SAN DIEGO TD Ameritrade is joining the crowd of firms intent on building a robo advisor, although it immediately notes that its product will be less "robo" and more expensive than some of its competitors' offerings.
Fred Tomczyk, president and CEO of TD Ameritrade, acknowledged at TD Ameritrade's Elite Advisor Summit, now underway here, that there is a market for the pure digital offerings in the marketplace. But he believes that such an offering supported by human specialists is the way to go. "Our belief is that you still need human beings to be part of the process," he said.
Tomczyk suggested that his firm's approach would more closely resemble Vanguard's than Betterment's. It will be a digital experience that is goal-focused and planning-oriented.
Although still a work in progress, the concept seems to be to enhance TD Ameritrades Amerivest platform, adding the goal planning functionality and the slick user experience that customers have come to expect from digital platforms today. This will allow clients to take a risk profile, establish goals and then have a portfolio constructed for them; or they can be guided in creating a portfolio that aligns with their goals and risk tolerance. Clients will be supported in this process by human experts. No release date has been set for the offering.
TD ameritrade plans to upgrade and enhance Amerivest in phases. The first phase entails the facelift discussed above. After that, the platform will be further enhanced with the addition of performance reporting, powered by Orion, and iRebal for trading and rebalancing. The addition of iRebal to the product is significant, because it will allow for trading in a much broader universe of investment products. With iRebal, the platform technologically could construct portfolios not just from ETF and mutual funds, but from individual equities, separately managed accounts and the like, making it a robust UMA-like platform.
Another differentiator will be price. Tomczyk made it clear that this digital experience will not compete on price. He believes that customers will be willing to pay a premium for support by human experts.
But what if TD Ameritrade is wrong about customers' need for human interaction and their willingness to pay for it? Tomczyk allows that this is a possibility. If that turns out to be the case, he says, his firm can drop the human element, drop the price and compete primarily on the basis of technology and the digital client experience.
For the advisor side of the business, TD Ameritrade Institutional is working with a number of partners who participate in VEO Open Access, according to Tom Nally, president of TD Ameritrade Institutional. These include Jemstep, Trizic, NestEgg, Oranj, Wealth Access, Modestspark, Upside and the Orion-CLS-Riskalyze AutoPilot offering.
In addition, TD ameritrade has long offered advisors an enhanced version of Amerivest that they can use with their cients. Although no details were provided, it's likely that TD Ameritrade will continue that practice as the new, enhanced version of Amerivest is rolled out. For example, they might choose to limit retail accounts to ETF and mutual funds, but allow advisors to construct more complex portfolios that include separately managed accounts. The technology will be able to support this, should the firm make the business decision to do so.
Nally says his firm will be releasing a robust iRebal Application Programming Interface that will allow partners to use iRebal as the trading and rebalancing engine for their portfolios that use TD Ameritrade as custodian. This enhancement, along with the release of VEO One, the successor platform to VEO that will provide deeper integration and a consolidated advisor dashboard in the second half of the year, should allow advisors to select a digital platform that meets their business needs.
In a related development, TD Ameritrade is developing big data capabilities aimed at translating into a better user experience for retail investors and advisors. On the retail side, TD Ameritrade will track and catalog how investors interact with the TD Ameritrade website. Much as Amazon does, TD Ameritrade will then offer suggestions on the type of content that a visitor wants. This could be anything from news to a specific page view.
For advisors, TD Ameritrade will offer role-based defaults in VEO One. So if you log on to the platform for the first time as a principal, you'll see one set of widgets on the dashboard, but if you log in as a trader, you'll see a different set of widgets.
If you are a trader, and you are performing a task within the system in a certain way, VEO One will be able to compare your actions to others performing the same task. If others are performing more efficiently with a different workflow, the system can suggest that you try the alternate method and perhaps quantify your potential time savings.
Joel Bruckenstein, Financial Plannings tech columnist, is co-creator of the Technology Tools for Today conference series and technology guides for advisors. For more information, visit JoelBruckenstein.com. Follow him on Twitter at @FinTechie.
Note: This story has been updated.
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