In the prior Weekend Interview for August 28-29, 2010, we spoke with Tom Bradley, the head of TD Ameritrade Institutional, on the occasion of his silver anniversary with the custodial firm for RIAs, in which he looked back at the changes of the last 25 years for him, his firm, and advisors.
In the second part of Investment Advisor Editor John Sullivan's interview with Mr. Bradley, Bradley had a lot to say--especially on the keys to success in the future for advisors--an excerpt of which is provided here. Look for the extended interview in the October issue of Investment Advisor.
Q: Yet another report was released recently that detailed the lack of retirement preparedness on the part of baby boomers, and how there's a disconnect because they don't see it as a big issue. Do you think the RIA channel is failing in its education mission?
A: I wouldn't say so. I don't personally see that. Remember, most RIAs are dealing with higher-net-worth individuals. I think if you're looking at individuals in the lower end of affluence or even middle-income folks, I think that's a different conversation and a different space. If you look at financial planning in general, I think bringing that education to the masses can best be done through a do-it-yourself model. That's something that I think TD Ameritrade is well positioned to do. It has more to do with our retail business.
Q: What will be the keys to success in the RIA channel over the next five to 10 years?
A: The key to success for RIAs is to run efficient and effective back offices. That will involve looking at all their systems, their practices, and especially being open to technology. That will give them a strong base so they'll be able to do the best job that they can for their existing clients and it will enable them to spend more time growing their businesses.
Q: When you stay "streamline their back office" are you really talking about outsourcing to you?
A: No, it's not "outsource to us." It's do whatever works for you; that could mean outsourcing to someone else; that could mean adopting some technology that we have here like our portfolio rebalancing system. But I really don't care if an advisor uses our rebalancing system or someone else's. I'm not in the rebalancing business. I'm in that business because I want to work with advisors, to show them there are better ways to do things, and if they don't adopt these technologies they will have a very difficult time expanding their businesses. In other words, we want them to double the size of their revenue without doubling their expenses.
One of the greatest challenges advisors have is hiring people. Well, guess what? If you take advantage of different technologies you might be able to double your business without hiring another person. That's what we're focused on--doing more with less.
Q: What about the marketing side? Are referrals still a marketing plan?
A: They are part of a marketing plan and a very good one. But make sure you are getting the most referrals in terms of volume and quality. Make sure to explore other things that might be effective for you in terms of marketing and sales. For example, we have a database that we make available on VEO for free to all of our advisors. They can go into that database and search for individuals that have a profile that matches their firm and the type of clients they like to work with.
Let's say there's an advisor that's going to meet an executive at a corporation. They can go into the database and identify other executives at that same corporation that might be able to benefit from their services. So they can call their client and say "Hey, I see 10 folks in THEM same building as you. I'd like to set up an appointment with them. Can I use you as a reference?"
Q: Are there other keys to success?
A: Consulting services are big. I think you will see smart custodians building out their consulting services to help advisors run more efficient and more effective businesses.
Q: Do you have some kind of a formal coaching program that gives advisors a comprehensive diagnostic check?
A: We have quite an extensive program. It hinges around this program that's called the Roadmap system, in which we will have a team consult with an advisory firm. Sometimes it's over the phone, sometimes it's face-to-face, probably a little bit of both, to help identify the goals and objectives for an advisory firm, then narrow that down to a handful of high-impact goals and objectives. Then we work with them to set up a roadmap on how to get there.
Q: Is this a "golden age" for independent advisors, especially considering the problems in other channels, most notably the banks and wire houses?
A: This has been a pivotal point for independent investment advisors. I think folks realize the fiduciary model is a better model. I hear more and more folks talk about their investment advisors, whereas they used to talk about their stockbrokers.
In the Weekend Interview prior to Mr. Bradley's two-part discsussion, NASAA's Denise Voigt Crawford talked about state regulation of advisors in the wake of Dodd-Frank with Investment Advisor Washington Bureau Chief Melanie Waddell.