From the August 2009 issue of Investment Advisor • Subscribe!

August 1, 2009

Now and Then

When it comes to how advisory firms are dealing with the continuing economic uncertainty, there's a clear divide between larger firms and smaller firms. Tom Bradley, president of TD Ameritrade Institutional, said in an interview on July 8 that a recent TD Ameritrade advisor survey found that while many smaller firms were cutting back on their marketing and technology budgets, larger advisors--those with more than $100 million in AUM--were doing just the opposite, spending money to build up their infrastructures and gathering more clients and assets, particularly through referrals.

The telephone survey of 503 RIAs, not all of whom custody with TD, took place in mid-May and was conducted by Maritz Inc. Not surprisingly as the Obama Administration, Congress, and regulators are floating ideas for major reform of financial services regulation, the survey found that regulatory changes and the macro-economic environment were respondents' top concerns (34% and 31%), along with profitability (27%). Also not surprising for RIAs, two-thirds of respondents said they'd like to see a fiduciary standard applied to brokers, but there was wide disagreement on what that standard should be: 36% said the current RIA standard should be applied; 29% said SIFMA's proposed Principles of Fair Dealing should be applied, and 25% said the current suitability standard for brokers should be maintained.

As for the wirehouse brokers that are desired by custodians, independent B/Ds, and RIAs looking to grow their practices, Bradley said that the majority of those brokers "are still kicking the tires." However, he said that TD was engaged in talks with wirehouse brokers representing some $10 billion in assets, and that TD expected to close 16 such deals in the quarter. He identified between 30 or 40 RIAs affiliated with TD--mostly larger firms with more than $300 million in AUM--who were interested in acquiring those assets.

On the fiduciary issue, Bradley said that while "you can't be a salesperson and a fiduciary," there's room for both a suitability standard and a fiduciary standard, but "with a hard line between the two." After all, he said, a client who was a "prudent person" and was asked to choose between the two "would probably choose the fiduciary."

Finally, Bradley said TD Ameritrade was writing a letter to the Securities and Exchange Commission opposing the SEC's May 14 proposal that would require RIAs to submit to surprise audits by independent accountants.--James J. Green

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