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TD's Tom Nally: “Trust in the RIA Business Is Fragile”

Public trust in financial services is low—lower, in fact, than chemical companies, said Tom Nally, president of TD Ameritrade Institutional. The millennial generation, which encompasses 70 million individuals, is the least trusting of financial services. Yet this generation is set to control trillions in assets.

“None of that matters if they don’t trust you,” Nally said, during TD Ameritrade Institutional’s annual LINC conference in Orlando, Fla. on Thursday.

One trust issue the industry needs to address is the examination of registered investment advisors, Nally said. RIAs are examined by the Securities and Exchange Commission once every 10 years. “That’s not good for investor confidence,” Nally said.

The competition—meaning the brokerage side of the business—uses that against RIAs. “They position you as the Wild West, and we need to take that off the table,” Nally said.

RIAs also need to do a better job explaining their value; currently there’s a misdirected focus on price, Nally said. Most RIAs are offering 10 different services on top of investment management, yet 95 percent of them charge a fee based on a percentage of assets under management. This places all the value on something with the potential to become highly commoditized.

Investment management is not the only area where advisors can add value. Good financial planning decisions can increase retirement income by 29 percent, according to Morningstar. And according to TD Ameritrade research, investors say a strong personal connection with their advisor is more important to them than price or beating the markets.

“We need to shift the conversation from a focus on the price of advice to talking about the value that RIAs deliver to clients through good planning,” Nally said. 

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