I’m fairly critical of most software and web sites I see. I go into software demos with low expectations and I love it when I get surprised by something cool. This happened a few months ago when a friend of mine invited me over to Trust Company of America (TCA) for a demo of their portfolio modeling and rebalancing software.

It was one of the better demos I’ve seen. I like their lightweight Java app/SOA layer and their “models within models” concept matches the way advisors actually think about their trading strategies. My first question after their demo was why weren’t they out in the press showing this off? It’s better than anything I’ve seen from their competitors and I’d never heard of it.

So I was happy to see them get a big hit recently in Virtual Office News. David Drucker has been keeping an eye on our two smaller advisor custodians for a while now and has been highly complimentary of both Shareholder Services Group (SSG) and TCA. In the case of TCA, they have an internal development team responsible for their entire advisor platform and, so far, they’ve been keeping up with the big boys.

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Joel Bruckenstein did a roundup of recent and planned technology initiatives for the big custodians. He notices several overall trends across all the custodians:

Clearly, there are some commonalities among the custodians with regard to technology initiatives. All of the custodians are moving to a more online, self-service model, much the same way that banks and brokers have done for retail clients. Online processing of applications, transfers and cash transactions will soon be commonplace throughout the industry. The deployment of work flow reporting and enhanced alert systems industrywide will help accelerate the transition.

TD Ameritrade’s early success with its rebalancing tool from ASI has spurred others, including Schwab and SSG, to offer similar tools to their advisors. If TD Ameritrade is successful with its acquisition of iRebal and if Schwab has similar success with Etelligent, additional mergers and acquisitions are likely to follow. By the same token, if Fidelity finds success with WealthCentral, it is a good bet that others will try to emulate its model.

I’m happy to see he’s included Shareholder Services Group on the list of “big custodians”, although I am wondering why Trust Company of America didn’t make the list.

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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.

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Wondering if anybody was paying attention to Fidelity’s WealthCentral announcement? Schwab was and they’re not sitting back to see if Fidelity can pull it off. Schwab’s acquisition of Etelligent Consulting must have been an open secret because I heard about it weeks ago; Etelligent does back office work for RIAs using Schwab PortfolioCenter.

This was a smart acquisition for Schwab for many reasons:

1. If I were Schwab, I’d be a bit uncomfortable having a third party vendor managing such a crucial piece of the client relationship. What if Etelligent took a glean to another portfolio management vendor? All of a sudden, Schwab could find 100 of their customers moving to Advent Axys, which would make it easier for them to switch between custodial providers. Now Schwab fully owns the technology relationship with Etelligent’s clients.
2. Schwab gets an in-house outsourcing capability that it can leverage by offering it to their captive audience of 3,000+ PortfolioCenter users.
3. Schwab adds a big component of the “total advisor desktop” to their platform, better positioning them in respect to Fidelity with their new WealthCentral initiative.

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I was talking to a friend I worked with at Investment Advisory Network and he reminded me of a little tool called MF.EXE that we used to troubleshoot imports. It’s a tiny little DOS program that quickly searches huge import files for account numbers, tickers, anything else. We used it for parsing custodial data to strip all of a client’s transactions out of the daily files and stick it into an individual client file. Once we could see all of a client’s transactions in one place, troubleshooting got much easier.

Say your out of balance report showed client John Smith’s (account 3923-1212) IBM stock having a share balance of 1,000.000, and the custodian says it should be 1,123.190. Before we even opened his account, we would run:

MF -e 39231212 IBM N:\ImportFiles\*.TRN

This would give you output like this:

From ADG123107.TRN:ADG 12310739231212IBM  249382 23.190  @43.329 12320 DIV…

From ADL121507.TRN:
ADL 12150739231212IBM  249382 112.000 @43.100 12320 SEL…
ADL 12150739231212IBM  249382 98.000  @43.100 12320 SEL…
ADL 12150739231212IBM  249382 11.000  @43.100 12320 SEL…

From ADG113007.TRN:
ADG 11300739231212IBM  249382 19.123  @40.990 12320 DIV…
 etc.

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*Updated Below*

Looks like e*Trade got a $2.5 billion cash infusion from Citadel. They’ll end up owning 20% of e*Trade.

I closed my e*Trade accounts two weeks ago. I wasn’t planning on it but they wouldn’t put a large wire through (or allow me to trade it out of cash). I got fed up and transferred my account to another custodian. This was overdue; their service was bad and I’ve problems like this before.

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For three days I’ve been instructing e*Trade to wire money out of my account and they’ve been giving me a variety of excuses why they can’t make it happen. I’ve never had problems with wires before, although e*Trade correctly points out that this is a much larger sum of money than I’ve previously wired. Apparently the larger amount of money has raised some flags and all of a sudden they’re not sure I am who I say I am. I’ve sent them a notarized letter and gone in person to a local branch so they could verify my bona fides. But they’re still “unable to verify my identity” and my wire hasn’t gone through.

I’m getting worried.

I think this may have something to do with the recent possibility of e*Trade being forced into Chapter 11. An analyst at Citigroup puts the risk at 15%, and his announcement alone could make it a self-fulfilling prophecy by causing a run on the brokerage. It certainly was a factor in my decision to pull money out. I can see where they might have an ulterior motive to keep assets on the books as long as possible, which may explain the difficulties with my wire.

The analyst report has some scary warnings:

If E*Trade doesn’t get significant support in the area of between $2 billion and $4 billion within the next week, or possibly 10 days, they’re going to be in dire straits,” Egan said.

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Fidelity announced their new WealthCentral platform by placing billboard ads throughout Las Vegas this week, during the Schwab IMPACT conference. Ballsy move — I love it.

WealthCentral combines portfolio management, customer relationship management, financial planning and other applications on a single platform. It doesn’t actually exist yet, but Fidelity plans to spend $50 million developing it. The software will replace Advisor Channel.

This an interesting move by Fidelity. They’re obviously under pressure to compete with Schwab’s Portfolio Center offering which is getting more and more popular. But instead of building all the components in-house (like Schwab), they’re tying together several best-of-breed products. That’s a tricky proposition — one vendor’s integrated best-of-breed platform is another’s Frankenstein monster.

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UPDATE: I’m hearing the deal is >$100M.

PNC just acquired StatementOne Albridge. I hope it works out better for their clients than Techfi’s acquisition did.

From the press release:

The PNC Financial Services Group, Inc. (NYSE: PNC) announced today it has signed a definitive agreement to acquire Lawrenceville, N.J.- based Albridge Solutions Inc., a provider of portfolio accounting and enterprise wealth management services. Through relationships with 150 financial institutions and more than 100,000 financial advisors with assets under management that exceed $1 trillion, Albridge delivers an aggregate, single view of clients’ assets along with robust performance reporting and analysis. Albridge will increase the offerings of PFPC Worldwide Inc., PNC’s provider of global investment services.

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TD Ameritrade is one of the most interesting things to happen in our industry in the last few years. I was amazed that an Internet discount broker could also make big inroads in institutional wealth management. I didn’t think they would be successful until I heard about their acquisition of TD Waterhouse, who was the third largest custodian for independent wealth managers.

The recent acquisition of the First Trust DATALynx division looks like yet another great move, and should cement their #3 position behind Schwab and Fidelity. Everything seems to be going so well for them that I was surprised to read that there’s a growing push at the board level to sell the company.

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