I was standing at the National Compliance Services booth on Friday chatting with Ken Kaltman and Patrick Burns, a Los Angeles-based attorney who helps breakaway brokers, when a member of the TD Ameritrade recruiting staff appeared.
Standing with him was a tall, light haired man of about 50 wearing glasses who looked a bit apprehensive. The TD employee made the quick introduction of this fellow to Burns, who politely but hastily bid farewell to Kaltman and me.
It turns out that this wirehouse advisor was far enough along in deciding to turn independent after three heavy days of TD Ameritrade conference activities that he was ready to speak to counsel about how to stay out of trouble in the process.
Stoutest of hearts
To break away from a wirehouse embrace in your 50s takes either the stoutest of hearts or the encouragement of a three-day party of the most rabid independents whooping it up in quintessentially crystalline San Diego weather in February. Or both.
“I find that a lot of prospective independent advisors who are on the fence about going independent commit after attending these types of events-conferences. The emotional factor of seeing how happy independent advisors are and attending all the sessions really helps them in deciding to move forward in going independent,” Burns said.
The TD Ameritrade conference accomplished its mission of heartening the troops and girding them for the rest of the year. Tom Bradley spoke about how RIAs are winning in the marketplace and Fred Tomczyk gave his usual speech about TD Ameritrade’s rapid growth and the rock-solid backing of TD Bank, one of the few AAA-rated banks in the world. (See: Ed Clark: TD Ameritrade will not compete with RIAs through its branches.)
People consistently asked me what I thought the “buzz” of the conference was – aside from the performance of the Doobie Brothers Friday night. Nothing clear emerged other than the onward press of technology – also the theme of Schwab IMPACT. (See: Eight software vendors give insider accounts of their IMPACT 2010 booth experiences.)
Yet as I picked through my notes on Saturday morning, I realized there were nuggets of conversation, speeches and happenings that formed a montage. There is an appetite for change that I’m not sure I’ve seen so strongly among any group in my life. It’s not just present at TD’s conference, but it was mightily present there.
Here are some of the happenings and information that fueled this impression.
1.) RIAs seem to have survived the 2008-2009 meltdown with their assets, honor and business model intact. Bradley showed a graphic during his speech showing that wirehouse assets only increased 4% or about $200 million to $4.6 trillion between 2005 and 2010. During that same time RIA assets climbed from $1.4 trillion to $1.9 trillion or 35%. He added that these statistics line up well with what he’s observing in day-to-day asset transfers from wirehouse brokers to RIAs keeping assets at TD Ameritrade. The better news is that the surface is just being scratched. “There’s more assets there,” he said.
2.) Advisors mostly succeeded in holding the line against investor panic during the 2008-2009 market meltdown. Bradley asked for a show of hands of advisors with clients who demanded to go to cash from equities during this crisis period. There was a strong show of hands in the room containing 1,500 or so people (there were 2,600 at the conference). He says that his travels around the United States to various RIA firms reveal that, on average, three or four clients overrode the objections of their advisor and liquidated their holdings. Considering that most advisors have more than 100 clients and this was the worst crisis since the Great Depression, this sounds like a favorable autopsy report. The bad news is that the people who bailed out did so at the trough in 2009 and many of them have still not returned to the market to experience its 93% rise since then. Bradley notes wryly that he could have made a lot of money by knowing this ultimate panic point. “I wish I was monitoring it more closely.” The good news about future prospects: investors have a long ways to go in putting cash to work, according to Fred Tomczyk, CEO of TD Ameritrade. “Is the retail investor back? I’d say they’re not all the way back.”
3.) TD Ameritrade is doing its own self-assessment of how it did during the downturn. In his speech, Fred Tomczyk singled out Bradley for how he performed during a difficult four years. First he presided over RIAz asset custody during the big merger between TD Waterhouse and Ameritrade in 2006, which dragged down service ratings. Just as TD got through that tumultuous integration process, the meltdown hit. The ebullient atmosphere of the 2011 TD Ameritrade conference did not exist in 2008, Tomczyk allows. “It was not a friendly conference at that time. Tom Bradley more than anyone stuck it out and got us back. I want to thank Tom for his leadership.” Bradley said in a later interview that Tomczyk, a former hockey star at Cornell University, is a great coach and mentor. “He has more of an intellectual, soft-spoken (manner than other bosses) but you listen.”
4.) Though the featured speakers at these conferences rarely provide much direct insight into the RIA business, Colin Powell gave a terrific, often hilarious speech that had nobody grousing about his last-minute substitution for a called-away Tony Blair. (See: TD Ameritrade replaces Tony Blair with Colin Powell for 2011 national conference.) One thing that struck me: he slipped “RIA family” into his speech in a familiar manner that suggested that he pronounced the letters signifying registered investment advisor in everyday life. This was the first time I’d ever seen one of these six-figure speaking-fee celebrities make that intimate connection to this industry. I thought it was a from-the-gods sign that RIAs are catching on – the way they did in NYT and WSJ articles this year. See: NY Times uncovers deeper fiduciary truth by interviewing wirehouse brokers and Page one Wall Street Journal article is a 'home run’ for the RIA industry
5.) There was a palpable enthusiasm for TD Ameritrade’s API, which opens its data to (virtually) all interested third-party vendors. (See: Third-party vendors vouch for TD Ameritrade’s API at first general session). Executives at Morningstar Office, EBIX, MoneyGuidePro, Orion Advisor Services and Redtail Technology praised it. In off the record discussions, some third-party technology executives added that API looks so promising that it makes them optimistic that Schwab Advisor Services and Fidelity Institutional Services will also be compelled to consider an API of their own. Otherwise, they believe that TD’s open system could give it a real edge with RIAs who want a potpourri of technologies that suit them. This conviction that API works well reduces anxiety about being left out in the cold. Schwab and Fidelity are choosing a select few vendors for close integration – though the San Francisco and Boston giants also say that they will facilitate less formal integration with a broader array of providers.
6.) Technology vendors all continue to do land office business. I had to stop by the booths of technology vendors often more than once to get an audience with these folks. When I finally got to talk to a marketing fellow for AssetBook, a portfolio management system maker, he confirmed that he was getting a steady stream of promising leads. I made the pilgrimage to this booth because I’d just run into two RIAs who both said they used AssetBook, including Eric Babcock of Greystone Financial Group in Troy, Mich. and Andy Millard, who has his own practice in North Carolina. About 180 firms use AssetBooks’ software.
7.) Advisors were arriving at the AssetBook booth with a sense of urgency to get their practice online and into the cloud. Most of the prospects currently use Schwab PortfolioCenter or Advent Axys, he says. (RIABiz technology reviewer Nevin Freeman says that it is still unclear where precisely that sense of urgency derives because desktop versions have worked fine.)
8.) I also ran into Karyn Davenport, marketing director of BOSS of Vista, Calif. Her company didn’t have a booth, but she was making the rounds. Her outsourcing company hosts Schwab PortfolioCenter as a main line of business. She also says that there is plenty of demand for her services to put the traditional desktop software onto the web.
9.) Also speaking were Fiscal commission co-chairs Alan Simpson and Erskine Bowles. The two senators known for combating the national debt suggested that political will is starting to coalesce. “We have to join hands and jump off a cliff,” Bowles said. Simpson says he gets resistance close to home – especially with his desire to curtail malpractice suits. “My sons are trial lawyers….they do love me. They just wonder about me.” Bowles experiences similar resistance from his 90 year-old mother to his idea of putting Social Security in play as a budget issue. She said to him: “I love your plan but don’t mess with my Social Security.”