Practice management services seen as best way custodians can win RIAs

Broker-dealers that hold client assets for registered investment advisers are pointing their marketing and technology arrows at practice management.

Helping advisers manage costs, segment clients by profitability and maintain operational rigor may not quickly offset the slowdown in new RIA assets that custodians experienced in late 2008 and through much of 2009, but it’s apparently good business.

“Providing custody, clearing and even the great service and array of asset management products that advisers expect is largely commoditized,” said Brian Stimpfl, managing director of advisor advocacy and industry affairs at TD Ameritrade Holding Corp.’s institutional division, which holds about $100 billion of assets for its 4,000-plus RIA firm clients. “Practice management is the place you can position yourself as a partner with the adviser.”

Last year, TD Ameritrade introduced its Roadmap consulting program, a service it says helped 60% of the 700 advisers who used it to develop new accounts or increase assets within the first six months. This year, the brokerage firm and Actifi, an outside consultant that helped develop the program, will add new components focused on areas such as best practices in human resources.

The Charles Schwab Corp., by far the largest RIA custodian with $560 billion of assets for more than 6,000 advisory firms, said hard times forced advisers to look inward.

“When you wipe out a big percentage of their revenue because of the markets, when clients aren’t coming to them in the same numbers that they were coming before, it exposes a lot of the inefficiencies of their business,” James McCool, executive vice president of the firm’s institutional services division, told securities analysts Nov. 5. “They are reaching out to us and saying, “Help me become more efficient. How can we become sharper in terms of attracting new business?’”

Schwab is investing heavily to expand its business consulting services, he said. That’s because advisers are putting more value on what used to be a peripheral offering, and they’re looking to Schwab for the managerial know-how that many lack, Mr. McCool added.

It’s also a way, of course, for relationship managers to keep in close touch with advisers, who increasingly are splitting their business among multiple custodians.

“They’re competing more and more on their ability to impact my back office, to make my business better,” said Sean Cook, president of DCA Global Wealth Management, an RIA with about $190 million in assets. “It’s a fine dance we do with them, because we all want services and technology capabilities, but we’re all very wary about being stuck with one firm.”

DCA keeps client assets in custody with Schwab, but Mr. Cook said Fidelity Investments has pitched him a wide range of services.

This year, Fidelity will work to help RIAs “become better business managers in tough economic times and improve operational efficiency,” said Stephen Austin, a company spokesman.

Practice management consulting advice has long been the calling card of Mark Tibergien, head of the Pershing Advisor Solutions LLC custody unit of Pershing LLC. His unit has 524 RIA clients with $74 billion of assets.

Mr. Tibergien’s message about the need for advisers to run their businesses professionally carries even greater urgency in the wake of the financial crisis, say competitors and some advisers.So does his realization that business consulting can be a tie that binds.

“Roadmap is probably much more important to our people than to the adviser,” said Mr. Stimpfl. TD Ameritrade expects its entire sales force to be trained on implementing Roadmap and its “killer apps” within three years. Currently, about one-third have such training.

E-mail Jed Horowitz at [email protected].