Thanks in large part to technology, financial advisors that offer only basic services are at a disadvantage, with TD Ameritrade Chief Executive Officer Tim Hockey using the phrase "table stakes" to refer to the most basic services such as building an asset allocation model.
Speaking during TD Ameritrade Holding Corporation's (AMTD) leadership conference that was covered by Harvard Business Review, Hockey said that technology is reshaping the financial advisory world, with the winners the ones that can understand and embrace technology so that they are free to bring more value to their clients. "The ability to build an asset allocation model is now table stakes – we have technology that can do that," said the CEO of the Omaha, Nebraska-based discount brokerage during the event. "The best advisors will understand technology tools to automate so they can specialize in what cannot be automated. The winners in the future will be the ones who embrace technology and use it to move upstream."
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Take TD Ameritrade's platforms that give advisors the ability to add customization to their offering and provide access to portfolio strategies. In January, the brokerage announced the launch of Model Market Center, which enables registered investment advisors (RIAs) to use the company's institutional platform to tap into the minds of money managers without any of the complexities associated with outsourcing portfolio construction. With the new platform, RIAs can choose from an array of third-party investment models in one location.
The platform works with TD Ameritrade's trading and portfolio management technology, so clients can execute the model in the manner they want. As the third parties update their models, advisors are automatically alerted to the changes, noted TD Ameritrade. Hockey said platforms like that as well as ones in the future that are similar to Alexa, the voice-activated digital personal assistant from Amazon.com, Inc. (AMZN), will become commonplace, giving advisors quotes and the ability to pull up data via voice while in meetings with clients.
According to Hockey, in the early days of the internet, everyone projected that financial advisors would take a big hit as the internet did away with the middlemen. But that didn't turn out to be the case, with so much data and information resulting in investors needing help from advisors more than ever. Since the early days of the internet, the financial advisory market has seen strong growth even as it transforms. "Just doing an asset allocation model has gone the way of the dinosaur," said Hockey. "Customers now have many more feeds of information and they have more inputs and they can log on to see returns. If you are an advisor today, you must be more knowledgeable, be quicker to respond, and be clear about your strategies and your unique value."