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Technology > Marketing Technology

Why Choice Matters

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I am a Mets fan. No, perhaps such a condition is not as heart-rending as being a Cubs fan, but it constitutes a depressing situation nonetheless. Though I normally eschew sports metaphors, this time of year it’s hard to avoid the practice. All the major U.S. professional sports leagues are competing now—baseball’s postseason, the NBA and NHL just starting their lo-o-o-ng schedules, the NFL and MLS are in full swing, not to mention college football and soccer.

During the interview that formed the basis of this month’s cover story, I mentioned in passing my sad MLB preference to Bernie Clark, who runs Schwab Advisor Services. Turns out he’s a Mets fan, too. I brought it up because I was thinking that Schwab’s RIA custody unit is like the other New York baseball team, which once again is in the playoffs, trying for its 240th World Series crown. Yawn.

Chuck Schwab’s triumph in breaking Wall Street’s monopoly helped make the independent advisor profession possible. That’s why in assessing the current state of that profession it seemed proper to speak to the current advisor universe Bronx Bombers’ skipper, Mr. Clark. Despite Schwab’s success and size, and Clark’s civility, the competitive fires are clearly visible at 211 Main Street in San Francisco.

As Clark spoke on a lovely October afternoon in the city by the bay, it occurred to me that I had, by chance and design, communicated with nearly all the executives of the major RIA custodians in a matter of weeks. My takeaway from those communications? You are more valuable than ever to Schwab, Fidelity, Pershing, TD Ameritrade, RBC Wealth, and the smaller custodians. Because you are more valuable than ever, they are competing for your business like never before, with the most obvious playing field being technology these days.
Mike Durbin, who heads Fidelity’s IWS custody unit for RIAs, called it a “technology arms race.”

I call it choice. Advisor choice is the natural outgrowth of competition. That’s good for you, just as it is good for clients and potential clients to have choice when they’re picking a new advisor or evaluating their current advice-giver. It’s also good—are you listening Mary Schapiro?—to give clients the objective information they need to make those evaluations.

While each of the custodians has its own technology approach, they are alike in their realization that to attract and retain the best advisors, they need to offer nonproprietary technology, just as they offer nonproprietary product. Moreover, as with the “no-commission-trade (NCT?) ETF arms race,” which was also started by a Schwab unit (Investment Management) and offered to retail customers but clearly directed at advisors (as was TD Ameritrade’s Oct. 8 announcement of 101 NCT ETFs on its platform), cutting costs in certain nearly-commoditized areas of interest to advisors and their clients makes it more palatable to charge for choice in other areas.

Good for their businesses, of course, but more important, good for you and good for your clients.


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