Battle for breakaways goes high-tech

TD Ameritrade Institutional unveiled a tool last week that gives its business development efforts a technological boost. Although the firm's new Business Evaluator tool was built to support recruitment overall, it is likely to be particularly helpful with a segment that represents TD Ameritrade's sweet spot: breakaway brokers who have modest books of business. In a demonstration last Tuesday, I got to see firsthand a lot of the meaty features and computations that fill this web-based application. In development for the last 12 months, the Business Evaluator tool walks brokers through many of the issues they should consider before becoming registered investment advisers — everything from an assessment of potential revenue to the cost of buying office furniture. “It definitely makes sense for TD Ameritrade to build a tool like this,” said Alois Pirker, research director with Aite Group LLC. “TD's assets per adviser or firm are a lot smaller than [The Charles Schwab Corp.'s or Fidelity Investments'], and because of that, the advisers coming to TD have more concerns and are more cost-conscious when setting out,” he said. “They need to know they'll have enough assets on the books to be profitable before they pull the trigger and sign on.” At the end of last year, TD Ameritrade did custody work for 5,000 RIA firms with a total of $80 billion in assets. Their average firm had about $16 million in assets, according to Aite. By comparison, Schwab Institutional supported 6,000 firms totaling $477 billion in assets with with almost five times the average assets per firm, Aite reported. It stands to reason that with a solid technology tool to help them, TD Ameritrade's “transition consultants” can deal more efficiently with the higher number of brokers that the company is seeking to attract. The tool is also helpful as a self-diagnostic screen for brokers who lack the experience of running their own business. “Many breakaway brokers have a good handle on the revenue they can expect when they go independent but have little knowledge of the expense side,” said Sean Cunniff, research director in the brokerage and wealth management practices at The Tower Group Inc. “Their broker-dealer has covered office space, tools and benefits, so helping advisers get a handle on expected expenses is a very valuable aspect of the tool.” * * *

ADVISORCHECK WAIVING ITS FEES

Last week, AdvisorCheck Inc. said that it had decided to do away with its fees for running background checks on advisers “in an effort to help restore consumer trust,” according to a prepared statement. Last month, I reported on how some advisers were upset about the tactics being used by the firm (InvestmentNews, Aug. 16). I spoke with Bryan Binkholder, AdvisorCheck's spokesman and a member of its senior management team, about the change and what had transpired in the month since our story ran. “I wanted to take the fee totally off the board — we know that's not really the reason for advisers' being upset, but let's just take it off. And I've also worked with some of our salespeople about being very apologetic and how they can better convince advisers to look at things a little bit further,” he said. He said that the company's website is garnering about 15 responses a day from consumers requesting background checks on advisers or insurance agents, but added that despite the waiving of fees, only about a third of those advisers are willing to submit to the checks. * * *

A GLACIAL RATE OF CHANGE

Last week at the Money Management Institute's first annual TechOps conference in Jersey City, N.J., I learned that many behind-the-scenes technologists are hoping that the managed-accounts industry adopts some sort of technological standards. One participant told me he was frustrated by the “glacial pace of change” in the industry when it comes to standardization efforts. The Depository Trust and Clearing Corp. said last week that UBS Financial Services Inc., the nation's third-largest sponsoring broker-dealer of managed accounts, is preparing to launch a test of DTCC's Managed Accounts Service and its recently introduced MAS web portal. That portal is intended to serve as a central hub for investment managers, program sponsors and service providers to exchange information electronically about managed accounts. “Not having to train your back-office staff on multiple proprietary platforms from sponsors should relieve the manual back-and-forth that takes place all too often today,” said Marianne Leone, executive director of managed operations for UBS. But if tech discussions among industry experts are a challenge, they are nothing compared with explaining technology to clients. During one panel discussion, for instance, one questioner spoke about the difficulties in selling unified managed accounts. “It is very difficult to explain the concept of something as complex as overlay management to a client — they want the explanations to be simplified,” said Kent Bonniwell, senior vice president of business solutions with Advisorport Inc., the UMA platform arm of PFPC Worldwide Inc. E-mail Davis D. Janowski at djanowski@investmentnews.com.