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How Much Is That Advisor in the Window?

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Confirming months of speculation, TD Waterhouse Institutional Services has announced that it will soon start charging for the first time for membership in its AdvisorDirect client referral program as well as penalizing advisors who attempt to pull assets out. CEO J. Thomas Bradley Jr. also signaled a shift in its advisor recruiting in a bid to convince successful wirehouse brokers to sign up with Waterhouse as independent RIAs.

In an interview during Waterhouse’s Partnership conference in San Diego, Bradley said that beginning March 1, he would levy a charge of 15 basis points annually on assets advisors bring in via AdvisorDirect. Advisors would also face a minimum charge of $10,000 a year “to make sure advisors in the program are active,” he said. An advisor bringing in about $7 million a year would thus be exempt from the minimum fee.

Bradley also said that he wants to see the average size of new accounts produced by AdvisorDirect climb to $1 million from the current $750,000. Aligning itself with rival Charles Schwab, which charges penalties if assets brought in through its referral program are moved to another custodian, Bradley said TD Waterhouse would start levying a 75-basis-point fee in such cases. The participation charges and penalties will not apply to assets brought into AdvisorDirect before March 1.

TD Waterhouse has 160 advisors and $1 billion in its referral program. Bradley said those participating in AdvisorDirect will need to have either 10 years managing assets as a primary occupation or either a baccalaureate degree or CFA certification and five years of money management experience. Advisors will need have at least $25 million in assets and be registered with the Securities & Exchange Commission to sign up, although Bradley said that TD Waterhouse may have to review that decision in light of SEC plans to raise from $25 million to $40 million the level where it takes over supervising RIAs from the states.

In the past, Bradley has spoken about his desire to win assets away from wirehouse brokers. In the interview, however, he signaled that TD Waterhouse would now try to persuade wirehouse reps themselves to join the RIA community and custody assets at his firm. Bradley has joined with Moss-Adams, the Seattle accounting and consulting firm, to produce sets of print- and Web-based tools for registered reps to help them evaluate the economics of jumping ship, Typically, wirehouse brokers eventually planning to become RIAs spend some time as independent broker/dealer reps before making their final move. However, Bradley urged them to “skip that step. Why go through two changes when you need to make only one?”


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