TD Ameritrade Institutional President Tom Bradley opened the clearing and custodial firm’s annual conference Thursday morning in Orlando, Fla., with what he called a “brain twister.”
Flashing two numbers, 45 and 6, on the screen behind him, Bradley said his IT department randomly assigned a score to the upcoming Super Bowl matchup between the New England Patriots and the New York Giants. Since Bradley hails from New Jersey, the fact that the Giants were assigned 45 came as no surprise. But Bradley said the numbers actually represented something else; the increase in growth experienced by RIAs (45%) versus that of their main competitors, wirehouses (6%), between 2005 and 2011.
“This is something to be excited about,” he said to applause. “You’re on the winning side.”
Bradley went on to describe the “core” of what RIAs do: they put the client first, are product agnostic, fee-based and the employ TD Ameritrade as their custodian.
“That won’t change,” he added. “I certainly hope that last part won’t change.”
Bradley then launched into a wide-ranging speech that touched on market volatility, practice management, technology and regulation, among other topics.
Although RIAs are competitively positioned, they have a lot to think about, Bradley said, a big part of which is market volatility. But volatility presents opportunity, he added, referring to the technology bubble early in the last decade.
“Everything was going well and the economy was steadily growing,” he said. “Right before the bubble burst clients were questioning the value of the advisor. That is no longer the case.”
He then referred to certain products and strategies that help in taking advantage of volatility, singling out the use options. He noted TD Ameritrade’s recent purchase of Thinkorswim, an options trading platform, and told attendees that over the past two years there has been a 155% increase in the use of options by TD reps, usually in the covered call category.
“Use [options] or don’t use [options],” he said. “But you must educate yourself about them and other strategies to combat volatility because the world is becoming more complicated, not less.”
He then moved on to a discussion of the coming generational wealth transfer, noting that there are $25 trillion in investable assets held by investors today. By 2020, he claimed, $45 trillion will be held by investors. Singling out women investors, he said they hold $8 trillion in investable assets today, a figure that will rise to $22 trillion by 2020. Generations X and Y hold $2 trillion today, a number that will increase to $28 trillion by 2020.
“The day is not too far off when you will be sitting in a Starbucks with a Gen X or Gen Y client, going over their portfolio on an iPad,” he predicted. “As for women, it’s a good news/bad news scenario. They feel underserved, which is the bad news. The good news is that they love the fiduciary model.”
He also noted that 70% of those that have lost their spouse fire their advisor within one year.
“This is a great asset gathering opportunity, but if done right, it is also a great asset retention opportunity.”
Bradley then pitched TD’s Roadmap program, a practice management evaluation tool offered by the firm.
Quoting Vince Lombardi, he said, “We’ll never achieve perfection, but through trying, we’ll achieve excellence.”
Those that go through the Roadmap program, he said, see a 17% annual growth rate, while those that do not experience only a 9% annual growth rate.
Moving on to technology, Bradley highlighted industry accolades the company’s Veo Open Access platform has received. The platform combines companies that provide CRM, financial planning, practice management, rebalancing and document management in a supermarket format that lets advisors pick the products and services they feel are most relevant to their businesses.
Touching on the current hot topic, regulation, Bradley said the current mix of regulatory change create uncertainty.
Specifically referring to so-called “harmonization” of the sales and fiduciary business, Bradley said it’s like “forcing a square peg through a round hole,” and thankfully, the Securities and Exchange Commission has informed Congress that it will push back any action on the proposal.
“The sales model is not a bad model if it’s used in the way it was intended,” he opined. “But the sales model started to look an awful lot like the fiduciary model without being subjected the fiduciary rules. That’s where it went bad. The SEC and Congress need to go in again and separate the two. Then advisors will be able to pick a side.”
On the question of who should regulate advisors, Bradley raised the novel idea of having the SEC “farm out” advisor audits to private accounting firms. He also quoted a study by the Boston Consulting Group that found the SEC currently operates with $105 million examination budget and can oversee RIAS if that budget is increased to $255 million. This compares with FINRA at a cost of $580 million and a new SRO at a cost of $640 million.
“FINRA went ballistic when they heard this,” Bradley said. “BSG stood by their numbers and asked FINRA to provide figures of what they though the amount would be. They received no response. Deafening silence on the other end.”
Echoing sentiments he made at last year’s conference, he said “we don’t need more regulation, we need better regulation.”
Read full coverage of TD Ameritrade’s conference at AdvisorOne.