Are advisors a bit too sanguine about the stock market?
 
Maybe. Client cash levels in accounts managed by RIAs affiliated with TD Ameritrade Institutional have fallen to a post-crash low of 7.4 percent, down about a full point from a year ago and from low double-digit levels seen after 2008.
 
“Advisors have been weekly net buyers” of stocks, said Tom Nally, head of TD’s  custody unit, in an interview Wednesday at the firm’s elite advisor summit in San Diego. 
 
“They’re pretty much all-in with this market,” Nally said. 
            
One reason for less cash is that as stocks advance, cash holdings as a percentage of portfolios decline, Nally said.
 
“And part of it, I think is, where else do you go” with investor dollars when bond yields are so low and perceived risks high?
 
“It’s a little bit concerning [because] people are being forced to take more risk,” Nally said.
 
On Tuesday, Nally and Fred Tomczyk, chief executive of TD Ameritrade Holdings, addressed some of the risks in the fixed-income markets in a general session with advisors.
 
“There is no way the [central banks] of the world are going to unwind [quantitative easing and raise rates] and not create more volatility,” Tomczyk said. 
 
A big problem is lack of liquidity in bond markets, he said. Better transparency in the bond markets would help by boosting trust and adding liquidity.
 
Market stresses might cause some trading issues with fixed-income ETFs, which more advisors are using, Nally said, since the underlying securities ultimately determine the liquidity of an ETF.
 
As they have in the past, Nally and Tomczyk downplayed the threat of so-called "robo-advisors" to the wealth management industry. 
 
But the cut-rate portfolio management offered by the robos has sparked a self-assessment among many advisors about how they charge and how they position themselves with clients, Nally said.
 
“The whole robo thing has got everybody to look [at new business models] and gotten them to try to separate what they do from [competitors], like what Betterment does versus what a comprehensive wealth manager does,” Nally said.
 
And the pricing question is looming larger: “Why are you setting up pricing on the part [of your services] that’s the most commoditized?” he said, referring to portfolio management.
 
Recent research TD sponsored, by FA Insight, shows that while 95 percent of clients are charged AUM fees, 71 percent of advisors provide more than just portfolio management services. And clients value highly the other services advisors offer, Nally said.
 
“We’re seeing lot of advisors consider [pricing] changes,” he said. In fact, 42 percent raised or changed their pricing in the last two years, such as establishing new annual fee minimums, or calculating fees on total assets under advisement, not just the money they manage directly. 
 
Importantly, changing pricing does not affect client retention, Nally said.
 
On the regulatory front, TD Ameritrade is evaluating the Department of Labor’s fiduciary proposal, Nally said.
 
“We don’t want a situation where the self-directed investor couldn’t go in and manage their IRA, or where we couldn’t refer a [branch] client to an advisor” in the firm’s Advisor Direct referral program.
 
The DOL’s wording says a service would not be exempt from the proposed fiduciary requirements, and the referral program is a service, Nally said. “We’re trying to get clarification from the DOL” about how Advisor Direct might be impacted, he said.
 
Separately, the Financial Crimes Enforcement Network (Fincen) is working on a proposal that would impose formal anti-money-laundering surveillance requirements on RIA firms, Nally said.
 
Advisors “would have to monitor and report suspicious activity” and file so-called SARs reports like broker-dealers do now, he said.
 
“We don’t know exactly what it will look like.  Many advisors know their clients well, but this would [require] them to put a system in place [to watch] ongoing activity,” Nally said.
            
He expects Fincen to release the proposal for comment this summer.