More online discounters have joined the full-service party.
In February, CSFBdirect (formerly DLJ Direct) unveiled CSFBdirect Institutional to target independent financial advisers. And in October, Ameritrade introduced its own adviser platform — Ameritrade Institutional Services.
The firms have jumped into a growing field dominated by Schwab Institutional. TD Waterhouse, Fidelity and the latest entrants are playing catch-up. E*Trade is developing a different arrangement to provide advice through planners at Ernst & Young.
Why are discounters courting financial advisers?
“The independent investment adviser model is winning in the marketplace,” says Gerald Graves, COO of Schwab Institutional. “You see more competition as a reflection of that.”
Jay Lanigan, executive vice president of Fidelity Investments Institutional Brokerage Group adds: “Everybody understands the viability of the fee-based model. It's a natural model to provide advice to consumers.”
Assets of independent advisers have been growing at around 30%, says Jeff Roush, director of corporate development for CSFBdirect Institutional. “We feel strongly that this is likely to continue given the demographics of the population looking to delegate advisory needs,” he says. “We see a market of $1 trillion with independent financial advisers.”
A tough market environment might actually help advisers, says Michael Anderson, general manager of Ameritrade Institutional Services. “There will be a number of people who … want to hire somebody. They're going to go to an RIA.”
Anderson predicts that of the 80 million brokerage accounts estimated to exist by 2004, half will be handled by an adviser. “Why limit ourselves to half of this huge market?”
Who's Who With Independent Advisory Platforms
Schwab Institutional — The firm now controls 70% of the market, according to market researcher Cerulli & Associates. “We have 6,000 fee-based individual RIAs and custody $235 billion in assets,” says COO Gerald Graves. “We work with clients of any size.”
Fidelity Investments Institutional Brokerage Group — Jay Lanigan, executive vice president, says the firm has 1,100 adviser relationships and $55 billion in assets. The firm says it can support advisers with asset levels both large and small.
TD Waterhouse Institutional Services — The firm deals with 3,000 advisory firms and custodies $15 billion, according to Tom Bradley, president. “We focus on advisers with $50 million or more.”
Ameritrade Institutional Services — Mike Anderson, general manager, declines to give data on the number of advisers or amount of assets the division services. The adviser business was launched in October and so far has “a lot of small- to medium-sized firms,” he says. “We'd like to land every [adviser] account that's $1 billion. However, many are entrenched with competitors.”
CSFBdirect Institutional — Launched in February, the firm is targeting RIAs with $25 million or more in assets.
E*Trade — E*Trade and Ernst & Young forged a $50 million joint venture to provide financial advice to E*Trade's customers electronically and through Ernst & Young financial advisers. In September, the two companies unveiled eAdvisor, the firm that will develop online advisory tools. There is no indication any service has been launched yet, however. Neither E*Trade nor Ernst & Young responded to requests for information.