Schwab’s $26 billion purchase of TD Ameritrade raises several issues for RIAs, especially for smaller firms with assets under $150-$200 million.
Many of those advisors use TD Ameritrade as their custodian and at this point don’t know whether Schwab will choose to retain TD’s custodial platform or its own.
“I can’t imagine that Schwab will retain both platforms,” said Alois Pirker, research director at Aite Group. “You will lose capabilities that are specific to one or the other platform if that platform is not chosen.”
Chief among those are TD Ameritrade’s Veo Open Access and Veo One open architecture platforms, which provide integration of multiple third-party applications for advisors.
”Schwab doesn’t have integration at the level of Veo One,” said Pirker, noting that it provides integration with more than 100 third-party applications. “If Schwab choses to retain its own custodial platform, “smaller RIAs will have a harder time,” said Pirker. “Who will serve them after consolidation?”
E-Trade and TradePMR appear ready to provide that service.
“This is nothing less than a huge opportunity for us,” said Matthew Wilson, E-Trade’s head of advisor services, in a statement. “The largest product push in RIA history is about to ensue. Our business model is unconflicted — no product manufacturing, and no competition with existing RIAs, which is increasingly important as the competitive ecosystem narrows.”
TradePMR, approximately 400 RIA firms, which equates to about 700 individual advisors, is also reaching out to advisors following the Schwab/TD Ameritrade announcement, noting that the firm doesn’t compete with advisors for retail clients or sell their own proprietary products.
“We only serve quality, growth-minded RIAs who are looking for a reliable, service-oriented custodian,” said Robb Baldwin, founder and CEO in a statement.
The competition — and conflict — of Schwab’s business model has big implications for advisors beyond their custodial choices, said Mark Tibergien, CEO of Advisor Solutions at BNY Mellon Pershing, the third largest custodian for RIAs in terms of assets after Schwab and Fidelity and fourth largest in terms of advisory firm clients.