Three former TD execs have big plans for small TAMP

Three former TD Ameritrade executives are taking over a small turnkey asset management platform with hopes of turning it into a major player in the wealth management industry.

Bryce Engel, a former senior vice president and chief brokerage officer at TD who also served as president and chief operating officer of Penson Financial Services, is the new CEO of Fusion Capital Management, a TAMP headquartered in Dallas. Also joining the company’s board of advisers are Asiff Hirji, who served TD as chief information officer, chief operating officer and president, and Wayne Ferbert, TD’s former head of business development.

The three have completed a recapitalization plan that they said brings “significant liquidity and operational flexibility” to grow Fusion. The company has attracted $800 million in assets under advisement since it launched in 2011 — $600 million coming in the last two years — but Mr. Engel believes he can accelerate growth with an investment in marketing and technology.

“We think of it as putting the ‘turnkey’ back into the TAMP,” Mr. Engel said. “Most advisers get into the space because they like to sell. These people want to be out there selling and growing their business. Our job is to make it easy.”

Mr. Engel said his first goal is the successful launch of Elements, Fusion’s next-generation technology platform. Elements is in beta testing right now and is scheduled to go live in the first quarter of 2018.

Mr. Engel couldn’t provide many details, but said the platform is a mix of proprietary technology and partnerships with vendors like Orion and AdvisoryWorld. He added that Elements will feature self-help tools designed to make the technology easy to use for advisers.

Beyond technology, Mr. Engel’s focus is on growing Fusion through partnerships in the independent RIA space. But some wonder if there is room for another TAMP in the marketplace. Not only does Fusion have to go up against well-known brands like Envestnet and AssetMark, but TAMPs of all sizes are facing increased competition from technology offerings by custodians and adviser networks.

(More: XY Planning Network launches TAMP for young investors.)

There’s also the growing trend of technology vendors partnering with asset managers to offer advisers products and strategies via “model marketplaces” at a lower price than TAMPs. Tim Welsh, founder and president of consultancy firm Nexus Strategy, said he’s skeptical how well a new TAMP offering could do in the current environment.

“At only $800 million, they are a tiny, micro-player in the overall TAMP landscape,” said Mr. Welsh. “It will be difficult for them to build a recognizable brand to attract new advisers at that size.”

However, Mr. Welsh believes the growing competition is evidence that an increasing number of advisers is looking to outsource their back office. As consolidation happens among the largest TAMPs (Envestnet recently acquired FolioDynamix for $195 million), there could be an opportunity for a company like Fusion to serve advisers looking for something smaller.

Not dissimilar, Mr. Welsh said, from the consolidation among custodians that opened the door for a discount brokerage like TD.

Because of his experience helping to grow TD from a small firm into a large custodian, Mr. Engel said he knows what it takes to make Fusion competitive in the TAMP market. Mr. Engel plans to focus on smaller advisers managing $40 million to $50 million in assets looking to go independent, and providing a technology offering that simplifies the decision-making process.

“I think a lot of [TAMPs] have grown so much and have so many options that it’s really challenging for an adviser coming in,” he said. “It’s overwhelming.” With Fusion, he said, advisers can just plug in and get to work.

“I believe that more and more advisers are breaking away to have control over their business,” Mr. Engel added. “We have the perfect solution to help them achieve that financial independence.”

David Lee, the owner and CEO of Mach 1 Financial, said he considered Envestnet but ultimately picked Fusion because of the technology. Mr. Lee said that as a result of the operational efficiencies he’s gotten from Fusion, he’s been able to nearly double his AUM to $92 million since 2016.

“The thing that I’ve appreciated most about Fusion is their ability to continuously improve their technology,” Mr. Lee said. His firm is testing the new Elements product, and Mr. Lee is optimistic about the direction Mr. Engel is taking Fusion. “I anticipate that they’re going to hire multiple programmers to make Fusion Elements be the program that we all envision it has the ability to become,” he said.

By focusing on firm like Mr. Lee’s, Mr. Welsh said Fusion could find footing in the crowded TAMP marketplace.

“With the overall wind in their sails from the growing outsourcing trend, they might be able to make a go of it with a niche message,” Mr. Welsh said.

The addition of new players is a sign that the independent advisory industry is healthy and thriving, but Mr. Welsh is still skeptical of a firm just focused on small advisers. “Nobody got rich going after the small guys.”