An amusing Investment News article, entitled “Sorry is the hardest word for TD exes,” talks about TD Ameritrade’s recent advisor conference, where the CEO overslept and was late to deliver the opening remarks. In the 90 minutes it took Moglia to arrive, the rest of his team spent their time “issuing a stream of apologies for the series of blunders in technology and service that beset the firm in 2007.”

But the speeches were not enough to keep several [advisors] from standing up with questions asked in an angry tone. “Still feel like the red-headed stepchild,” said one adviser who still has not been brought onto the TD platform from the old Ameritrade platform. “It will happen in the next quarter,” Mr. Bradley responded.

I’m not sure Tom’s going to get another quarter. Distraught TD Ameritrade advisors have another option; several people in TD Waterhouse’s senior management team didn’t make the jump to Ameritrade. Instead, they founded a San Diego startup called Shareholder Service Group (SSG). SSG founder Peter Mangan ran the financial advisor division at TD Waterhouse, and co-founder Bob Reed was a founding exec of Jack White & Co. They have been signing up disgruntled TD Ameritrade advisors since the acquisition in 2006. They passed $1 billion in assets last year and seem poised to be a major player in the realm of advisor custody.

Mangan did something brilliant. Instead of building a platform himself, which would have taken many millions of dollars, he partnered with Pershing and has become Pershing’s de facto solution for independent advisors. He gets access to all of Pershing’s technology without having to go deeply in debt, and even gains free processing capabilities that can’t be matched at Schwab, Fidelity or TD Ameritrade.

Using the Pershing back-office also lets SSG layer their fees in such a way that they are already profitable (two years running). They can scale up to handle new business with very little cost or effort and, instead, spend their time on client service. All of this combines to make a large impact on advisors.

In The Land Of Giants has numerous quotes from their advisors, similar to:

“I moved all my clients to SSG away from TD Waterhouse and Schwab… Mangan and his team are very responsive. I was sick of bad service from TD Waterhouse and being a peon with Schwab. The agility and responsiveness of a small custodian is a plus, especially when they are owners of the firm.” says Carl F. von dem Bussche of Financial Guidance Group Inc., Palm Harbor, Fla.)

The continued success of SSG and Trust Company of America in the advisor market shows there are many advisors out there whose needs are not being met by Schwab, Fidelity or TD Ameritrade. I wonder if the presence of SSG will open the door to a plethora of new custodian startups, similar to what we’re currently seeing on the software side. The complexity of creating a custodial offering makes it doubtful, but there is obviously a market need.

For now, advisors can be happy with one more option.

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Disclaimer: I am a minor shareholder in Shareholder Services Group.