WASHINGTON — It was a LinkedIn message that led to a firm with $445 million in assets under management ditching giant custodian TD Ameritrade for Trust Company of America.

SEM Wealth Management, which has changed its name under TCA from Strategic Equity Management, is currently transferring the assets of its largest 95 advisors, the company's part owner and COO Jeff Hybiak said last week. The Tucson, Arizona-based turnkey asset and third-party money manager says its AUM has jumped 16% from $384 million at the end of last year.

The company manages $325 million in direct assets making the custodial switch and an additional $120 million on other firms’ platforms, according to Hybiak. The transition to the new custodian will take about two years due to logistics and the company’s emphasis on prioritizing its resources to attract new assets, he says.

SEM Wealth Management's assets

Its gains in AUM this year come from a variety of sources: five advisors who brought all managed funds in from other platforms, a new advisor joining the fold and other accounts added to SEM’s platform, according to Hybiak. SEM serves the advisors through risk-reducing asset allocation programs aimed at capital preservation and diversification.

The strategies usually carry the countercyclical effect of attracting more assets during bear markets and fewer ones during bull markets. SEM's expansion by assets and geography, especially in Virginia, therefore comes as a surprise, Hybiak says.

“We’re starting to become a national company,” Hybiak said in a presentation at Trust Company of America's Focus on the Future conference. “It’s something we never expected, especially inside a bull market.”

A spokesman for TD Ameritrade declined to comment on the departure, citing a company policy against discussing “confidential business matters involving advisors on our platform.”

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SWITCH IN PROGRESS
SEM began exploring a possible move in the summer of 2016, as executives were struggling to keep bull market investors’ assets on its platform, according to Hybiak. They met with the smaller custodian after Hybiak engaged in an impromptu exchange about its troubles on LinkedIn with an acquaintance from the firm’s sales team.

Since signing up with Trust Company of America in January, the firm has transferred a third of its assets over and expects to migrate half its assets by the end of the year, Hybiak says.

The transition is expected to take as long as two years, thanks to the "strong 'status quo' bias" among advisors and clients, who tend to be reluctant to switch custodians, along with other logistical challenges, according to Hybiak.

Jeff Hybiak and Rick Gage, SEM Wealth Management
Jeff Hybiak (left) and Rick Gage (right) own SEM Wealth Management.

“There is also a question of resources,” Hybiak writes in an email. “Our primary focus is always on new assets, which has taken up a good chunk of our internal resources.”

Trust Company of America acts as custodian to roughly 225 RIAs and 7,000 advisors, with about $17 billion in assets under custody, CEO Josh Pace says. These figures fall far below those of giants like Charles Schwab and Fidelity, but Pace said his company's ability to attract a firm like Strategic Equity underscores one of its unique competitive advantages.

“We’ve been really fortunate that the advisors feel our technology is an absolute differentiator,” he said. “And I think they would also concur that the service model matters to them. So if you can give folks a best of breed technology set rapidly in a high-touch service model, that becomes something unique.”

NO LONGER BULLISH ON BEAR
With the assistance of its new custodian, SEM started a separately managed account called Ameriguard in May, according to Hybiak. The new offering features multiple types of asset allocation programs in the same client accounts, spread across 163 funds.

Additionally, Trust Company of America helped SEM with a rebranding that entailed changing its name, logo and website. SEM founder Rick Gage, an engineer with a background in statistical design and optimization, launched the firm 1992.

The staff consists of both engineering and finance experts. Hybiak, who recently became a 49% owner of the firm, and his wife Brandi, the firm’s advisor services and operations manager, have relocated from Tucson to Newport News, Virginia, where they now share an office with an advisor client of the TAMP.

Having charted a new course, SEM also plans to bulk up its staff, given that its executives no longer worry that the company will languish without a market downturn, Hybiak said during the presentation last week.

“And it all started with that simple LinkedIn message,” he said.