The departure of Tom Bradley from TD Ameritrade Institutional in early February might have worried some of the 4,000 advisers who now hold assets in custody at the firm.
Indeed, Mr. Bradley, who was named president of retail distribution at TD Ameritrade, was a staunch advocate for the registered investment advisory business model and for the interests of RIAs in the still uncertain regulatory environment after the financial crisis.
Those advisers can take heart in the fact that his successor, Tom Nally, formerly head of sales at TD Ameritrade Institutional, was cut from the same cloth as Mr. Bradley. In fact, Mr. Nally has been involved in the firm's institutional business since joining TD Ameritrade Institutional in 1994. And now, as leader of the division, he plans to pick up where his former boss left off.
“If it's not broken, don't try to fix it,” said Mr. Nally, who served as Mr. Bradley's second in command for 12 years. “We'll continue to focus on what we've been doing.”
With about $180 billion in assets, TD Ameritrade remains a distant third in the adviser custody business, behind industry leader Schwab Advisor Services, which has $736 billion in assets, and Fidelity Institutional Wealth Services, $502 billion.
Q. How will your leadership of TD Ameritrade's custodial business differ from that of your predecessor?
A. I was Tom's right-hand man for a long time. I worked with him for almost my entire career, and he has been a great mentor to me. He and I shaped this business together. The same level of passion and commitment to the RIA industry that advisers came to expect from Tom, they'll get from me.
Q. What initiatives do you have planned?
A. I'm not going to make any dramatic shifts in strategy. We're growing rapidly as an organization and we'll continue to focus on what we've been doing. That means promoting the RIA model and the fiduciary standard that RIAs adhere to and helping our advisers to deliver white-glove service to their clients. It's been working, and I don't see a need to make dramatic changes.
Q. How is TD Ameritrade different from its competitors?
A. We have a conflict-free business model. We have no proprietary products to sell to anyone. We have three businesses: one that serves self-directed active traders, one for self-directed long-term investors and the RIA business. If someone walks into one of our branches looking for wealth management services, we refer them to an RIA. We have no conflicts of interest. We walk the walk.
Q. What are the biggest challenges facing the RIA industry?
A. The biggest challenge is the regulatory environment. We have to wait and see how that shakes out and how we'll have to adjust to it. A second big challenge is coping with the major demographic shift going on in this country. Generation Y is set to see its wealth grow from about $2 trillion to $28 trillion over the next decade or so, and the industry has to prepare for that. The average age of advisers is 55 years old, and they need to understand that young people have different value systems and different ways of communicating. The faster they understand that, the less of an obstacle it will be for their businesses.
Q. What is your position on the Securities and Exchange Commission's plans to issue a uniform fiduciary standard for brokers and RIAs?
A. According to the Dodd-Frank Act, a new standard can't be any less stringent than the [Investment Company Act of 1940]. It's going to be a very difficult challenge to apply a fiduciary standard to a salesperson whose ultimate loyalty lies with their employer. The worst-case scenario is that we get a watered-down standard that confuses investors more than ever. We don't want to kill the brokerage industry, but it has to be clear to consumers how they're interacting with their financial service providers — whether as a salesperson or in an investment adviser capacity as an RIA. Maybe we just need to establish a clearer delineation between the two models.
Q. Who should oversee RIAs?
A. We're all about better protection for investors, but this has to be done in an efficient and cost-effective manner. We're concerned about layering regulatory infrastructure on small businesses as we're trying to get the economy recovering. Two studies that we have in part sponsored concluded that the SEC — which is already on the path of standardizing and improving its adviser examinations, would be the least-expensive option. The Financial Regulatory Authority [Inc.] would be more expensive, and the most expensive option would be a new self-regulatory organization. We don't think anything is going to happen on this front until next year.
Q. Where do you see the RIA industry in five years?
A. We see the wallet share of RIAs continuing to grow in the industry, and we see consumers demanding more conflict-free relationships with their financial service providers. The more prudent providers see the puck moving in this direction. I see technology vendors getting more engaged with their customers and developing more-innovative products to help advisers better serve clients. The momentum will continue, and as the industry matures and the demands of next-generation investors come more into play, there will be a lot more electronic communications. The future is unbelievably bright for this industry.
At the end of the day, when you do the right thing for clients, good things happen.
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