E*Trade Financial Corp. said Thursday it is buying Trust Company of America (TCA), a small Denver-based RIA custodian, for $275 million in cash.
TCA serves about 180 RIA firms with $17 billion in assets. The company caters to advisors who run model-based portfolios using the firm’s in-house technology for trading, rebalancing and reporting.
The purchase gets E*Trade, with $365 billion in individual-investor assets, into the RIA custody business.
A significant part of E*Trade’s business is handling stock-option plans for corporate clients, and E*Trade wants to leverage those corporate contacts into new clients for TCA advisors.
“A lot of the [stock plan participant] assets that leave us … go either to bulge bracket firms or to the RIA channel and [TCA] is something that we think we can use to harvest additional share of wallet and continue to keep more of those assets,” E*Trade CEO Karl Roessner told analysts Thursday.
Roessner said E*Trade has only 10 percent to 12 percent of its customers' investable wealth.
Senior management of TCA, which is led by CEO Joshua Pace, will remain in place. “We’ll run it together," Roessner told analysts, according to a transcript provided by Seeking Alpha.
The TCA platform will be put under the E*Trade brand. “We’re putting our marketing and branding behind this to help [TCA] go out and garner additional assets,” Roessner said.
Whether that plan will work remains to be seen, said Robb Baldwin, chief executive at TradePMR, a support platform for RIA firms that competes with TCA.
With TCA, “E*Trade is buying a trust-accounting platform system, which doesn’t go hand-in-hand very well” with a brokerage platform, he said.