiscal policy as well.”

Women with money

To provide the state of the union for TDAI and the RIA industry, TDA chief executive Fred Tomczyk and TDAI president Tom Nally held forth in a lively Q&A moderated by wealthmanagement.com managing editor Diana Britton.

Nally tipped his strategic hand by saying that TD is focusing on the next generation of investors, women clients, retirement plans and embracing technology.

“The big things happening that advisors need to adapt to, or risk being left behind are focused on the demographic shift in wealth moving to the next generation and the influence of women investors,” he said. “By 2030, women will control 66% of all of the wealth in the U.S. and you can’t make assumptions based on gender. Also, there is a tremendous opportunity to go after the $5 trillion in the retirement plan space.” See: Forget their reputation; rich women are more fearless investors than supposed.

Robo = B-D headache

Fred Tomcyzk: For RIAs, it really
is an apples and oranges comparison.
The people who should really feel
threatened are the full commission brokers.
[Tim Welsh photo]

Tomczyk added his take on how the much-discussed “robo”-advisors will fare as the make their collective bid for wealth management assets. See: Why I find the term 'robo-advisor’ objectionable and unhelpful.

“Trading commissions are easier to disrupt than managed money services,” he said. “For RIAs, it really is an apples and oranges comparison. The people who should really feel threatened are the full commission brokers.” See: Bill Crager: I’ve got your back against the attack of the killer robo-advisors.

Rounding out the town hall discussion were multiple questions and comments from advisors about the recent slew of “cyber-audits” by the SEC going around. “One of the tactics the SEC is doing to cover many of the firms they haven’t audited recently or at all, is to use technology to gather information,” said TDAI’s regulatory guru, Skip Schweiss. “It is one of their sweeps.”

Greenest M&A pastures

One of the more compelling aspects for advisors attending the Elite Summit is the chance to break out into smaller discussion groups and learn from their peers on various strategic and operational issues in a one-on-one setting.

Leading the “Growth through Mergers and Acquisition” breakout was Ron Carson along with Ben Welch of TDAI. During the session, advisors peppered Carson with questions about his methodology and approach for acquiring firms — and he obliged with a specificity that was appreciated.

“The best feeding ground right now are advisors who have roughly $60 million to $80 million in assets and are being squeezed by increasing costs and declining fees,” said Carson as he walked advisors through his tuck-in process. See: Fidelity loses some RIA assets over its new DFA/Vanguard fees but other RIAs crunch the numbers and soldier on.

Lunch al fresco at the Ritz
Carlton [Tim Welsh photo]

Helpfully, Carson also revealed where he had experienced failure. “The only time we had to unwind an acquisition was due to cultural issues.” See: Ron Carson launches roll-up/TAMP-like venture with Envestnet, TD Ameritrade and Advizent as puzzle pieces.

Automatic Hancock

Carson also credited his investment in technology and infrastructure as the key differentiator that sets his firm apart in the crowded buyers marketplace. See: How TD Ameritrade is playing the logo game to spur 4,000 of its wavering RIAs to adopt its third-party hook-ups.

On the operational front, TDAI managing director Jon Patullo and JD Bruce, president of Abacus Wealth Partners led a discussion about the operational efficiencies and latest trends covering data integration, rebalancing, outsourcing, mobile technologies and big data.

Top of the list that advisors are looking at are e-signatures and the ability to automate the new account process with TDAI. See: RIAs in the catbird seat to leverage straight through processing in 2012.

Custodian love on display

The Beach Boys — or a
reasonable facsimile — serenade cosseted TD
attendees.[Tim Welsh photo]

“The benefits of workflow technology from Orchestrate, a tool TDAI offers to Salesforce users has been key in streamlining business workflows,” said Patullo. See: 12 key events of 2012 that rocked the RIA technology landscape, Part 1.

Bruce of Abacus pointed out the tremendous efficiency gains from automated portfolio rebalancing, as they were able to go from three traders to one by implementing rebalancing software. See: Tech Review: iRebal thrives after TD Ameritrade acquisition.

Of course, the nature of TDAI’s Elite Summit is also about showering the big RIA chiefs in attendance with custodian love. Conference organizers took advantage of the scenic Ritz Carlton venue to throw outdoor dinners, receptions and parties. Live bands, elegant dining and cocktail gatherings dominated the agenda, along with a golf tournament on the nearby Monarch Beach golf course. Greens fees ran $219 for non-members, according to the resort website.

Fore!

Tim Welsh has done consulting work for TD Ameritrade.

_To learn more about what went on at TDAI’s Elite Summit, check out the #TDAIELITE hash tag on Twitter.-

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 tim@nexus-strategy.com or on Twitter @NexusStrategy.