E-Trade 'very slow and deliberate' in picking RIAs for referrals, CEO says

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E-Trade is breaking into wealth management with a different approach from incumbents who purchase large RIAs. The self-directed and employer stock plan giant is seeking to do business with advisory firms instead of absorbing them, CEO Karl Roessner points out.

In line with its competitors, however, E-Trade made a sizable investment towards the pivot last year with its $275-million acquisition of tech-informed custodian Trust Company of America. In a session at SourceMedia’s In|Vest conference, Roessner discussed the New York-based firm’s plans for the custodian and E-Trade’s new RIA referral network.

E-Trade has since rebranded TCA as E-Trade Advisor Services, which had more than $19 billion in assets in its custody across 150,000 accounts at the end of the first quarter. It launched the network in December, unveiling Edelman Financial Engines and Mercer Advisors as the first RIAs.

Clients “either reach a certain wealth level, they're not comfortable [investing] themselves or they just quite honestly don't have the time or attention span to deal with their finances,” Roessner said. “It can be extremely complicated, as we all know.”

“Getting that platform up and running,” he added, “was really about rounding out our solution for traders and investors alike for that next step in their life cycles, so that we maintain that relationship with E-Trade and we can serve all of their needs going forward.”

Some $460 billion in assets and vested accounts across E-Trade’s retail, custodial and stock plan administration platforms will enable the firm to get some help from RIAs on its mission. E-Trade’s technology also allows for “plug and play” with multi-custodial RIAs, Roessner notes.

The Liberty platform developed by TCA prior to the acquisition can fill in gaps for any “underserved RIAs” while also fueling the tech side of asset transfers after referrals, he says.

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Without revealing any raw figures on the number of RIAs that have applied or joined the referral network, Roessner said the firm expects it to be extremely successful. E-Trade is performing due diligence on which RIAs gain access to its nearly 7 million retail and stock-plan accounts.

“Our clients are our greatest asset and our greatest supporters, obviously,” he said. “Having those clients go out to RIAs who we know, we trust, we feel comfortable putting the E-Trade brand and name behind and giving them sort of our lifeblood and handing off our clients to them for advice, it's extremely important to us. We've been very slow and deliberate in the process.”

The background, services and reputation of RIAs have emerged as key criteria, alongside the ability to work well with E-Trade financial consultants in the firm’s branches, according to Roessner.

He describes the firm as an original disruptor of investing, dating to the early days of the internet. However, E-Trade has also always focused on raising investor knowledge and helping people deal with their finances through lower-cost, self-directed electronic tools, Roessner said.

“It's incumbent on all of us to continue to educate and to train individuals to let them know that they have access to all of this,” he said. “It's all available in a few clicks. And if you're not comfortable with that, you can pick up the phone and talk to us.”

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RIAs Referrals Referral marketing Client acquisition ESOPs Clearinghouses/custodians E-Trade Financial Trust Company of America In|Vest In|Vest Conference