TD takes integration approach on robo-strategy over acquisition

The custodian chooses multiple digital advice platforms instead of building or buying just one

Feb 5, 2016 @ 10:49 am

By Alessandra Malito

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TD Ameritrade Institutional, the adviser arm of the custodian, has a unique perspective on robo-advisory platforms — it won't pick just one.

Instead, it continues to grow the number of robos on TD Veo, its open architecture system. There are now 16 vendors with robo technology on the list.

"Instead of picking one horse to win the race, we're building the stable," said Jon Patullo, managing director of technology product management at TD Ameritrade.

This approach allows advisers to pick their preference, experts said.

"There are a lot of benefits to going that route," said Sean McDermott, an analyst at Corporate Insight. "You become a one-stop shop for advisers and at the same time, the adviser is less likely to face decisions like an ultimatum."

Competitors like Charles Schwab & Co. and Vanguard Inc. pushed the robo conversation forward last year when they released their in-house automated investment platforms. Schwab came out with Schwab Intelligent Portfolios in March and Schwab Institutional Intelligent Portfolios in June. Vanguard Personal Advisers, a digital platform with traditional humans at a call center, rolled out of beta in May.

Competitors soon followed. Pershing announced in June around the same time that it was partnering with Marstone, a robo-adviser startup, for advisers interested in offering digital advice. Fidelity started testing out its own platform, called Fidelity Go, in the fall.

At the same time, TD chose to integrate with numerous vendors.

To date, Veo Open Access, the TD open-architecture system that integrates with more than 100 third-party vendors as of January, including robos such as Envestnet's Advisor Now, previously known as Upside, Riskalyze's Autopilot, Invesco's Jemstep and Vanare's NestEgg.

Having a suite of these software providers, which also include non-traditional robos with digital advice capabilities, allows advisers to keep customizing their offerings to clients. An adviser may want to choose Jemstep because it offers active investing features, Nestegg for its open architecture or Oranj, a client-centric wealth management platform.

"They can find a platform that meets their needs," Mr. Patullo said. They don't want a firm to pick their offering for them, he added.

Matt Fronczke, an analyst at kasina, said TD is working in line with firms like BlackRock and Invesco, which have acquired robos for a business-to-business model.

"They participate in growth with the digital phenomenon by partnering with different robos," Mr. Fronczke said.

The retail side of TD Ameritrade has Amerivest, a decade-old online platform for investors to receive advice on portfolios. Joseph Giannone, a TD spokesman, said the firm doesn't consider it as a robo, but is looking at ways to make it better for clients in the next year.

There are different costs associated with the adviser's robo preference. Schwab, for example, charges 10 basis points for advisers with less than $100 million in assets under management with the custodian, while those that manage more than that can use the platform for free. BlackRock, the asset manager that acquired direct-to-consumer FutureAdvisor, is now offering its robo to advisers, with no additional costs for BlackRock clients to use the technology. With TD, the adviser must first license the robo platform before they can integrate with TD Veo.

Other competitors, like Raymond James, have made it clear they will not participate in the robo movement altogether. Instead, the firm has chosen to build or integrate with other types of software so that advisers are always engaging clients, Josh Bohlander, vice president of adviser technology at Raymond James Financial Inc.

"We have no plan to do anything with a robo, but we do want to make sure advisers have tools," Mr. Bohlander said.

Although TD's strategy is to pick up robos for its platform, it does use its current technology to help other robos function. Adhesion Wealth Advisor Solutions, a unified managed account platform, for example, announced during TD's annual conference in Orlando on Wednesday that it was partnering with Riskalyze's Autopilot, made available exclusively for advisers who custody with TD.

"I think TD Ameritrade has a great understanding that robo is a technology model, not a business model," said Aaron Klein, chief executive of Riskalyze.


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