Due Diligence

TD Ameritrade's Bradley Says Universal Fiduciary Standard Won't Stem Flow of Breakaways

In an interview with the Registered Rep. crew Thursday morning, TD Ameritrade Institutional President Tom Bradley said a fiduciary standard for all would "technically" create more competition for the firm. But he also said that TD still has some important advantages over the Wall Street wirehouses; even if everyone "goes fiduciary," the steady stream of breakaway brokers to TD Ameritrade won't dry up, he said. Earlier this week, TD announced it had attracted a record 212 breakaway brokers so far in fiscal 2010, which is higher than the total number that joined the firm in 2009. (Most of these advisors have under $100 million in client assets, he said.)

So what are some of TD Ameritrade's advantages? It offers 14,000 mutual funds on its platform, and there is absolutely zero pressure to sell a particular product, said Bradley. The product-driven sales culture of the wirehouse firms may not change with a fiduciary standard, he said, because brokers would still be able to do commission business under current carveouts in Wall Street reform signed into law last week.

The thing is, a lot of RIAs these days do both fee and commission business. In fact, the dually registered channel (fee and commission) is the fastest growing in the industry in terms of number of advisors. Several independent b/ds, as well as Merrill Lynch, have rolled out RIA platforms that allow advisors to set up their own independent RIAs while continuing to do commission business under the b/d. And many of the RIA custodians have relationships with b/ds that allow dually licensed advisors to do commission business. But Bradley predicts that the surge in dually registered advisors will be temporary, that it reflects the high volume of breakaway brokers going the independent RIA route, and holding onto their series 7 licenses as an intermediate step.

TD Ameritrade's other advantage? TD Bank, which is triple A rated (do ratings still mean aything?) and had the prescience to get out of the CDO business long before most of the wirehouse firms, back in 2005, Bradley said.

As for the threat of Merrill Edge, Bank of America Merrill Lynch's recent incursion into online brokerage, Bradley said one should never underestimate the competition, but that TD Ameritrade is way ahead of Merrill where technology is concerned. For example, it has intuitive trading screens and options trading from thinkorswim, which it acquired early this year and was recently ranked No. 1 in options trading technology by Barron's.

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