TD Ameritrade takes DIY approach to 'robo' trend

Custodian will not develop its own automated investing platform but will help advisers direct assets to digital providers

Oct 24, 2014 @ 11:05 am

By Mason Braswell

TD Ameritrade has been tapping into the online advice trend not by developing its own service, as other custodians have planned, but by hosting a number of so-called robo-advisers on its trading platform, according to Thomas Nally, president of the firm's institutional business.

TD Ameritrade is allowing a number of robo-advisers who hold assets in custody with TD to integrate with TD's Veo Open Access platform, which will let advisers view or manage their client's robo investments through one dashboard. The amount of control the adviser has in managing those assets varies depending on the robo-adviser and the level of integration.

Advisers can also build their own robo service and integrate it with Veo, provided that all assets are held with TD Ameritrade.

“It's just another segment of the market, and advisers can choose from one of these technology providers that work with us if they want to offer that service,” Mr. Nally said on the sidelines of the National Association of Personal Financial Advisors conference in Charlotte, N.C. “Advisers need to step up to the plate and provide a more robust end-client experience.”

TD will not receive additional compensation outside of the custody relationship it has with the robo-adviser, according to Mr. Nally. Advisers or clients still have to pay the robo-advisers any fee associated with the investments.

The integrations have been going on for several months, and Mr. Nally said that more robo-advisers are looking to be placed on the Veo platform.

Advisers, for example, can already send client funds to online platforms such as Jemstep Inc., Upside Financial, Trizic or NestEgg Wealth, all of which hold assets in custody with TD Ameritrade. They could also work on developing their own digital advice platform, as some firms, such as Ritholtz Wealth Management, have done with platforms like Liftoff, which was built using a custom platform provided by Upside.

That strategy runs counter to some of the other services so far announced by other custodians. Charles Schwab & Co. hinted that it plans to develop its own reportedly free online advice offering, details of which have yet to be announced. It is still not clear if it will be open to registered investment advisers who hold assets with Schwab.

Fidelity Investments earlier this month announced it was collaborating with the digital advice provider Betterment, which charges a 25 basis-point fee on assets invested. Fidelity receives a fee on those assets for making the referrals.

Mr. Nally said TD wanted to avoid locking advisers into one online advice platform because of how quickly technology changes.

“We don't want to pick one horse and say this is going to be the winner,” Mr. Nally said. “We'd rather position ourselves as the stable.”

He also said that the TD's automated portfolio rebalancing and tax-loss harvesting software, iRebal, already performs most of the basic time-saving functions of an online advice provider, aside from selecting the portfolio of investments.

“You can use iRebal to construct your own model portfolio,” he said. “At the end of the day, advisers want that open-architecture platform.”

(Correction: An earlier version of this story incorrectly stated that Fidelity received a 25 basis point fee from the assets it referred. It receives a fee, but it is not 25 basis-points. Betterment charges a separate fee of 25 basis-points to use its platform.)


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