The man who leads the TD Ameritrade Inc. division serving registered investment advisers is pitching a new way for those firms to get paid as they stare down increasing competition from the online portfolio managers called robo-advisers.
Thomas Nally, president of TD Ameritrade Institutional, said firms should consider replacing the widely used fee based on assets under management with one based on total wealth under advisement.
“Don’t charge on just that one little slice of the pie. Why don’t we charge a lower basis point number on total wealth that you’re advising on so you can have the same number as some of these robo-advisers, but provide much more services?” said Mr. Nally.
According to the proposal, if an adviser provides tax or estate strategies associated with a home or business, for instance, they would assess a total fee that was linked to those assets, in addition to the client’s securities portfolio. By accounting for the wider array of assets covered, the overall fee could be lowered — making it competitive with the low headline figure advertised by online advisory firms, Mr. Nally said.
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Mr. Nally’s remarks to a set of his firm’s top advisers Monday and in an interview with InvestmentNews Wednesday, reinvigorated discussion of alternative fee structures for financial advisers, a topic of years of discussion and consternation.
Some advisers see fees linked to assets under management as devaluing aspects of their service offerings beyond securities and investment manager selection, such as estate and tax planning. Others see the fee as an easy way to be rewarded for investment decisions that benefit clients and to participate, alongside those clients, in the upside of a rising market, such as the one enjoyed by U.S. stocks since 2009.
Figures on the number of advisers using fees for engagement or other alternative fee models are hard to come by. But anecdotally, the use of such models is marginal. That’s despite the advocacy of people like Sheryl Garrett, a fiduciary advocate who recommends hourly fees for advisers in her namesake network.
At the same time, in their move to transition to fee-based business and more planning-centric relationships, wir
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