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Skip Schweiss, President of TD Ameritrade Trust Co.: The Weekend Interview

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Sure, RIAs are well-versed in retirement income planning for senior executives and other high-net-worth individuals, but what about at the plan level? It’s a client need, and chunk of opportunity, that’s passing too many RIAs by. TD Ameritrade Trust Co. President Skip Schweiss has specific insight on what it will take to get more RIAs over their fiduciary fears and into the corporate retirement plan arena. He recently shared his ideas with Boomer Market Advisor editor John Sullivan.

BMA: What steps are the RIA channel taking to get more involved in the retirement income market?

SS: Traditionally RIAs have, as a body, not been heavily involved in the retirement plan space. I’m excluding IRAs here because most independent advisors are very involved in the IRA space. I really mean the corporate retirement plan market. I’ve been speaking with advisors about the corporate retirement plan market for quite a few years now and it’s amazing how quickly they’re eyes glaze over. They almost get this look of fear when I raise that topic.

BMA: When you mention corporate retirement plans, you mean 401(k)s, SIMPLE IRAs and SEP IRAs?

SS: All of the above. But I think most advisors are more comfortable with the SIMPLE/SEP kind of things. Most fee-based advisors are comfortable working with business executives, but far less so with the corporate retirement plan as a whole. There are a number of reasons for this. First, it’s outside their area of expertise and their comfort zone. It’s one of those things you don’t know what you don’t know until you really dive into it. Second, they hear about this fiduciary concept. It always baffled me a bit because fee-based advisors are already fiduciaries to their clients by virtue of being registered investment advisors under the Advisor Act of 1940. What seems to scare them more is being a fiduciary to a retirement plan and operating under ERISA.

BMA: Is it because of a perception that it’s easier to be a fiduciary in the accumulation stage than in the distribution stage?

SS: I think so. The decumulation stage is harder and many advisors have a lot less experience in that area. But as this demographics tide rolls on, advisors are going have bring themselves up to speed. You do have complex issues and conflict of interest possibilities. One is when the advisor charges basis points on assets. Maybe the right thing for the client is to take the money out of the advisor’s management and put it into an annuity. Or maybe the right answer is to pay off a mortgage. Well, that takes the money out of the advisor’s management and thus out of their fee stream. So you’re right in observing that the decumulation stage gets more complicated in terms of fiduciary responsibilities.

BMA: But if you believe the client focus is heading towards the decumulation stage, and advisors are afraid or ignore it for some other reason, what does it mean for their business?

SS: It’s all those things. We talk about with Social Security and Medicare, but no matter what political point you come from, those systems are not actuarially sound. It’s just a fact, it’s not politics. There’s this huge baby boom that’s moving through, of which the leading edge is now age 64. That retirement bulge is really going to accelerate in coming years. Advisors who turn their back on it are going to have problems.

BMA: What about service consolidation? Is one-stop shopping the model?

SS: The client is no longer going to want just an accumulation expert, or even just a decumulation expert. They’re going to want both and they’ll have to incorporate both into the RIA. And there is also asset protection; making assets last potentially for 30 years. And I think ultimately the RIA needs to look at working with their clients’ heirs. If the heirs are in their 30s and just starting to accumulate, they’ve got to retain those accumulations skills as well. Generational planning will be just as important for the RIA’s success.

BMA: How is TD Ameritrade helping advisors and RIAs in these areas?

SS: We’re really expanding our services in the practice management arena. We’re aligning with a firm called ActiFi out of Minnesota. It’s a practice management consulting firm and we’re combining the road map tool it offers with our own practice management consultants. We’re going into firms and we’re walking them through the use of this tool, finding what their objectives are for their practice and then identifying the steps to move them toward that goal.

BMA: It’s a sort of diagnostic check?

SS: Yes. But it starts with the advisors. “What are the priorities for your business?” and then we use this diagnostic tool to discover what’s standing in the way and the steps needed to have it solved. It’s not just asking a bunch of questions and then creating a report that collects dust. We stay with it. We’ve found that advisors who go through this entire planning process and stay with it through execution are realizing substantial results.