TD Ameritrade Buys 401(k) Trust

Jersey City, N.J.-based TD Ameritrade last week bought a small Baltimore-based trust company with close to $1 billion in 401(k) assets, according to Investment News.   Most of Gail Weiss & Assoc.’s retirement dollars come from registered investment advisors (RIAs).

The acquisition marks a recent increase on the part of custodians in tapping into the growing RIA channel to grow their retirement businesses.

“There’s a huge opportunity out there that we think is going to get much larger very quickly,” said J. Thomas Bradley, Jr., president of TD Ameritrade Institutional. The main cause: the automatic enrollment allowed through the Pension Protection Act of 2006.

RIAs will like TD Ameritrade’s custody service, the company contends, because unlike competitors like Charles Schwab or Fidelity, the discount brokerage does not have its own funds or recordkeeping services to promote.

Meanwhile, companies like Fidelity do not consider their multiple services a conflict of interest, but a competitive advantage. “We’re tying to set a new standard by integrating the trust services with our brokerage services,” said Fidelity Spokesman Stephen Austin. Fidelity has collaborated with SunGuard Data Systems. 

Schwab also anticipates an up-tick in 401(k) money coming through RIAs and third-party administrators (TPAs). “TPAs are growing at 25% and we see that trend accelerating,” said Mark Coffrini, senior vice president of Schwab corporate and retirement services. 

Others, like Skip Schweiss, executive vice president of Firstserv Investment Support Services, think banking on RIAs might be a bit premature.  “There’s a wide open door, but we have not seen that migration yet. [RIAs] don’t know, don’t care, or they don’t want [anything] to do with it,” he said. 

That’s because,  often, the businesses RIAs  attract tend to be smaller and have fewer employees and an  average of $2 million in plan  assets.  In addition, some are scared off by the responsibility of being fiduciaries for retirement plans.

Bradley contends that although the plans may be smaller than those of, say the Fortune 500, the prospects in this $2.5 trillion marketplace are great. 

“Our only enemy here will be inertia,” he said.  

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.