Custodians are unleashing yet another round of products and services.
If it's an interesting time to be an advisor,
imagine the challenge involved in being a broker-dealer trying to
figure out and deliver what advisors want.
The brokerage executives we spoke to are doing their best to deliver the tools advisors need to move their business to the next level, while still remaining efficient. That includes streamlined technology, investment and rebalancing selections, outsourcing, practice management and business development assistance.
"One of the things that we're hearing loud and clear is that advisors are struggling with their own success," says Marjorie Qualey, vice president of Schwab Institutional. "We're seeing this across the board, regardless of the size of the firm. Advisors are realizing that they're doubling in size and need to automate and streamline so they can manage more assets and clients in a cost-effective and time-efficient manner.
Since efficiency is the big push, Schwab has rolled out a new online trading platform that for the first time allows the 5,000 advisors who custody $365 billion in assets at the San Francisco brokerage to buy and sell both mutual funds and equities on the same screens. The product features consolidated order entry, and the ability to make trades for individual clients or multiple accounts. More than 92% of Schwab's 5,000 advisor clients trade both funds and equities for client accounts, Qualey says.
"We're looking at all steps in the trading process, and working on fund rebalancing to help advisors, Even though advisors initiate all of their trades online, we find there's still just a horrible amount of back and forth and paperwork involved before the trade takes place," she adds.
Later this year, Schwab plans to roll out more comprehensive fixed-income online trading capabilities, providing advisors with a deeper inventory of more instruments, Qualey says. A dedicated fixed-income window, the ability to sell U.S. Treasuries, a broad selection of hybrid products and daily listings of more than 15,000 instruments from 300 dealers will be among the offerings.
Schwab also has recently added the ability for advisors to view clients' money movement (also called cashiering) activity online, so they can provide faster and more detailed assistance to clients who want to track their activities. "Now the advisor can go online and eliminate a lot of the back and forth when a client calls to see if a wire transfer went through. Advisors say this saves their firm as much as a couple hours of work a week. A few have told us it makes them look good to have this kind of information at their fingertips when a client calls," Qualey says.
With 2,800 advisors and more than $145 billion in advisor assets, Boston-based Fidelity Investments recently announced three new enhancements to its advisor offerings: A trustee referral program, a newly refurbished, online fixed-income platform, and the rollout of an outsourced portfolio administration program.
The Fidelity Trustee Referral Program gives advisors access to ten trustees, which offer a range of different services. As important, the advisors will be able to retain investment management of the trust assets, manage both brokerage and trust assets on a single platform and use standardized forms and agreements. The retained management will be key for advisors. "This allows advisors to manage the assets and client relationships, which is critical as they focus on multigenerational planning," says Scott Dell'Orfano, executive vice president of Fidelity Registered Investment Advisor Group. With the personal trust market set to grow to $1.2 trillion by 2007, Dell'Orfano said this tool should help advisors capture more of these assets.
Fidelity ramped up its BondTraderPro through a relationship with New York-based BondDesk Trading LLC, an alternative trading system. The changes give advisors access to online order entry, enhanced decision-making tools and access to deeper inventory, including 15,000 offerings from more than 70 dealers.
The portfolio administration service Fidelity is rolling out will give advisors a menu of services to choose from, including performance reporting, client fee calculations and deductions and rebalancing, "Our goal is to have a total fee-to-clients of less than 100 basis points, which will include product expenses," Dell'Orfano says.
LPL Financial Services, headquartered in Boston and San Diego, has just rolled out two new platforms, one for annuities and one to help advisors work with mutual funds and separately managed accounts (SMAs) in one online venue. Both of these programs, as well as the turnkey mutual fund platform LPL introduced in 2003 (Optimum Market Portfolios), offer advisors use of the firm's proprietary rebalancing and overlay management tools. "Optimum grew to $1.7 billion in assets in two years and reinforced for us the appetite advisors have for more of these rebalanced turnkey solutions," says Jonathon Eaton, executive vice president of product marketing at LPL.
The annuities version of LPL's platform is called Optimum Annuities Portfolios, the result of a partnership with Prudential Skandia, "What our research did was take the best of Prudential's 90 subaccounts and put them together in various portfolios, adding central rebalancing by asset allocation model," says Eaton.
To make it easier to work with higher-net-worth clients, LPL's new Personal Wealth Portfolios allows advisors to combine both mutual funds and SMAs. "What Personal Wealth Portfolios does is morph the two platforms into one and enables you to charge one fee for one account and do aggregated performance reporting on both mutual fund and money managers," Eaton says. "It also enables advisors to outsource rebalancing and manager selection, so they have more time to sell and interface with new clients and get new business."
Building these programs was one thing. To get advisors to use them, LPL launched a 12-city "Fast Forward" training program. The three-day event, held in cities ranging from Baltimore, Chicago and Dallas, to New York, San Francisco and Seattle, drew more than 2,500 advisors in 2005. "We focused on helping the advisor decipher where clients are in their investment lifecycle," says Eaton.
"We also did 50 business development events, designed to help interested advisors learn how to transition their business from commissions to fees. We identified LPL's top fee-based advisors and asked them, 'What do you do that works so well?' We're ramping up in 2006 to focus on wealth management," Eaton says.
Price sensitivity is obviously on advisors' minds, and in response, St. Petersburg, Fla.-based Raymond James Financial is repricing a number of its advisor products. For firms with assets greater than $50 million, RJF has reduced trading costs to $14.95 plus 2 cents a share up to 1,000 shares. If the client has a $1 million or larger relationship with RJR, the trade cost drops to $12.95, plus 2 cents a share, but the client must agree to receive electronic statements and confirms.
"We also repriced our asset management services for both of our turnkey asset allocation programs (ETF and mutual funds) and our separately managed account platform," says Mike DiGirolamo, president of Raymond James Investment Advisor Division. For advisors using no-load NTF (no-transaction fee) mutual fund programs, the price can go as low as nine basis points. How? "Instead of the firm keeping the trails on the funds, we'll credit them back to the client," DiGirolamo says.
For accounts of $50,000 or more, RJF will also do allocation and rebalancing based on the advisor-client asset allocation agreement and policies. In addition, the company will do performance reporting and automatically bill the client. Advisors can link these accounts with any other client accounts they have with RJF for consolidated reporting, he adds.
A new entrant to the RIA market just four years ago, RJF's Investment Advisor Division has 48 advisory firm clients and $2.3 billion in advisor assets. DiGirolamo says that he expects the division to grow by 50% next year.
TD Waterhouse, which has announced its intention of being acquired by Ameritrade (the new firm is set to be called TD Ameritrade), is advancing an aggressive agenda of technology solutions for advisors, including an integrated workstation, advanced order technology, portfolio rebalancing and affinity service programs. The acquisition requires regulatory approval and should take at least six months. The companies announced in early October that New York City-based TD Waterhouse President Tom Bradley, a vocal proponent of advisors and the benefits they can provide to investors, will lead the new entity.
"Our goal after the acquisition is to release a combined offering that is better than what we have today," says Brian Stimpfl, senior vice president of business solutions at TD Waterhouse. "Our ultimate goal is to be seamless and transparent." While discussions of synergies have obviously begun, "right now, we're still operating as competitors. When we get the green light, things will get intense pretty quickly," Stimpfl says.
Advisors using Morningstar's workstation application will be able to integrate data from their Waterhouse clients directly into their workstation by year-end. "At that point, I think we'll be the only folks doing this," Stimpfl adds.
"We're also focusing on advanced trading tools to make them more efficient for advisors," he says. "We've recently signed a contract with Sungard Transaction Network that will allow advisors to submit trades and allocations via a fixed protocol," he says. This will allow advisors to send trades directly through to custodians.
Stimpfl says the company should roll out its portfolio rebalancing tool within their platform by the end of the year. "The key with rebalancing, as with all of our innovations, is increasing efficiencies for advisors."