TD Ameritrade buys Scottrade. TD Ameritrade introduces iRebal,portfolio rebalancing software.
Schwab buys asset managerThomas Partners.
TD Ameritrade Institutional launchesthe Veo One platform in partnershipwith 85 tech vendors.
Schwab Advisor Services starts a pilotprogram for its Digital Account Open tool.
2018 Schwab Intelligent Portfolios forinvestors and Institutional IntelligentPortfolios for RIAs are introduced.
E-Trade acquires RIA custodial servicesfirm Trust Company of America.
Schwab Intelligent Advisory tobe renamed Schwab IntelligentPortfolios Premium and cost $30 amonth (vs. 0.28% of assets eachyear); it includes support from a CFPwith a $25,000 investment minimumand $300 initial planning fee.
Mar. 28, 2019
TD Ameritrade names TimHockey as CEO and president.
Schwab launches its ETF OneSourceplatform with commission-freetrades of ETFs from most majorproviders; Robinhood launches withaim to expand free trading.
TD Ameritrade Institutional rolls out
its thinkpipes trading platform and Veo
Open Access, its open-architecture
platform for RIAs that works with
technology from 119 vendors.
that really dramatically changed the landscape, and in the
middle of at all that and you thought, ‘maybe E-Trade’s going
to come out of nowhere and become an option.’ But technol-
ogy-wise, they just never got there. And then they got bought
by Morgan Stanley.”
In terms of RIAs’ view of their biggest options, it looks
like they now have “really got Schwab and Fidelity, and a
lot of places would like to have a third bucket,” Mallouk
said. “So [Schwab’s deal with TD Ameritrade] does open the
door for another [large] competitor, whether it’s Pershing or
Earlier this year, Pershing lowered its minimum asset level
for RIAs to $100 million from $250 million and gave its RIA
clients two more options for how they pay for custodial servic-
es — a zero-commission model tied to a low-yield cash sweep
program and a plan that charges at least $25 a month with fees
tiered to assets.
With most RIAs managing less than $200 million, those
competing with Schwab and Fidelity “need to move down-
stream” to capture that part of the market, Mallouk said. “And
it just naturally seems like if there’s only two major players,
you’ll probably see them raise the minimums, so they can
encourage consolidation and have less firms to keep track of.”
Explaining the motivation of such a move by the biggest
players, he asked: “[If] you’ve got thousands and thousands
of [RIA] firms, why not raise your minimum and have to deal
with 20% less firms with [about] the same assets?”
The advantage with this strategy, Mallouk added, is that “it’s
just less everything — less cost, less risk.” Also, he noted, the
more traditional industry players are not likely to lower their
minimums to $50 million or $25 million.
While there could be some interesting developments among
‘The Squeeze’ Begins
those firms willing to work with RIAs with under $100 million
of assets, “the real door opener is going to be the self-custody
places,” the executive added.
At the RIA level, “We’re in the beginning stages of the squeeze,and … people don’t realize they’re about to be squeezed,”according to Mallouk.
“You saw this with mutual fund commissions, with mutual funds fees and then with ETFs. [It’s happened] with custodial trading fees, and now you’re seeing it with advisors,”he explained.
What’s playing out “is this demand for technology, strongpersonal relationships, extra services and value, and more control [that is] moving to fewer custodians,” Mallouk said.
“All of those things put together are going to resolvethe great squeeze in the RIA space,” he noted. “But … 18months ago, [Schwab and Fidelity were] competing with TDAmeritrade … and E-Trade, and now essentially all of that’sgone.” (Scottrade was gobbled up by TD Ameritrade in 2017).
As a result, “a lot of the power has shifted back towards thecustodians,” Mallouk pointed out. In addition, compliance andtechnology requirements are increasing, as is the demand forfinancial planning.
“You’ve got to deliver for your clients without raising theirfee,” he explained. “Soon you’re going to see the custodiansimpose their requirements, whether it’s basis point fees fortheir own cybersecurity or [other issues] … that are going tofurther drive the expense for these smaller [RIA] firms andencourage them to consolidate.
“I don’t see a future where custodians tolerate workingwith” smaller RIAs, Mallouk said. “It’s just that interest rates