If you are starting a new RIA firm and you are in the market for a custodian, your initial search results will likely include the large, established firms that already command a substantial following among independent RIAs: Schwab, Fidelity, TD Ameritrade and Pershing. If you are breaking away from a wirehouse or transitioning from an independent B/D model and you are bringing substantial assets with you, or if you have a credible plan to bring in substantial assets in a relatively short period of time, those big firms will no doubt welcome you with open arms. But if you are new and unproven, or if you plan to grow at a more leisurely pace, you may find the four major custodians less enthusiastic about providing service to you and your new firm.
There are other credible options out there for new entrants into the field or those looking to move from one custodian to another. They include firms such as LPL, Scottrade, Shareholder Service Group and Trust Company of America. One firm that's rarely been included in the conversation in the past, but which we can expect to hear much more from in the future, is Trade PMR.
Although this firm is not as well-known as many of its competitors, it's not new. Trade PMR opened its doors in 1998. Its sole purpose was, and is, to service RIAs. Today, the firm is well-equipped to handle the needs of fee-only independent RIAs, but it is equally suited to the needs of dually registered ones-those that charge both commissions and fees. In recent years, Trade PMR has experienced rapid growth. At the beginning of 2009, the firm serviced approximately 300 advisors. During its recent annual conference, the company announced that it is now servicing 563 advisors, and that it has a significant number of additional prospects in the pipeline.
It is highly likely that the firm's recent growth is at least partially attributable to its enhanced technological prowess. In 2008, Trade PMR launched eCustody, its Web-based advisor platform. Since that time, the firm has continued to improve eCustody to keep it on the leading edge of Web-based custodial technology platforms. Another factor in the firm's growth is no doubt its willingness to work with breakaway brokers and RIA startups without imposing any minimum AUM or minimum fee requirements.
The Trade PMR Approach to Technology
The company has recently added a basic integrated client relationship management (CRM) application, paperless account openings, account aggregation and enhanced portfolio reporting to its eCustody platform, which gives Trade PMR advisors access to a comprehensive, state-of-the-art, Web-based workstation. In addition to these capabilities, the eCustody workstation offers account management, research, model trading, block trading, reports, fee processing, market news and more.
My recent conversations with Trade PMR Chief Technology Officer Dennis R. Suppe and Executive Vice President Frederick A. Van Den Abbeel led me to conclude that the company understands the value of advisor technology as well as the value of an integrated advisor workstation. Despite their strong belief in technology and integration, Trade PMR does not impose its business model on its advisors. Rather, through education and aggressive pricing, the firm seeks to make such a compelling argument for its offering that advisors will find it hard to resist. The approach seems to be working.
In essence, Trade PMR is seeking to provide a two-pronged eCustody model. At the core, it wants to provide a highly evolved back-office solution wedded to a strong front end that includes integrated applications such as basic CRM and portfolio management and reporting. For those who prefer an alternative portfolio management solution or a more robust CRM application, Trade PMR will integrate with third-party providers. Before we stray into the third-party applications, let's take a quick look at the core eCustody capabilities
Core eCustody Capabilities
Trade PMR's new, improved paperless account-opening system is impressive. An application wizard guides the advisors through the account-opening process. The wizard starts by requesting a client name and e-mail address. The advisor then selects the type of account to be opened. After you check the features you want the account to have (margin, transfer, etc.) the wizard tells you what is required to open the account. When you enter the necessary information, the wizard presents multiple options to verify the identity of the account holder.
If the client is in the office, you can print these forms and have him sign them, but this is the least desirable method. The better way is to use the proprietary identity verification the company offers through Equifax. Here, the clients answer a number of "out of wallet" questions from their credit report. This might include questions like "Who held the mortgage on the house you sold three years ago?" or "What is your current monthly car lease payment?" These questions can be answered by the client if he or she is in your office, or the client can be notified by e-mail to log on and perform the verification.
Once the client is verified, the answers are like an official signature. The completed document is stored in an unalterable format on eCustody. Both the client and the advisor can download and store paper copies if they wish to do so. As soon as the identity is verified, eCustody opens the account and supplies the advisor with the new account number.