Schwab, TD Ameritrade Leadership Address Advisor Complaints About Service

The combining firms gave an update on Tuesday.

(JB Reed/Bloomberg)

(JB Reed/Bloomberg)

Managers from Charles Schwab and TD Ameritrade said Tuesday the combining of the two companies is on track, addressed speculation about the merger’s disruption to their custody businesses, and advertised an improved platform that thousands of advisors will inherit in the future.

In January, RIAs with client assets at TD Ameritrade Institutional complained that the custodian’s service had “fallen off a cliff.” The wait times to speak to a customer service representative more than doubled to 45 minutes. Processing times for assets to transfer or documents to change status had elongated to a week or more. And an increasing number of forms to submit changes were returned, unexplainably labeled “not in good order,” a correspondence that advisors often refer to as a “NIGO.”

In less common but especially worrisome instances, advisors told RIA Intel they caught errors made by the custodian that could have damaged a client relationship.

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It is unclear how many of TD Ameritrade’s more than 7,000 custody clients experienced poor service in December and earlier this year. When asked about the complaints in January, the custodian did not refute any made by more than a dozen advisors.

But any deterioration in service had “nothing to do” with the merger, John Tovar, managing director of Institutional Wealth Management Services at TD Ameritrade Institutional, told reporters during a conference call Tuesday. The two financial services firms continue to operate independently. An unexpected high volume of service calls was to blame, he said.

Tovar and Tom Bradley, who is leading Schwab’s TD Ameritrade integration and also participated in the conference call, said speculation about poor service occurring due to fewer service representatives was false. Although there have been layoffs due to the merger, no frontline RIA service employees have been laid off at Schwab or TD Ameritrade. In response to the increased volume of calls, both companies have grown the number of service professionals in recent months and plan to add more. “There have been zero layoffs on the service side in the advisor custody business. In fact, we’re hiring quite aggressively,” Bradley said.

Schwab declined to share any specific details about its hiring plans during the call.

In addition to hiring more employees, the custodians have made other changes and service has improved since earlier this year, Bradley added.

Schwab currently intends to keep a group of TD Ameritrade’s service employees based in San Diego, as well as a group in the Dallas-Fort Worth area. Whether those employees in Texas will continue to work in their current location or Schwab’s new headquarters nearby has not been decided, Bradley said.

One of the three biggest concerns advisors have about the merger is whether they will have the same service team once it is complete in 13 to 31 months. Bradley said that Schwab “isn’t making any guarantees” but that most relationships won’t change since the objective is to make the transition “as smooth as possible.”

A survey of TD Ameritrade’s custody clients, which about 1,600 participated in, also showed RIAs are worried they will need to repaper client accounts. With perhaps the exception of some esoteric holdings, RIAs won’t have to. Accounts will be transferred for them, saving advisors a considerable amount of time and possibility for errors.

Another survey topic that received significant feedback was Schwab’s advisor platform. TD Ameritrade’s VEO One platform was partly what drew many RIAs to choose the custodian. But Schwab intends to keep the best parts of its own and integrate or copy the best from TD’s. Even before the deal closed, Schwab said last fall it planned to keep TD Ameritrade’s popular portfolio rebalancing tool called iRebal, as well as the thinkorswim and thinkpipes trading platforms.

Schwab is investing “tens of millions of dollars” and expects most of the upgrades to its advisor platform — including digital account opening — to be available when the merger is complete, Bradley said.

“Were making some tremendous progress.”

Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.

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