Technology Drives Service at TCA

For advisors and financial professionals, "2017 is going to be bumpy," Joshua Pace, president and CEO of Trust Company of America, said in a presentation on Thursday in Denver. "It will be business as unusual."

Advisor custodian TCA works with about 230 firms representing 7,000 advisors, Pace said. The average account size is about $111,000.

TCA is focusing its technology on advisor services in order to help them serve clients. Pace stressed that the fundamental belief underlying TCA's approach is that investors have better financial outcomes when they work with an advisor. "Emotions are hard to pump into an algorithm," he said.

"We fundamentally believe that every ounce of technology, every ounce of our service model, is geared toward making sure that [clients'] eyeballs are on you, not us," Pace said.

One of the key benefits TCA users noted, according to Pace, is a "non-competitive partnership," cited by over half of surveyed users.

"You know we're on your side," he said. "We're happily not in retail. You do what you do, and we do what we do."

RIA Industry Trends

Although most industry observers are sounding a "steady drum beat" of the transfer of wealth from baby boomers to millennials, Pace suggested that at least for some people, that transfer may not happen as boomers are living longer and their No. 1 fear is running out of money.

That "slows the rate of wealth transfer," he said.

He referred also to the accelerating rate of outflows from active funds to passive. Money that is still in mutual funds is concentrated in the cheapest funds, with over half of assets in the 10% of lowest-cost funds.

Pace reiterated robo-advisors' role as a "relevant component" of financial services, but "not the be-all-end-all" for advisors. Assets under management "are starting to plane off" at robo-advisors, he said, and even the way people talk about robos – as "digital advisors" rather than "robo-advisors" – indicates a shift in the way they're seen in the industry.

"Robo is a dirty word. Now [it's] digital advisor," Pace said. "If everything is all love and happiness, you're probably sticking with the moniker you've got."

Ultimately, Pace said, "he or she who owns the end consumer wins."

Transparency is "more than just the DOL; it's a movement within the industry." There are rewards to firms for being transparent, Pace said, which have helped TCA grow. The firm's Custody Advantage platform is "very DOL friendly" and the MMX investment management platform gives "advisors more choice." Pace said, "There will be opportunities for all of us. We just have to be smart and seize them." The DOL rule is "an upheaval" for the industry, but "this industry has proven time and time again that it will weather great storms."

A survey TCA conducted of its users found most advisors' responses to the DOL rule relate to costs: using lower cost funds and ETFs, being more transparent about costs.

"What the market trends tell us about how advisors are very cost-sensitive as it relates to the products that they're using, you said the exact same thing," he said.

What's Next for TCA

Looking ahead to 2017, Pace said the company will focus on a limited number of core integrations, including MoneyGuidePro, Riskalyze and Quovo. He expects about a dozen new integrations by the end of next year.

Household and tax-advantaged trading capabilities are also on the roadmap, but Pace said those functions are a "heavy load" for a custodian's technology platform.

TCA's bank charter prevents it from competing with retail banks, Pace said, so some familiar banking features won't be available, but it is adding remote check deposits for advisors and credit cards they can offer clients.

Data management is another area TCA is distinguishing itself. "We sit on a remarkable amount of data" about advisors' firms, Pace said. The firm used it to create RIA scorecards for its users that rate their profitability, operating statics, technology and marketing, and compares them to firms of a similar size.

The firm partnered with WooRank to score TCA's advisors' websites for search engine optimization and provide feedback to improve that score so it's easier for clients to find those websites.

— Read 5 Best Asset Managers for Tech-Minded Advisors on ThinkAdvisor's TechCenter.