Scottrade acquisition could be a boon to TD Ameritrade RIAs

Members of custodian's 'Advisor Direct' program may develop new clients from Scottrade

Oct 24, 2016 @ 2:00 pm

By Christine Idzelis

TD Ameritrade Holding Corp.'s $4 billion deal to buy Scottrade Financial Services Inc. may be a boon for the registered investment advisers in TD's network.

The deal, announced Monday, adds about 800 RIAs, according to Tom Nally, the president of TD Ameritrade Institutional, the firm's brokerage and custody services division. It also increases its client base by nearly 50%, possibly uncovering new client relationship opportunities for existing RIAs on its platform.

The firm is gaining market share as the wealth-management industry consolidates amid rising competitive pressures tied to compliance and new technology. TD Ameritrade will have more than 10 million client accounts after the Scottrade deal is completed and will more than quadruple the number of its retail branches.

“I think it's a great acquisition strategically,” said Steven Giacona, chief executive officer of Round Table Wealth Management, an RIA firm with about $900 million of assets and offices in New York and Westfield, N.J. “It gives TD a much broader footprint in the investment advisory market for mainstream investors.”

Mr. Giacona said Round Table is among firms that TD Ameritrade has approved for its “Advisor Direct” referral program, and sees the opportunity to gain new clients through the Scottrade deal. TD Ameritrade refers its retail brokerage customers to RIAs in the Advisor Direct program on the institutional side of its business when they are seeking more than online help for their investment accounts.

"I'm excited about it,” he said, adding that he also expects the Scottrade acquisition will increase TD Ameritrade's “buying power in the market,” benefiting RIA clients who partner with the firm for technology services.

The industry has been consolidating as firms look for economies of scale that will help them invest in technology resources to remain competitive, according to Mac Sykes, an analyst at Gabelli & Co. Financial services firms are spending more to reach clients through their mobile devices, he said, as well as for cybersecurity and software investments needed to stay on top of regulation such as the Labor Department's new fiduciary rule.

“We'll have about $1 trillion in assets when this deal closes,” Tim Hockey, TD Ameritrade's chief executive officer, said in a phone interview. “If you're a TD Ameritrade client, that scale allows us to invest in the future.”

The Scottrade deal adds 500 retail branches to TD Ameritrade's 100, according to Mr. Hockey, who said that after cutting overlapping locations, the firm expects to have about 450 stores in total.

The acquisition is expected to be completed by Sept. 30, 2017, with an anticipated clearing conversion to TD Ameritrade systems in 2018, according to the firm's statement Monday.

“It just gives us that much more to invest because of the economies of scale it creates,” Mr. Nally said by phone.


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