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An Overlooked Custodian that Deserves Consideration

A look at Trust Company of America's TCA Advisor.

Joel P. Bruckenstein, 10/09/2008

There's been a great deal of buzz this year about the various custodians for independent advisors and their capabilities with regard to software integration. One custodian that often gets overlooked in those discussions is Trust Company of America. I'm not quite sure why TCA is often overlooked as a custodian, but it could be the name. Many folks naturally assume from the name that TCA is a traditional trust company; it is not. Although organized as a trust company, the firm's primary business is acting as a custodian for fee-based advisors.

TCA seems to suffer from a lack of name recognition as well. While I find that most advisors can name at least three or four custodians, TCA is not one I hear mentioned that often. It is a pity that TCA is not better known in the advisor community, because the firm does have some unique attributes that make it an attractive custodial option for many fee-based advisory firms. It might also be TCA's corporate organization as a trust company, as opposed to a broker/dealer, that causes advisors to hesitate. While there is nothing inherently wrong with a custodian being organized as a trust company, and in fact there may be some advantages, many advisors are unfamiliar with this arrangement, so they may be wary at first.

One advantage that advisors perceive when working with TCA is that the firm has no retail-facing business, so it does not compete with advisors for wealth-management clients. TCA is not alone in this regard. Others custodians, including Shareholder Service Group and Pershing, also confine themselves to the institutional side of the business, but it is perceived as an advantage nonetheless.

A second advantage of working with TCA is its expertise dealing with nontraditional assets. These include direct participation programs, limited partnerships, limited liability companies, private and preferred stock placements, deeds of trust for mortgages, promissory notes, and real property.

Another possible advantage in today's turbulent economic environment is TCA's corporate structure and its financial strength. As a Trust company, TCA is regulated by both the FDIC and the Colorado Bank Board. Idle client cash in customer accounts is insured by the FDIC.

According to D. Terry Reitan, president and CEO of the firm, TCA has $22 million in equity capital and no debt. It has invested its capital conservatively. There are some mortgage pool investments, but they are mostly Ginnie Mae pools, which are backed by the federal government.

Perhaps TCA's largest competitive advantage, however, is its technology platform. The centerpiece of TCA's technology platform is TCAdvisor. This single, Web-based application offers extensive functionality to the individual advisor and to the advisory firm. For example, the TCAdvisor platform includes portfolio management and reporting capabilities, which eliminates the need for daily downloads to reconcile with a third-party portfolio-management system. Since the TCA portfolio-management software s integrated into the platform, there is nothing to download or reconcile.

Trading is also simplified. That functionality, too, is integrated right into the platform. This means there are no trades to manually upload, and that trade allocations can take place from right within the single online application.

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