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Advisors Look to the Future

New tech tools and trends were on parade at TD Ameritrade's annual conference.

Joel P. Bruckenstein, 02/11/2010

(Editor's note: Joel Bruckenstein was a paid keynote speaker at the TD Amertrade Conference.)

I just returned from the TD Ameritrade Conference and I'm going to make a real effort to curb my enthusiasm, but it is going to be difficult. I'm supposed to take a balanced approach, but there were so many positives and so few negatives about my recent experience at the TD Ameritrade Institutional 2010 National Conference in Orlando that it is difficult to find fault with the event.

As is traditionally the case, the pre-conference day was dedicated to workshops highlighting TD Ameritrade tools and services and those of third-party providers that TD Ameritrade has a relationship with. One session I attended dealt with the Veo Portfolio Rebalancer. This tool, developed by Advisor Software, Inc. and provided free to TD Ameritrade Institutional advisors, has been much improved and refined since I last looked at it. The rebalancer, which is integrated into the TD Ameritrade advisor website allows advisors to create proposals, rebalance individual accounts, rebalance a group of accounts, or rebalance a household.

TD Ameritrade recently announced a number of enhancements to the Veo Portfolio Rebalancer that were detailed during the workshop. One is the ability to add a cash buffer at the account level. This means that you can now assign a fixed dollar amount or a percentage of the portfolio value as a cash constraint at the individual account level. As a result, the advisor can ensure that there is cash on hand to cover regular cash distributions, management fees, and other cash needs.

The ability to create custom security equivalents is another enhancement. By tagging equivalents in a portfolio, advisors can potentially reduce portfolio turnover and transaction costs when rebalancing against a model.
One frequently requested enhancement is the new ability to override the default style or sector designations. Previously, the system assigned the style/sector designations, and advisors pretty much had to accept them. Now, advisors have the ability to override the defaults and customize the settings to their liking. Once a change is made, it is reflected in diagnostics, and proposals. The settings are saved, so they persist in future rebalancing sessions.
Restricted securities alerts are another new feature. Advisors can create a list of securities that will generate an alert should they be included in a rebalancing session. This feature can be used to accommodate "do not buy" constraints at both the firm level and the client level.

Additional enhancements include the ability to include a firm logo in client-facing proposal reports and the ability to save advisor data in the system so it does not have to be re-entered each time a new session commences. 

The "Leveraging Portfolio Management Software Systems to Improve Efficiencies" workshop, presented by Orion and IAS, did not break any new ground, but it offered, among other things, a compelling look at the efficiencies and ROI that can be achieved by outsourcing portfolio reconciliation, software, and reporting functions to an outsource provider.

In another first, TD Ameritrade invited an outside expert to give a keynote address on technology and operational efficiency during the pre-conference day. Since I was the speaker they invited to inaugurate this new addition to the conference, I cannot find fault with their selection.

On Thursday, I kicked off the day with a few non-technology sessions. Ed Slott, one of the nation's foremost experts on IRAs, presented a session titled "IRAs and Roth 2010 Conversion Opportunities" to a packed room. There are a number of folks who can explain the intricacies of Roth conversions to an audience of professions, but none can make the subject and understandable and entertaining as Ed.

The highlight of the conference for many was the general session during which ex-presidents Bill Clinton and George W. Bush were interviewed by TD Ameritrade Institutional president Tom Bradley. Both former presidents were surprisingly frank with their remarks on topics ranging from terrorism to the economy. Overall, the audience loved them.

If there was one disappointment during the conference, however, it was at the end of this session when it became apparent that neither former president was conversant in the Securities Exchange Act of 1934 or the Investment Advisors Act of 1940. Clearly, the whole issue of reforming the regulations that apply to investment advisors and/or registered reps when they provide advice to clients is something the former leaders of the free world know nothing about.

Moving back to technology, one of the highlights of the conference for me was Martin Carmichael's session, titled "Information and Data Security for Advisors." I had never met or heard Carmichael, TD Ameritrade's chief security officer speak before, but he immediately wowed me with the depth and breadth of his knowledge. Even more impressive was his ability to discuss complex security issues in a way that even the less-technology-savvy advisors in the audience could easily understand.

For example, Carmichael gave a concise explanation of an attack on Google that originated in China. According to Carmichael, this was a highly sophisticated and targeted attack using vulnerability in Adobe Reader. The attacks appear to have originated from servers associated with agents of the Chinese state, or their proxies. Attackers sought passwords for Gmail accounts and other intellectual property.

So what should the average advisors do to keep out intruders? Carmichael offered a number of tried and true solutions that most readers should be familiar with. These include the use of up-to-date antivirus software, anti-spyware software, firewalls, and software patches.

According to Carmichael, the ultimate security tool at advisors' disposal is sound decision-making. For example, each time you add another plug-in to your browser, you potentially weaken its overall security. While some browser extras, such as Adobe Flash Player, might be business necessities, others have no business purpose at all. Carmichael suggested that you refrain from adding anything that is not absolutely necessary to your browser. Installing unnecessary plug-ins is stupid, he said. Carmichael was also critical of those who download unnecessary applications. "People put toys on their computer every day, and it compromises security" he said.

When asked about two-factor authentication, such as a user name and password plus a randomly generated number, Carmichael said it is a step in the right direction, but it is not foolproof. He cited the "man in the browser" attack whereby malware waits to launch itself until after you log in to a financial website. Once you log in, it then launches and begins doing whatever evil task it was programmed to do.

Carmichael is in the early stages of developing a highly secure log-in solution for TD Ameritrade Advisors that he expects to exceed the security provided by any advisor-facing solution available today.  As an intermediate step, TD Ameritrade added security questions as an additional layer of security while it works on a more-sophisticated security solution.

"Leveraging Social Media to Grow Your Business," hosted by veteran journalist Andy Gluck, provided insights from Jessica Maldonado and Bill Winterberg on how to best utilize these new tools. Maldonado suggested using LinkedIn to cross reference your LinkedIn contacts with a database of HMW individuals. If a LinkedIn contact is connected to a HNW individual you are targeting, you can then ask for an introduction.

Winterberg suggested that Twitter is a great tool to engage in circles that you would not usually engage in, perhaps because of geographic or other barriers. Christopher Winn provided some cautions about the compliance dos and don'ts surrounding social networking. While I found this session informative, I could not help questioning whether or not social networking was the best use of advisors' time when most are lacking fundamental technologies such as CRM and document management. One also has to question the ability of many advisors to execute a social-networking strategy when they lack a marketing plan and/or a marketing budget.

Spenser Segal of ActiFi's session titled "Breaking Through the Clutter--How to Make Informed Decisions about Selecting CRM" included some useful nuggets of information as well. While I strongly disagree with Segal's statement that the technology itself is mature and sufficient, I do agree with him that advisors (and vendors) need to devote more resources to maximizing CRM usage, workflow, integration, training, and scalability.

Finally, Bob Veres, publisher of Inside Information and perhaps the best trend-spotter the financial advisory profession has ever seen, outlined five key trends in his session titled "The Prosperity Agenda." As the name suggests, Veres is very bullish on the future of the independent RIA model. One of the five trends Bob mentioned related to technology. Bob says that advances in advisor technology are setting the stage for increased productivity. "Within five years," he said ,"you can cut your operating expenses in half by deploying the proper technologies." That's a very encouraging thought!

Aside from the strong practice-management and technology sessions, I noticed one other encouraging phenomenon, technologically speaking, that I've never experienced at a custodian-sponsored event before: Traffic at the booths of technology sponsors in the exhibit hall was noticeable higher than that of other exhibitors. Michael Wilson, Morningstar's director of marketing for advisor software solutions, told me that he was so busy that he was exhausted and losing his voice at the conclusion of the event. When I stopped by to visit with Fujitsu and CEO Image Systems, I could not get near them, they were so busy. Virtually every technology vendor I passed, including AssetBook, Broadridge, IAS, Junxure, MoneyGuidePro, and Orion, was engaged in conversations with one or more advisors throughout the event.

I'm convinced that the renewed interest in technology exhibited by advisors at this conference bodes well for the future of the profession, and it suggests to me that Veres is probably on to something when he predicts low expenses and higher productivity for advisors in the coming years. For those who embrace technology, the future looks bright indeed!

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