Independent RIA firms have never relied more heavily on technology, but for most firms, at least some of the technology is housed externally. In fact, most RIA firms depend heavily on technology supplied by custodial firms for trading-related activities. Some advisors rely on custodial firms for a much wider range of technology needs including automated forms processing, outsourced technology services, rebalancing software, and more. Since advisors' work flows are often intertwined with custodian-supplied technologies, let's take a look at what the custodians have in store for 2008.


Schwab Institutional serves approximately 5,500 advisory firms that custody over $581 billion in client assets, making it the largest custodian to independent advisors. Since it has such a large presence in the independent segment, Schwab's technology decisions are closely scrutinized by other industry participants.

After an active 2007, it looks like 2008 will be a year of refining and improving upon initiatives that were undertaken in 2007. On December 13, 2007, Schwab Performance Technologies (SPT) announced the acquisition of Etelligent Consulting Inc., a provider of outsourcing services to more than 100 independent advisors primarily in the areas of portfolio data management and performance reporting. According to Dan Skiles, vice president of client technology consulting at Schwab Institutional, the acquisition was done made primarily in response to the wishes of clients, who were vocal in urging Schwab to make the purchase.

In 2008, Schwab hopes to leverage Etelligent's existing Web-based platform so that it appeals to a much wider audience. To that end, Skiles says that Schwab will be developing interfaces that enable connectivity with other applications. For example, an advisor looking at a portfolio report through Etelligent might want to rebalance a portfolio, so Schwab plans on offering a link to the Schwab Institutional portfolio rebalancer or trading application.
Currently, Etelligent reports are based on daily custodial downloads. While this is usually sufficient for advisors' needs, there are times when real-time portfolio reports are essential. Skiles says that Schwab will be exploring ways of providing real-time portfolio information through links to the Etelligent platform in 2008.

Skiles believes that Etelligent will be particularly appealing to existing Schwab clients and brokers leaving the wirehouses, but he stresses that Etelligent's platform will be open architecture, and that Etelligent, like the rest of Schwab Portfolio Technologies, welcomes the opportunity to serve advisors that have no custodial relationship with Schwab. Approximately 900 firms currently work with SPT that do not have a custodial relationship with Schwab. And there are reports Schwab may be on the prowl to acquire other specialty tech companies.

In July 2007, Schwab Institutional launched an online account opening tool. This tool offers wizards that walk advisors through the steps necessary to open an account. The wizards are context-sensitive, so they only ask for the information pertinent to the task at hand. Problems are minimized because the wizards check for errors as you work. More importantly, the wizards save time because they can reuse data the advisor has previously supplied. So if the client already has an account with Schwab, that data will be used to automatically populate subsequent forms. The wizards also save time by allowing the advisor to open multiple accounts for a new client while only entering the data once. Wizards are currently available for the nine most popular account registration types, representing approximately 70% of new account openings.

According to Skiles, the tool has been very well received. Currently, about 25% of new accounts are being opened online, and 54% of advisors have tried the tool at least once. Based on the strong response to the account opening tool, Schwab plans to offer a similar tool to initiate asset transfers in 2008. Advisors will be able to go online and, with the help of wizards, initiate transfers from other brokers into Schwab Institutional.
In addition, Schwab will introduce an online status tool. This tool will provide real-time work flow reports so that advisors can see the status of new account openings, transfers, and other custodian-related tasks. "Advisors have been telling us that they would like access to the same information that their service teams have," said Skiles. "This online status tool is designed to provide that access."

Another successful online initiative that Schwab Institutional will be expanding upon in 2008 is the Schwab Institutional Cashiering System. According to Skiles, roughly 50% of qualifying cashiering transactions are now conducted online. Currently, only automated clearing house (ACH) transactions can be initiated online. In 2008, Schwab Institutional will expand the scope of online cashiering to accommodate wire transfers as well.

Schwab Institutional's Portfolio Rebalancer, another product initially launched in 2007, will add new features. Apparently, a number of advisors have been asking Schwab to add some specific capabilities to help them deal with cash deposits to an existing account. One thing advisors asked for was the ability to place cash using an existing model without doing a full rebalance. Other requests included the ability to set tolerance bands at the account level and at the individual security level in addition to the capability to set tolerance bands at the household level. Look for all the above capabilities to be added during the first quarter of 2008.


With approximately 3,500 advisor relationships and over $325 billion in advisor client assets, Fidelity is second only to Schwab as a custodian of independent advisor assets. As reported earlier in the December 2007 issue of Financial Advisor magazine, ( Fidelity has big plans, technologically speaking, for 2008. Before the end of 2008, the company will launch WealthCentral, a new platform that integrates key RIA operational systems such as customer relationship management (CRM), portfolio management and financial planning, along with the capabilities of its current Advisor Channel platform, into one hosted unified workstation that can be accessed through a Web browser. Fidelity has announced that it plans to spend $50 million over three years on technology for advisors, the largest financial commitment it has ever made to this market segment.

Key components of the new WealthCentral platform include Oracle's Siebel CRM On Demand; Advent Back Office Services, which will offer Advent Portfolio Exchange (APX) software to advisors for outsourcing; and NaviPlan Central, the financial planning application from Emerging Information Systems Inc. (EISI).

As part of the WealthCentral initiative, Fidelity will enhance many current features such as the ability to pull data from existing CRM applications in order to populate and submit online new account applications. According to Fidelity Senior Vice President Ed O'Brien, Fidelity plans to significantly enhance advisor alerts in 2008. Advisors will be able to receive alerts online, through an "alerts monitor," or they will be able to receive them through a secure e-mail mechanism. Fidelity also plans to offer "two-way alerts." These are designed to alert advisors to a situation that requires a response and allow them to respond immediately through the existing alert. For example, if an advisor submitted a new IRA account application that lacked date of birth, the alert would notify the advisor, and the advisor could enter the information and submit it right back to Fidelity.

Fidelity will beef up work flow monitoring by providing an estimated time of completion or resolution for all work flows in the system. For online cashiering, Fidelity will offer a review and release system. This is designed for firms that require multiple inputs to generate cash dispersals. So, for example, someone on the investment team might electronically enter a cash distribution for a client, and then a manager could go online and approve the dispersal electronically so that a check can be sent to the client.

Over the last several years, Fidelity has offered a one-day "Technology in Practice" event for advisors at their Boston headquarters annually. O'Brien told me that this event has been a sellout each time it has been offered, so Fidelity is discussing ways to expand the program in 2008 and beyond.

TD Ameritrade

TD Ameritrade currently serves over 4,300 advisors with more than $73 billion in assets. When its merger with FISERV is completed in early 2008, custodied assets should exceed $100 billion. According to Brian Stimpfl, managing director, advisor solutions, advisors can look forward to an improved, redesigned VEO platform in 2008. "When we went through the clearing conversion in 2007, we bolted the TD Institutional VEO front end onto the Ameritrade clearing platform. This allowed us to maintain the look and feel of VEO for our advisors, but it did not allow them to take full advantage of the Ameritrade platform." The VEO redesign will offer seamless integration with the Ameritrade platform. This will result in a faster, more scalable application.

The VEO overhaul will also deliver new functionality. For example, the current VEO platform displays real-time account balances, but positions and transaction histories are updated daily. When the new system is implemented, advisors will be able to view positions, transactions and other data in real time. Navigational tools will be improved based on recommendations made by the operations advisory panel, focus groups and individual advisory firms.

Like the other major custodians, TD Ameritrade is trying to provide more of a "self-service model." "We want to automate as much as we can, so that advisors can log onto the Web site and communicate directly with back office operations," says Stimpfl. TD Ameritrade already offers some Web access to account openings and cashiering, but these services will be expanded in 2008. In addition, plans call for online work flow tracking and enhanced operational alerts by e-mail.

TD Ameritrade continues to improve its rebalancing tools. For larger firms with over $300 million in AUM, iRebal, the industry's premier rebalancing tool, releases enhancements on a quarterly basis. In late 2008 or early 2009, TD plans to tie iRebal's functionality directly into the TD Ameritrade custodial platform to offer enhanced functionality for assets held at TD while maintaining existing import/export capabilities for those with multi-custodial relationships.

For firms of more modest size, TD Ameritrade offers a customized version of ASI's rebalancing solution. This tool received a major upgrade late in 2007, and another round of enhancements is scheduled for early 2008. According to Stimpfl, more than 500 firms already are using the ASI rebalancing tool, which is provided at no charge to TD Ameritrade's advisor clients.

TD Ameritrade is looking for new ways to help further integration. "We are aware that most advisory businesses rely on applications such as CRM, portfolio management and financial planning software. We also know that advisors want their applications to communicate with each other. We are looking for ways to help our clients address these needs and we expect to announce new initiatives in 2008."


With more than 480 advisor relationships and more than $73 billion in advisor assets under management, Pershing Advisor Solutions is becoming a force to be reckoned with as a custodian to independent RIAs. Pershing's 2008 technology plans mirror those of Schwab's on a number of fronts.             According to Trent Witthoeft, vice president, technology, Pershing Advisor Solutions, this should not come as a surprise: "All of the major custodians realize that our value proposition has to expand. We need to provide more open access. We will also need to provide services traditionally housed at the RIA firm on an outsourced basis."

  in the footsteps of TD Ameritrade and Schwab, Pershing will offer a rebalancing solution in 2008. Pershing's plans call for the firm to collaborate with outside expertise to deliver an application that Witthoeft believes will exceed the ASI-built solutions offered by Schwab and TD Ameritrade.

Like Schwab, Pershing has moved many cashiering functions online already, and it plans to expand those capabilities in 2008. Pershing will also be opening up much of the work flow information previously available only to service reps so that advisors can view it as well.

On the trading side, Pershing plans to significantly expand advisors' ability to conduct business internationally. "Many advisors serving high-net-worth clients want the ability to trade on foreign exchanges as opposed to purchasing ADRs. We plan to offer them the tools they need to do so," says Witthoeft.

Pershing will also be adding new fixed income and reporting tools. These will be a hypotheticals so an advisor can project what the impact of a 50 basis point rate increase would be on a portfolio. Advisors will be able to view muni bonds by AMT status, geographic distribution, interest schedule, etc.
Finally, Pershing is currently developing a technology white paper for advisors. This study, expected in the first quarter, should provide them with useful benchmarks and help establish best practices that firms can then implement. In addition, Pershing hopes the study can identify emerging trends that advisors can benefit from.

iNautix, a technology affiliate of Pershing, will be rolling out a paperless office solution in 2008. While it will initially be targeted at Pershing's broker/dealer clients, the platform will also be adaptable to the needs of independent RIAs. The iNautix solution will allow advisors to scan all of their documents locally and then upload them to Pershing servers for storage. In addition to storage for all documents advisors wish to store, the application will provide work flow routing and reporting. For example, if an advisor uploads an application that requires approval, the document can automatically be routed to a supervisor and then to compliance. As each party signs off on the document, an electronic receipt can be sent to the advisor. Those with authority (presumably the advisor and his supervisor) can track the status of each document throughout the work flow process.

According to Marc Butler, managing director, iNautix USA, this paperless office solution will solve a number of problems. Besides substantially reducing paper, it will lessen tension between operations staff and reps, because all work flows will be easily traceable. It will also supply compliance personnel with a clear audit trail. In addition, it will allow firms to benchmark how long it takes to process various tasks, so reasonable expectations can be set firm-wide.

Shareholders Service Group (SSG)

SSG currently serves about 400 advisors with assets of approximately $1.5 billion, but it is no slouch when it comes to technology. The company recently introduced a model portfolio rebalancing tool. According to Peter Mangan, SSG's president and CEO, "This tool allows advisors to run ad hoc draft rebalancing reports at any time to see how one or more accounts are positioned relative to their models."

2007 also marked the introduction of Quicken download capabilities. Apparently, many SSG advisors have clients who want the ability to download their portfolio information into Quicken, so SSG responded and supplied this functionality.

Like the bigger firms, SSG is opening up more of its back office to advisors through an advisor Web site. It is introducing online check processing, online ACH requests and other services that used to require a phone call to the SSG service team.

In 2007, SSG introduced a consolidated relationship with Albridge. This allows SSG to leverage its client base to deliver performance reporting at a discounted price. In 2008, the company will also add CashEdge's account aggregation capabilities through Albridge so that advisors can consolidate held away assets into their reports if they choose to do so.

Emerging Trends

Clearly, there are some commonalities among the custodians with regard to technology initiatives. All of the custodians are moving to a more online, self-service model, much the same way that banks and brokers have done for retail clients. Online processing of applications, transfers and cash transactions will soon be commonplace throughout the industry. The deployment of work flow reporting and enhanced alert systems industrywide will help accelerate the transition.

TD Ameritrade's early success with its rebalancing tool from ASI has spurred others, including Schwab and SSG, to offer similar tools to their advisors. If TD Ameritrade is successful with its acquisition of iRebal and if Schwab has similar success with Etelligent, additional mergers and acquisitions are likely to follow. By the same token, if Fidelity finds success with WealthCentral, it is a good bet that others will try to emulate its model.

Whether driven by competitive pressure, advisor demands or anticipated cost savings, custodians continue to invest heavily in technology, and that is sure to benefit their advisor clients. 2008 is shaping up to be a good year for custodial technology.