TDAI opts for FundQuest to enlarge selection of SMAs, UMAs and fund wraps. RIA custodian TD Ameritrade Institutional (TDAI) has expanded its investment roster to include FundQuest's Select Portfolio Solutions (SPS) platform. The new offering includes a unified managed account (UMA), which TDAI hopes will attract ex-wirehouse brokers who want access to the models-based products they'd grown accustomed to.

UMAs combine different asset classes, investment styles and investment vehicles -- typically separately managed accounts (SMAs), mutual funds and ETFs and -- in a single account.

Retail style

In addition to UMAs, SPS features FundQuest's mutual-fund wraps, SMAs, advisor-managed accounts and Russell's Model Strategies wraps and LifePoints and Target Portfolio life-cycle funds.

"We are constantly looking to add more sophisticated, innovative and flexible options for our advisors," says TDAI's president Tom Bradley. "These capabilities enable advisors to spend less time on research and administrative tasks and more time meeting with clients."

Last year TDAI brought in Milwaukee-based Capital Market Consultants (CMC) to provide a range of UMA options from pre-set portfolios to manager research for do-it-yourself advisors and broad-based consulting for fee-based firms looking for platform-support technologies.

At the time TDAI said it also planned to bring in a more retail-oriented UMA platform to augment the high-end CMC offering and a five-year-old SMA-only platform sponsored by Chicago-based Envestnet Asset Management -- and evidently it picked FundQuest. TDAI said its aim was to boost uptake of managed accounts of all kinds from 8% to 10% of its overall investment platform to the 10% to 12% custodians like Schwab Institutional and Fidelity Institutional were seeing.

TDAI wasn't able to say if it has made inroads in this regard.

David Root, head of institutional sales at Boston-based FundQuest, says TDAI's "new platform delivers a broad selection of managed account options combined with back-office operational support and investment due diligence services that can help RIAs accelerate the growth of their business."

Access is all

But for a third-party investment provider like FundQuest, landing an RIA custodian isn't like bringing in a large broker-dealer. "A 'captive' brokerage or a bank might be planning to convert a lot of assets [to our platform]," says FundQuest's head of marketing Jim Graves. "A large custodian gives us access to its client base, which isn't going to mean a lot of assets on day one."

In fact RIA-based advisors don't seem to have taken to SMAs and their ilk to the extent that brokers have. The 66 RIAs that responded to a survey by Boston-based research and consulting firm Aite Group last year said they put, on average, 5% of their clients' assets in SMAs and 4% in mutual-fund wraps. Mutual funds meanwhile accounted for a quarter of their allocations and annuities garnered 16%.

Despite this, Schwab Institutional, which caters mainly to RIAs, is the biggest non-wirehouse distributor of retail SMAs, according to Cerulli Associates, another Boston-based research firm. And the wirehouse stranglehold on SMA distribution is slipping fast. In early 2005, the big five brokerages distributed about 80% of retail SMAs; by last summer they accounted for 65%.

Jersey City, N.J.-based TDAI, a division of online brokerage TD Ameritrade, provides brokerage and custody services to more than 4,000 RIAs.

FundQuest is a subsidiary of Paris-based BNP Paribas. It provides outsourced investment programs to 110 financial institutions in the U.S. and Europe. It has $43 billion in assets under management and administration. -FWR

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