Despite its many setbacks in 2007, TD Ameritrade Institutional has one measurable edge over bigger rivals — better trade execution, according to its executives.
What separates TD from the pack is its commitment to helping registered investment advisers meet the requirements of fiduciary care, and that includes getting the best trade execution, J. Thomas Bradley Jr., president of TD Ameritrade Institutional, said at the company's Partnership 2008 conference this month in Orlando, Fla.
Mr. Bradley produced charts from Thomson Transaction Analytics of Chicago showing that TD handily beat
Fidelity Investments of Boston, Schwab Institutional of San Francisco and Pershing Advisor Solutions LLC of Jersey City, N.J., in executing trades at the most favorable prices.
For instance, TD gets a price better than the one listed on the Nasdaq Composite Index 60.8% of the time, versus Fidelity's 32.6%.
For the Nasdaq-100 Index, TD beats the listed price upon execution 64.9% of the time, versus Schwab's 53.8% and Pershing's 14.1%, according to Thomson.
But Schwab isn't buying the figures.
"TD's use of percent of shares price improved as a measure of a custodian's overall performance is misleading and deceptive," said Alison Wertheim, spokeswoman for Schwab. "When evaluating execution quality, total dollars of price improvement is what matters to clients."
"TD isn't shining a bright light on total dollars of actual price improvement, because it underperforms Schwab in this area," Ms. Wertheim added. "One of the reasons may well be that TD receives payment for order flow, a practice Schwab discontinued because we believe it creates a potential conflict of interest [with our customers]."
Pershing officials agreed.
"Using the metric of percentage of shares' price improved provides an inaccurate depiction of the true benefit to the customer because it omits the rate of improvement per share," said Mike Geller, a spokesman for the company.
Jersey City, N.J.-based TD needs to do much more to compete with Schwab Institutional and
Fidelity Investments, said some analysts and financial advisers.
Execution of more mundane tasks is still subpar at TD after last year's disarray, industry observers said.
"The wait times on the phone are a little better, but still frustrating," said Georgia Bruggeman, principal of Meridian Financial Advisors LLC in Holliston, Mass., who declined to disclose assets. "Basic services such as researching a bond is unavailable on Veo, so I have to call every time I want to place a fixed-income trade."
TD is spending $150 million, and that will include an overhaul of Veo, TD's trading platform for advisers, Mr. Bradley said. The custodian's fixed-income trading capabilities will be radically upgraded in that process, he added.
This atmosphere of work-in-progress at TD does not impress Robert Ellis, a New York-based analyst for Celent Communications LLC of Boston.
"Unless there's something they've got that I'm not seeing, I don't get it," he said. "What makes it more attractive than Fidelity or Schwab?"
The difference is TD's responsible attitude, said Robert J. Braglia, president of American Financial and Tax Strategies Inc. in New York, who declined to disclose assets.
"In a previous business relationship, the custodian would also make mistakes, however, instead of taking responsibility and then doing whatever it took to fix it, they would blame me, the client, the weather, the dog ... and I would eventually have to fix it myself," Mr. Braglia said.
This attitudinal difference at TD is for real, said Joe Kiely, managing principal of Kiely Financial Services Inc., a Greenville, N.C., firm that manages $200 million in assets.
"They've made significant progress, and if they have a problem, they take care of it," he said. "If I e-mail Tom [Bradley], he always responds."
This refrain from Mr. Kiely about Mr. Bradley's responsiveness is common among advisers but not necessarily reassuring as TD bulks up through acquisitions, according to Philip Palaveev, senior analyst with Moss Adams LLP in Seattle.
"I think Tom Bradley's reputation is holding a lot of things together," Mr. Palaveev said. "Outside of him, I don't feel like I know anyone there, and that's not a positive sign."
But Joe Moglia, chairman of parent company TD Ameritrade Holding Corp. of Omaha, Neb., dismissed these concerns about putting too much of a load on Mr. Bradley's shoulders.
For instance, TD Ameritrade Holding Corp. named David Kelley, a former executive with Merrill Lynch & Co. Inc. of New York, as its new chief information officer in October and Fred Tomczyk, former No. 2 executive for TD Bank Financial Group of Toronto, as its new chief operating officer in June, he said.
But Mr. Bradley is likely to remain prominent, because it's just his management style, Mr. Moglia said. "A piece of that is the way Tom runs his organization," Mr. Moglia said.
Brooke Southall can be reached at [email protected].
