TD Ameritrade is open to robos, sharing software code and working with Schwab et. al. against the Wall Street lobby

January 29, 2015 — 8:43 PM UTC by Guest Columnist Timothy D. Welsh


Brooke’s Note: TD Ameritrade Institutional has always had a confounding aspect for reporters who cover it. For years it had a PR staff that made it difficult to breathe oxygen into articles. But then, right at the moment of final reporter despair, RIA chief Tom Bradley would get on the phone and tell you pretty much everything you wanted to know, and in human language. See: Tom Bradley answers 10 questions about TD Ameritrade’s competitive stance in his 25th year. With Tom Nally now the man doing the interviews, there is a version of that dichotomy. A more schooled corporate character, Nally will speak like a PR department’s prize pupil but, with some of the Bradley spirit, he tosses out sparkling lines that help the reporter — and more importantly, the reader — get a bead on things. Here, thanks to Tim Welsh, and with less trouble than interpreting a Chinese dissident speaking in public, you get a sense of why TD has a sneaking ability to haul in RIA assets at a growth rate not often matched in this business. See: Once good for a few million, TD Ameritrade’s foot-in-the-door strategy is starting to net billions.

Disclosure: Tim Welsh has provided consulting to TD Ameritrade on various industry issues.

In advance of the kick-off to the 2015 TD Ameritrade Institutional annual conference, I had the opportunity to sit down with TDA’s top custody executive, Tom Nally here in balmy San Diego. TD now boasts 4,500 advisors and $300 billion of RIA assets.

Appearing relaxed, loose and on top of his game, Nally gave me the inside scoop about his big upcoming conference, the state of the RIA industry and how TD Ameritrade continues to execute on its game plan to be the go-to custodian for RIAs. See: Tom Nally answers 10 questions that show one seminal shift: TD Ameritrade no longer seeks a few assets and extended probation.

Capacity crowd

RIABiz: Tell me about the conference this year, particularly in light of the fact that you had to cut off registration due to such strong demand.

Tom Nally: This is the largest event we’ve ever had in our history, with over 3,400 attendees registered, a significant jump to last year’s 2,800, which was also a record number. The attendees here represent over $1 trillion in AUM, which is just remarkable. We had to cut off registration simply because we hit capacity. I think this speaks to the overall growth of the RIA space and what we are doing at TD Ameritrade to support advisors and provide them with the tools and resources they need to continue to grow.

Breakaway suits

RIABiz: Where are you finding your inorganic growth coming from, such as from the breakaway brokers, and how does that differ from a few years ago?

TN: The breakaways we are seeing today versus a few years ago are bigger and more thoughtful as they now have a much better understanding of what is involved in becoming an RIA. We continue to get the majority of our breakaways from the independent broker-dealer channel as these advisors realize that as they get larger, what they are paying for versus what they get is not in alignment. They need more and can take advantage of our open architecture of service, technology, trading tools, advocacy and ways to run a better business. See: TD Ameritrade makes a clean sweep of five IBD reps in New England with about $1 billion of combined AUM.


RIABiz: What can you do for a big RIA that your competitors can’t do as well?

TN: We pride ourselves on putting our clients front and center and our ability to provide great service, something we do with transparency. Our client service index is published every quarter in our advisor magazine so that advisors can see exactly how we are performing. See: Once good for a few million, TD Ameritrade’s foot-in-the-door strategy is starting to net billions.

On the platform side, we offer advanced trading tools such as our ThinkPipes offering and our trading strategy desks provide a great resource to help advisors with structuring sophisticated trades. We are extending our technology leadership with the launch of our VEO One platform, which enhances the advisor experience by bringing together all of their systems and software into one place with one single sign on. See: “Joining the industry-wide trend, TD Ameritrade announces its upcoming project for “open architecture technology integration.

Additionally, we continue to invest in the client experience for the end-clients of advisors, by providing a rich web and mobile technology platform that can be customized by advisors as to what features and functionality they can provide to their clients. See:.

iRebal update

RIABiz: What about iRebal? What is the penetration and how is it being appreciated?

TN: The new iRebal launched in early summer of last year and now over 900 firms are using it, with great reception. This new version is extremely powerful and can not only solve rebalancing, but also automate the entire portfolio management process. So much so, that many advisors are telling us that they can now target new segments of clients, such as the wealth accumulators, and structure a service offering that doesn’t have to include financial planning analyses, something they can do at a lower cost. See: TD Ameritrade will make iRebal software available free to all its RIA clients.

How flexible?

RIABiz: Will you be able to maintain your “nimble” advantage as you get bigger?

TN: People have been asking me that question for the last ten years! (laughs). Over this time, we’ve consistently demonstrated that we can. Because we keep the client front and center and have structured a business model to support that philosophy, we absolutely can continue to be flexible and nimble. We believe that whatever makes the most sense for the client — both retail and institutional — is what will keep us focused. See: Relentless TD Ameritrade antes up a killer ETF platform.

Nine shades of robo

RIABiz: You seem to be the custodian that has the most involvement with the robos, such as Jemstep and Trizik. How do they fit into your bigger strategy for serving RIAs and building your custody business?

TN: We don’t believe an automated advice solution will replace what advisors do today. Advisors provide a much more comprehensive service model, with portfolio management just one slice of the value proposition. However, we do encourage advisors to be open-minded from a digital perspective and embrace the best of what robos offer.

Consistent with our open architecture philosophy, we have nine different “robo” solutions [Trizik, Jemstep, Wealth Access, Upside Advisor, Oranj, Orion (new offering called Discover)], Blue Leaf, Balance Financial and Modestpar] for advisors so that they can leverage that integrated platform to attract that next generation of investor and develop an ability to “groom” smaller investors into full wealth management clients as their assets grow.

We’re in the early innings with the robos, but we’ve had success with celebrity advisors like Barry Ritholtz who has a large social media following. See: Josh Brown and Barry Ritholtz, masters of the financial Twitter/blogging universe, launch a robo effort to monetize their followers. Because he can cast a large net, he needs to have the ability to profitably service smaller clients who come his way. But ultimately, I think we in the industry get a bit wrapped up in the robo phenomenon. When you look at it from the clients’ eyes, they want to know that their advisor has their back and that their family is going to be ok. No website can do that.

Custodian cooperation

RIABiz: Tell me about the RIA custody coalition. What is TDA’s role and do you have hopes that custodians can show a unified front on certain matters?

TN: We are actively engaged and are working not only with the other custodians, but also with the industry’s associations and membership groups, such as IMCA, FPA, NAPFA, CFP Board, and the IAA on this initiative. So far we have had just the one meeting but we think there are focus areas that we as a collective can have an impact. See: How to hold 1,000 hands: Robo CEOs lay out a stark choice for traditional advisors at MarketCounsel Summit.

Right now, Wall Street with its huge lobbying efforts has outsize influence, which we want to balance. To assist in these efforts, at TDA, we are launching an Advocacy Hub to help advisors get involved on a grass roots basis. The Advocacy Hub provides a searchable database that advisors can use to find their local congressperson and send them pre-written letters. Believe it or not, but elected officials actually do listen to their constituents. This will be a slow process, but we are hopeful that advisors don’t lose patience and get complacent. That is why we are investing so much in advocacy and have dedicated so much of Skip Schweiss’ time towards these issues. See: TD Ameritrade pulls off amazing Summit in DC that reveals rot to the core of SEC, FINRA and ERISA system. Despite this progress, we remain fierce competitors with each other.

Piecemeal practice-management

RIABiz: The custody business is a commodity — true or false?

TN: False. If you allow it to be a commodity, then yes it can be and there are some custodians out there who just provide the basics. However we fundamentally believe that we can add value to advisors’ business by providing them all types of services, helping them to run a better business, providing them with the technology to stay on top of their clients and more. We are in the process of re-thinking our practice-management approach. Advisors are busy people; they can’t stop their businesses on a dime and implement major change all at once. So, we are focusing on business performance and helping advisors make incremental change in measureable steps. See: TD Ameritrade will continue to provide free software to breakaways on an ad hoc basis.

Showing its age

RIABiz: What else is on your agenda?

TN: This industry is not getting any younger. The next generation of advisor continues to be a glaring issue. The industry is growing, but we are not seeing the younger advisors show up yet. Millennials as a demographic will soon become the largest segment of the population, yet the advisor demographic does not reflect this. Diversity is also a problem. The demographics of the client base are changing as well. Forty percent of millennials are from a diverse background versus only 25% of the baby-boomer generation. See: The giant raise RIA folk got in 2014 and the threat it poses in 2015.

We as an industry need to get this into alignment and at TDA we are launching a slew of initiatives around this with new scholarship programs, university grants and our work with Texas A&M to build a financial planning program from scratch. We will have 44 students from 22 different schools here at the conference this week, so we are off to a strong start.

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:

TD Ameritrade
Asset Custodian
Top Executive: Tom Nally

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