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."