From the October 2002 issue of Investment Advisor • Subscribe!

October 1, 2002

Planners Who Switched, and Why

Some advisors are shifting all of their clients' assets to another custodian, while others are spreading new and existing dollars among a variety of firms. Each of these methods is designed to achieve the same goal: to avoid being handcuffed to one firm's service offerings.

Tom Gryzmala, president of Alexandria Financial Associates in Alexandria, Virginia, is transferring all his 165 clients and their $80 million in assets from Schwab to Waterhouse. He's become disenchanted with Schwab's new service model because it targets clients that he's trying to serve. But it's not just disappointment that's prompting the switch; Gryzmala likes Waterhouse's service attitude, technology, and lower prices. He's particularly impressed with Waterhouse's VEO platform, which provides trading, "superior" research offerings from Goldman Sachs, market overviews, and a range of mutual fund offerings. Waterhouse's prices are cheaper too. "Stock trades cost $15 [at Waterhouse] as opposed to $29.95 at Schwab," he says. Gryzmala is also anticipating the rollout of Waterhouse's 401(k) relationship with Financial Engines.

What about the headache of shifting custodians? Gryzmala says that's not an issue because Waterhouse handles all the details. Tom Bradley, president of TD Waterhouse Institutional, says the firm has employees whose only job is to "live and breathe moving assets from another broker into Waterhouse."

Roy Diliberto, president of RTD Financial Advisors in Philadelphia, is also shifting clients' assets from Schwab to Waterhouse because he prefers Waterhouse's arms-length relationship with vendors like Advent and Capital Trust Company of Delaware. Diliberto "keeps looking" at SEI Investments as well, specifically because it specializes in reporting and back-office work, tasks his firm now has to perform in-house. But he expects to handle some of those reporting chores once Waterhouse completes adding Advent's service offerings to its VEO platform.

Moving some assets to National Advisors Trust Company (NATCO) was one of the best ways for John Ueleke, president of Legacy Wealth Management in Memphis, Tennessee, to protect his firm's independence. "It's important to have more than one custodian because we're never sure who our friends are," he says. Ueleke also houses client assets at Schwab, but found it increasingly hard to get trust services handled for clients with $1 million or less through U.S. Trust.

NATCO offers cheaper prices as well. At NATCO, "a trust account is about 25 basis points for them to serve as trustee," Ueleke says, "and that's under the assumption that we are then serving as the investment advisor to the account and doing the investing, so [NATCO is] not accepting that responsibility for that price level." The 25 bps charge is about half of what U.S. Trust would charge for the same service, he says.

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