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‘What happens now?’ How Tim Hockey’s resignation affects RIAs

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TD Ameritrade CEO Tim Hockey said his decision to resign yesterday stemmed from several conversations "over a period of time" with the board. The rest of the industry was taken by surprise.

“I was shocked. I had no idea that this would happen, and I’m still a bit shocked,” says George Papadopoulos, who runs an eponymous firm registered in Michigan. He has used TD Ameritrade as a custodian since the 1990s, he says.

Papadopoulos is not the only advisor that was taken aback.

“That news caught us all off guard,” says Brice Carter, chief investment officer at Financial Strategies Group Michigan, which uses TD Ameritrade as its primary custodian.
As for vendors on the platform, “I don't think anybody saw this coming,” says Aaron Klein, CEO of Riskalyze.

TD Ameritrade has experienced significant financial success since Hockey took the chief executive seat in January 2016. He came from TD Bank Group, which owns more than a 40% stake in TD Ameritrade. During his time as CEO, net revenue at the brokerage and custodian grew by over 45%. Net income grew from $212 million at the end of 2015 to $555 million by the end of June 2019. Its custodial arm hit a new threshold of 7,000 RIAs this year.

Hockey is well-liked among the RIA and broader investment community. At a company conference last month, Hockey mingled with RIA chief executives during a cocktail hour on the lawn at the Ritz Carlton in Dana Point, California. Earlier this year, Hockey was cheered on by advisors as he promised the company’s retail brokerage would not compete with RIAs.

This assurance came soon after Charles Schwab launched its new subscription-based planning offering for its hybrid robo advisor, Portfolio Intelligent Services. Schwab's new pricing has attracted an additional $1 billion of client assets onto its platform since March, but has frustrated some advisors.

“That's a challenge for a number of custodians who have great retail businesses and great advice businesses,” Klein says. “I felt like [Hockey] kind of drew a line in the sand and said: We're not going to compete with you. And I think that was a really powerful moment for the RIAs that they serve.”

Will the next CEO follow in Hockey’s footsteps — or take the company in a new direction?

“We thought Tim Hockey was doing a fantastic job, particularly with his emphasis on improving technology. The only concern we have would be around TD's strategy towards advisors with the next CEO. … Our concern would be that the next CEO will not share the same sentiment,” Carter says.

The reason for Hockey's departure is still unclear beyond disagreement between him and the board. TD Ameritrade spokeswoman Kim Hillyer declined to comment further, but said that the decision was not based on any one issue and that they expect it to be an "orderly and amicable transition."

Analysts question if the company is interested in moving in a new direction when it comes to M&A.

“While details are thin, it is possible differing views around industry consolidation contributed to the decision [to resign],” write Chris Shutler and Andrew Nicholas in a William Blair equity research report on TD Ameritrade

The report notes the current chairman of TD Ameritrade’s board, Joe Moglia, was CEO of TD Ameritrade when the company acquired Datek Online Holdings in 2002 and TD Waterhouse in 2006.

Hockey said today his resignation was unrelated to M&A and a potential purchase of E-Trade.

William Blair “takes comfort in the experience and ownership interests of the company's board," according to the firm's analyst note. Shares closed down 12 cents at $52.28 on Tuesday.

Other analysts don’t share the same optimism. “We find the announcement perplexing in that we believe the company was executing especially well in a variety of ways under his leadership,” says Deutsche Bank’s equity research report. The report suggests the resignation stemmed from disagreement in either long-term strategy or M&A and predicts near-term stock volatility that may have greater upside potential.

Those aligned with the company’s institutional custodian arm say they anticipate the leadership team to keep the company on a strong trajectory.

“I think that they've got a very strong bench,” Klein says.

Matt Cooper, president of Beacon Pointe Wealth Advisors, doesn’t see the resignation having any effect on his firm.

“I expect business as usual between Beacon Pointe and TD Ameritrade. Our relationships with Tom Nally and his leadership team at TDAI are very strong,” he said in an email.

TD Ameritrade says the board will start looking both internally and externally for its new CEO soon.

Some are already speculating who will step into Hockey’s shoes.

“Tom Nally is a great leader. I could see him being a fantastic CEO for the broader company,” Klein says. “What's interesting is Steve Quirk, who runs the active trader for TD Ameritrade, has a pretty deep understanding of the institutional and RIA market as well.”

Papadopoulos expressed hope that Tom Bradley, the former president of TD Ameritrade Institutional, may be in the running for the new role.

“That would be the best news for us RIAs,” he says. “Tom Bradley knows us. I never got the feeling that Tim knows us nearly as well.”

The custodian insists nothing will be amiss for advisors. “With respect to our strategy and what advisors can expect, they should expect business as usual,” Hillyer, the TD Ameritrade spokeswoman, said.

While he says it did seem sudden, Klein anticipates a clean transition.

“I think sometimes we make this a little bit more dramatic than it needs to be, and there are different leaders that are the right leader at different times for a business,” he says.

Still, some advisors say they are unsettled with the news.

“It’s kind of alarming. What happens now? I guess time will tell,” Papadopoulos says.

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