Schwab and TD Ameritrade

The Challenges of Change for Registered Investment Advisors

Yes, this really happened. The shock may be starting to wear off, but there are still many questions to answer about how Schwab’s acquisition of TD Ameritrade will affect RIA’s, particularly smaller RIA’s who always seem to get marginalized when deals like this happen. Sure, there’s a whole lot of “positive vibing” coming out of both camps right now, but what’s really going on? Will small RIA’s be devoured by our version of Big Retail?

Mom and Pop stores in the 80’s and 90’s called it Walmarting. The big player comes in, snatches up all the paying consumers, and the smaller retailers go out of business. Walmart did it with huge selections and lower prices, not to mention monstrous ad budgets. Today, they’re going toe-to-toe with Amazon, seeking total domination of the online direct-to-consumer market. Sound familiar? It should. Your custodian is doing the same thing right now.

Darth Tamarac and the Parable of Portfolio Center

Let me tell you a story. A long time ago in a galaxy far, far away, there was a small reporting system. His name was Portfolio Center and he was the first of his kind, rivaled by none, a true Jedi warrior and apprentice to the mighty Schwab, master of the Force known as financial management. They lived long together, and prospered (yes, I know I’m mixing sci-fi metaphors), but eventually the Schwab that PC knew died and became one with the Force.

Darth Tamarac, servant of the evil Emperor Envestnet, saw PC and knew he was vulnerable. Sweeping in, he captured Porty’s ship and enslaved the 3000 passengers on board, innocent RIA’s who wanted nothing more than to service their clients with cost effective reporting software. Alas, it was not meant to be. Schwab had moved on. Independence was no longer an option. Powerless, the hapless RIA’s stood by as prices began to rise, slowly drowning them one by one.

Protect Yourself by Capturing and Owning Your Data

Let me put this in the simplest terms possible. If your reporting system is owned and controlled by your custodian, you DO NOT own your data. They do. In the parable of Portfolio Center, Schwab sold Tamarac a system which already had 3000 users on it, along with all their historical performance data. How difficult do you think it is for those advisors to migrate to a new reporting system? I can tell you from experience it’s tough and expensive. Once Portfolio Center gets sunsetted (yes, it’s going to happen) and remaining customers moved to Tamarac, migration will be impossible.

I recently attended a conference for the “independent” division of a well-known broker dealer. Maybe I missed something while I was there, but there was nothing independent about the advisor offerings these folks were making available. Using proprietary software from your custodian because it’s cheaper is not a break-away move. It’s the equivalent of letting the cage door close and lock after you refused to leave when it was open.

By all accounts, it will take 18-36 months to finalize the Schwabatrade deal and implement the estimated $1.6 Billion in technology changes that are planned. In the meantime, protect yourself. Make sure your reporting / portfolio management system is independent and that you can easily access not only today’s performance data, but past history. You should also be able to auto-feed that data to other systems. For help with that, contact Blueleaf. They’re the best in data automation.

Framing the Narrative for Your Clients

The internet is a wonderful place with lots of websites to go to and news articles to read. Unfortunately, there’s not a whole lot of fact-checking going on. If you want your clients to get the right information, you absolutely HAVE TO control the narrative. There are two ways to do that:

  • Your Website Blog
  • Your Client Engagement / Reporting System

If your website was set up properly you should be able to write a blog post and have it auto-deliver via email to all your clients and auto-post on your social media pages. If that’s not happening, you need a website redesign and/or reconfiguration of your communication tools. Contact Flynn Creations to learn more about that.

Your client engagement system should have an easy-to-use client portal and customized reporting that allows you to tell the story in a language your clients will fully understand. Combine that level of communication with a good digital media strategy and your clients will know how to handle the barrage of retail and robo requests they are going to see in the next few years. Trust and believe, those ads will be coming full-force soon.

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