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TD Ameritrade’s New Referral Rules Split RIAs

April 14, 2017

TD Ameritrade Institutional’s changes to how it charges RIAs for referrals have irked some advisors. But others say the changes only hurt those relying on passive management, RIABiz writes.

Last month the discount broker told its RIAs it will start charging them 25 basis points on the first $2 million in assets referred to them rather than 25% of the fee RIAs charged clients, according to the web publication. The fee drops to 10 basis points for assets between $2 million and $10 million and to 5 basis points for assets over $10 million, RIABiz writes.

The 150 advisors in TD Ameritrade’s referral program, who get between $25 billion and $30 billion in referrals annually, were given until April 5 to agree to the change or be dropped, RIABiz writes.

A major impetus for the change was the Department of Labor’s fiduciary rule, which purports to require retirement brokers to put clients’ interests first, Matt Judge, managing director of wealth management for TD Ameritrade Institutional, tells the web publication in an email.

The new structure “eliminates any question as to why assets were referred to one advisor over another,” he tells RIABiz. Judge adds the firm was planning to go through with the fee change regardless of the implementation of the rule, which the DOL delayed by at least 60 days on April 4, the publication writes.

Some advisors tell RIABiz they were surprised – or even upset – about the tight deadline, while others say they are angry that the fee change went through even though the DOL rule was delayed.

But the change is only likely to hurt advisors who aren’t actively managing assets, Dan Moskowitz, president of Chatham Wealth Management, tells the publication. And TD Ameritrade’s current fee structure is in line with the referral programs in place at Charles Schwab and Fidelity Investment, Matt Cooper of Beacon Pointe Advisors tells RIABiz.

By Alex Padalka
  • To read the RIABiz article cited in this story, click here.