MidWeek Commentary

HI Market View Commentary 02-06-2023

HI Market View Commentary 02-06-2023

Protection has been left on a few stocks as we are unsure what way the market will decide to go.


UAA – leaving protection out of the money on the idea that retail brands have done well for Christmas sales even though retail stores have not.


META and BIDU – Ridiculous pent-up demand after prices fall significantly usually causes a spring higher

  • BIDU has China is opening up in a HUGE way.
  • People are getting back to work
  • Huge amounts of STIMULUS is being infused into their economy
  • Supply chain gridlock cleared up with should help inflation

Earnings dates:

BIDU        – 3/01

DIS           – 2/08  AMC

MU           – 3/29

SQ            – 2/23  AMC

UAA         – 2/08  AMC


Where will our markets end this week?



DJIA – Bullish

SPX –Bullish

COMP – Bullish



Where Will the SPX end February 2023?

02-06-2023            +2.0



Mon:            AAP, DENN

Tues:            MAR, AKAM, DVN, GDDY, HLF, KO

Wed:            GOLD, KHC, LAD, OC, CSCO, NUS, ROKU, VMEO, ZG, UAA


Fri:              AMC, DE



Econ Reports:


Tue              Trade Balance, Consumer Credit

Wed:            MBA, Wholesale Inventories

Thur:           Initial Claims, Continuing Claims,

Fri:               Michigan Sentiment, Treasury Budget


How am I looking to trade?

Currently running mostly stocks with protection getting ready for earning by protective puts and full collar trades

We are starting to add leaps = BA, BIDU, JPM,

Next week Jan 31 we can add back in tax selling shares = META, DIS, BAC

We also add SPY puts for the rate hike



www.myhurleyinvestment.com = Blogsite

info@hurleyinvestments.com = Email




Bears sent running as stock market breaks downtrend and passes key tests


Bears sent running as stock market breaks downtrend and passes key fundamental tests



Marcos Del Mazo | Lightrocket | Getty Images

The way to scare away a bear, according to experts, is to make a lot of noise while rising up to make yourself appear bigger.

Sure enough, a loud equity rally to start the year — amplified by ferocious gains in some of the riskiest and most-hated stocks — has indeed sent bears running and made the bulls seem more powerful than might be expected with only half the total bear-market losses now recaptured.

A week ago, the setup was something like this: “The S&P 500 is up more than 6% in the first four weeks of the year, benefiting from a reversal of deeply defensive positioning and now sitting right at the downtrend line from the record high, with daunting tests ahead in a Federal Reserve meeting plus earnings coming from most of the biggest stocks in the market.”

Consider those tests passed, for now.

The S&P gained another 1.6% last week even after slipping back 1% Friday. Fed Chair Jerome Powell conveyed a willingness to let the economy prove it can land softly without forcing unemployment much higher, declining explicit opportunities in his press conference to scold the market for its upwelling optimism about such a prospect.

Friday’s glaringly strong jobs report lifted Treasury yields a bit and caused a rethink of some bets that the Fed would be cutting rates later this year.

Yet the bigger picture is that all last year the bears were able to lean on a Fed tightening into a slowing economy and stocks tracking bond prices in a persistent grind lower — while now they face a Fed coasting slowly to its anticipated destination near 5% short-term rates in an economy that’s acting firmer than feared, and stocks and bonds breaking tentatively above those declining channels.

It’s all a delicate interplay, the growth-policy equation can certainly swing either way from here. But the fact is, inflation in decline from very high levels is among the more favorable backdrops for equities through history, and in a market that may have bottomed in classic fashion during October and ahead of a midterm election.

Market technicals strengthening

Along the way, the technical characteristics of the market are winning converts for the bullish cause. The S&P 500′s 50-day average crossing above its 200-day average, the index has made a new “higher high,” the percentage of stocks at a new 20-day high finally surging to trigger some fairly rare signals of a possibly important advance.

Reassuring, even if the market could use a rest and cooling-off phase in the short term.

Some chart readers are now giving the market the benefit of the doubt on this basis, and even those who aren’t are duly noting it.

S&P 500 Index

RT Quote | Exchange | USD

4,136.48-43.28 (-1.04%)

JPMorgan technical strategist Jason Hunter, who got more bullish late last year near the market low yet became more cautious as the S&P 500 neared 4100, said: “From a pure chart-based perspective, the accelerated S&P 500 Index rally leg into the upper end of our anticipated resistance zone and recent bullish longer-term momentum signals like the golden cross obviously are not the types of things we expected or want to see in the early weeks of 2023 given our outlook.”

Yet the makeup and atmospherics of the rally have been such that almost no one is comfortable with the move: unprofitable and heavily shorted stocks bursting from the wreckage of two years’ worth of demolition; last year’s winners chopped down; a stampede into speculative upside call option buying.

The crash of the iShares MSCI US Momentum Factor ETF (MTUM) relative to the broader market shows part of this dynamic.

The crucial detail here is what sorts of stocks ended up in this momentum basket: recent relative winners, which coming into 2023 meant, overwhelmingly, defensive-style stocks. The MTUM is now 60% healthcare and energy. It has a massive underweight in tech and consumer cyclicals.

Too much garbage?

So quantitative investors riding this factor – often while shorting low-quality stocks – have been whipsawed mightily. Goldman Sachs reports that Thursday saw the single heaviest day of short-covering activity by hedge-fund clients in a decade.

The reawakening of once-bubbly unprofitable speculative-tech stocks this year along with the excitable options trading has brought out the “Tsk-tsk” crowd lamenting the return of recklessness and fun. Fair enough, healthy markets are not dominated by such action for long.

Here Deutsche Bank shows net call-option buying in mega-cap growth and tech stocks ramping above any readings from 2022, though still unremarkable by the manic standards of 2020 and 2021.

Deutsche Bank

But any market rebound strong enough to attempt escape velocity is going to have a high-beta “garbage-stock” rally associated with it, so in itself this “last shall be first” element doesn’t disqualify a rally from serious consideration.

There is also more-quiet outperformance by industrial-metals, homebuilding and other consumer-discretionary stocks, as well as continued leadership from the equal-weighted S&P 500, a clue that the broad list of stocks is acting better. Tight credit spreads also offer reassurance that the macro picture is not eroding quite quickly enough for bears to cash in their bets on a buckling economy just yet.

Of course, in order to log these gains, the market had to seize on pessimistic sentiment and positioning, meaty declines in bond yields and the dollar, and muted expectations on earnings that have allowed the tape to shrug off largely unimpressive corporate results. Arguably, a lot of that fuel has been burned, though sentiment is hardly giddy by most longer-term measures.

Still top heavy

Valuation is surely a factor that’s hard to paint as a weapon of the bulls after the recent index appreciation. Surely at the S&P 500 level, above 18-times forward profit estimates is a demanding bogey implying so-so returns. Yet I continue to point out how top-heavy the market remains.

The six largest stocks by market value (Apple, Microsoft, Alphabet, Amazon, Berkshire Hathaway and Nvidia) are a combined 21% of the index and have an average forward price/earnings ratio above 30. The equal-weight S&P is closer to the longer-term average at 16, and mid-cap stocks still modestly valued compared their history.


For sure, the risk/reward assessment here at the midpoint of the entire 2022 bear market decline appears a bit more balanced, with the tape more vulnerable to unwelcome news at 4136 on the S&P 500 than it was 600 points lower in October. The S&P 500 is compounding so far in 2023 at a 120% annualized rate of return so yeah, expect some give-back and gut-checking.

A new trading range developing well below the all-time highs would be unsurprising. The confusion and debate around the leading indicators of recession won’t be going away soon. Markets often convey relief as a “soft landing” appears plausible even when one isn’t ultimately achieved. Jay Powell speaks on Tuesday and could easily choose to sharpen the edge of his rhetoric on “higher rates for longer.”

Yet it’s hard to dismiss that when the S&P was at this exact level nine months ago in early May, it was before the latest 400 basis points of Fed tightening, prior to $500 billion (and counting) rolling off the Fed balance sheet and ahead of a 10% reduction in S&P 500 projected profits for this year and next. No doubt the worst-case outcomes are not priced in, but for now it’s the bears who need to regroup.



Here’s how much money you’d have if you invested $1,000 into McDonald’s 10 years ago

Published Wed, Feb 1 202311:03 AM ESTUpdated Wed, Feb 1 202311:09 AM EST

Cheyenne DeVon

Bloomberg | Bloomberg | Getty Images

McDonald’s customers are still “lovin’ it” despite cutting back on restaurant spending due to inflation.

For the fiscal fourth quarter, McDonald’s reported earnings per share of $2.59 on $5.93 billion in revenue. That compares with earnings per share of $2.45 on $5.68 billion of revenue Wall Street expected, according to Refinitiv.

The fast-food giant also reported an increase in customer visits to its domestic restaurants and a 10.3% uptick in U.S. sales, driven by higher menu prices and increased demand. Global same-store sales rose 12.6% in the quarter.

“Overall, the consumer, whether it’s in Europe or in the U.S., is actually holding up better than what we would have probably expected a year ago or six months ago,” said CEO Chris Kempczinski on the company’s conference call Tuesday morning.

What this means for investors

Despite the fast-food chain beating analysts’ expectations, Kempczinski gave a cautious outlook for 2023. The company expects short-term inflation to continue this year, but executives believe that inflation has likely peaked in the U.S.

Looking further into 2023, McDonald’s is planning to open 1,900 new restaurants, including more than 400 located in the U.S.

On Jan. 31, McDonald’s shares dipped slightly after it reported its latest quarterly earnings. Shares closed lower by about 1.3%, ending the session at $267.40 per share.

Here’s how much money you’d have as of Feb. 1, 2023 if you had invested $1,000 into the company one, five and 10 years ago.

If you had invested $1,000 into McDonald’s a year ago, you’d have about $1,066 as of Feb. 1, according to CNBC’s calculations.

If you had invested $1,000 into McDonald’s five years ago, you’d see a slightly higher return on your investment and have about $1,695 as of Feb. 1, according to CNBC’s calculations.

And if you had given your $1,000 investment into McDonald’s a decade to grow, it would be worth about $3,270 as of Feb. 1, according to CNBC’s calculations.

Investors should do their research

Whether you’re investing $1,000 in TargetApple or other individual stocks, it’s important to remember that a stock’s past performance doesn’t necessarily predict how well it may perform in the future.

Rather than attempting to select individual stocks, a passive investment strategy tends to make sense for most investors. Experts generally recommend investing in low-cost index funds, which are automatically diversified.

The S&P 500, a market index that tracks the stock performance of large American publicly traded companies, can be a great way to get started.

As of Feb. 1, the S&P 500 declined by more than 9% compared to 12 months ago, according to CNBC’s calculations. However, the index has increased by about 44% since 2018, and grown by about 170% since 2013.



3 mistakes with filing for Social Security that could cost you a fortune

By B.O.S.S. Retirement Solutions and Advisors | Posted – Jan. 30, 2023 at 3:00 p.m.

This story is sponsored by B.O.S.S. Retirement Solutions.

Do you plan to file for Social Security in the next five years?

Filing for social security could be one of the most important financial decisions of your life.

Why? Because the difference between your best and worst-case scenarios could mean hundreds of thousands of dollars in lifetime income.

But getting the most out of your benefits is a lot more complicated than you may realize.

Most people make critical mistakes And mistakes are often irreversible and come with a big price tag.

We want to help you avoid this. So, below are three common mistakes that could needlessly cost you a fortune.

Mistake #1: Claiming your benefits at the wrong time

When it comes to filing for Social Security, there’s no one-size-fits-all strategy.

The timing of when you file for your benefits will be totally unique to your specific situation. So, what worked for your parents, siblings, and friends might not be the optimal choice for you.

Most people think that filing for social security is just about filing early or delaying their benefits until age 70. But it’s a lot more complicated than that.

Your decision could not only impact the amount of your monthly benefits check, but also the taxes on your benefits, your IRA and 410K withdrawals and other investment income. It could also cause you to forfeit thousands of dollars in other benefits every year and double your Medicare premiums.

Pro tip: Don’t just focus on getting the biggest benefits check. Be sure to consider how your decision could impact your taxes, spousal benefits and Medicare premiums. This will help you get the most “net” income from Social Security.

Mistake #2: Overlooking the tax consequences on your benefits

Most people don’t think about taxes when it comes to their Social Security benefits.

They’ve researched how much their estimated monthly benefits will be in retirement. They assume all of this money is theirs. And they’re counting on it to help them pay for retirement.

But what they don’t realize is they could pay taxes on these benefits. And it could be a big number. You could pay taxes on as much as 85% of your Social Security income.

So the money you were counting on could be less than you thought.

Income thresholds were created to determine what percentage of your benefits will be taxed.

If your retirement income is more than $25,000 a year (or $32,000 for couples), you’ll owe taxes on 50% of your benefits. If your income exceeds $34,000 a year ($44,000 for couples), you’ll have to pay taxes on as much as 85% of your benefits.

But these income thresholds haven’t been adjusted to keep pace with inflation. In fact, they haven’t changed since the law was introduced nearly 40 years ago. So each year, more and more people will owe taxes on their benefits.

Pro tip: You have more control over your taxes in retirement than you do at any other time of your life. And if you take advantage of some simple tax planning strategies before you file for Social Security, you could dramatically reduce — or possibly eliminate these taxes.

Mistake #3: Relying on the Social Security Administration for personalized advice

When people get overwhelmed with filing for Social Security, they think they can get help from the people working at the Social Security Administration.

But that’s probably not a great idea.

According to Forbes, “The Social Security Administration has some 40,000 undertrained, overwhelmed, and sometimes arrogant staffers who routinely tell people things that are dead wrong, half wrong, misleading, or incomplete.”

“As a result, thousands of people are making terribly wrong decisions daily claiming Social Security retirement benefits — decisions that are costing them huge sums.”

Pro tip: The bottom line is you can’t rely on advice from the Social Security Administration.

And that’s why it’s critical you understand how to avoid these mistakes outlined here.

Where should you start?

There’s a lot of money at stake here. If you’ve made an average income throughout your career your Social Security benefits could be several hundred thousand dollars in lifetime income. And if you’ve made an above-average income, it could be over $1 million.

The Social Security Administration has some 40,000 undertrained, overwhelmed, and sometimes arrogant staffers who routinely tell people things that are dead wrong, half wrong, misleading, or incomplete. As a result, thousands of people are making terribly wrong decisions daily claiming Social Security retirement benefits — decisions that are costing them huge sums.


That’s why you can’t take this decision lightly.

So, we’ve put together a short educational video that further explains how you could avoid these mistakes when filing for Social Security.

Plus, you’ll have an opportunity to receive a free, customized Social Security Analysis, which pinpoints the exact strategy that could help you wring every nickel out of your benefits.

You can watch it on demand right now by clicking here.

Tyson Thacker and Ryan Thacker are the President and CEO of B.O.S.S. Retirement Solutions with seven offices throughout Salt Lake City. B.O.S.S. Retirement Solutions is a four-time winner of Utah’s Best of State Award.

If you have any further questions about social security, you can speak to one of their fiduciary advisors by calling 800-637-1031.

Advisory services offered through B.O.S.S. Retirement Advisors, an SEC Registered Investment Advisory firm. Insurance products and services offered through B.O.S.S. Retirement Solutions. The information contained in this material is given for informational purposes only, and no statement contained herein shall constitute tax, legal or investment advice. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. You should seek advice on legal and tax questions from an independent attorney or tax advisor. Our firm is not affiliated with the U.S. government or any governmental agency.




Self-made millionaire: These 3 traits separate highly successful people from everyone else at work

Published Sun, Jan 22 202310:00 AM EST


“I said yes to almost any opportunity that I got,” says Steve Adcock, who retired early at 35. “Even if I didn’t know how to do a job being offered to me, I would always accept the challenge and figure it out as I went.”

Photo: Steve Adcock

Success isn’t always linear, and it doesn’t have a standard definition, either.

While people might measure and achieve success differently, there are some traits that set high achievers apart from others.

These attributes don’t just happen by accident or luck — they’re built through intentional habits, practiced every day until they become second nature.

The habits of successful people tend to be profoundly powerful, yet “incredibly simple,” says Steve Adcock, a self-made millionaire who retired at 35.

In 2016, he and his wife Courtney retired after accumulating about $870,000 working in information technology. With the right investments, their net worth increased to $1 million shortly after.

Adcock credits much of his success to smart habits he adopted in his 20s, modeled after the traits of high-achieving mentors and colleagues he admired throughout his career.

There are three traits in particular that set successful people apart from everyone else in the workplace, Adcock says — here’s how to develop them:


“Believing in yourself and having the confidence to put yourself out there is the first step to success. If you adopt the mindset that you can do almost anything you set your mind to, that level of optimism will shine through in the work that you do and make it 10x better.

Optimism isn’t just about being more positive about the future of your career — it’s about having a sunny outlook on life in general, too. If you smile a lot and are kind to people, you are going to instantly separate yourself from 99% of the population because most people just don’t do that.

At the start of my career, I quickly noticed that people wanted to work with the people who walked into the office smiling, who said hello to everyone, who just had a natural, upbeat personality. I started following their lead, and that attitude got me way more opportunities both inside and outside of the office than if I had been sullen and serious all the time.”

Emotional Intelligence

“For a long time, I thought that your intelligence quotient (IQ) determined your future success — I wasted a lot of time trying to impress people with my knowledge about random things.

But as I progressed through my career, I learned that IQ is only a small part of the success equation. Developing a strong emotional intelligence (EQ), or a heightened awareness of other people’s emotions, as well as your own, will get you much farther in life.

People with strong EQ are more self-aware and willing to take responsibility when things go wrong instead of blaming someone else, which is a bad habit that a lot of people do. But to build wealth and be successful, you need to be willing to learn from your mistakes and understand your shortcomings.

Improving your emotional intelligence can also help you navigate challenging situations calmly and rationally, and work with many different types of personalities more effectively. Practicing EQ helped me become a better communicator and build stronger relationships with my bosses.”


“I hate the phrase ‘never give up,’ because rich and successful people give up all the time. What’s more important is knowing when and how to give up, and not giving up on your dreams too quickly.

Accept and anticipate change: You’re going to encounter problems that are small and manageable, as well as ones that feel so big and disarming that you might want to give up on your dreams entirely.

That’s where perseverance comes in: If you believe in yourself and are consistent about working hard to achieve whatever goals you set out for yourself, you’re unstoppable.

Be patient, know your absolute limits and try your best to cope with any challenges that arise before throwing in the towel entirely, because success could be just around the corner.”


Alternative Custodian Options For Independent RIAs In The Wake Of Schwabitrade

APRIL 12, 2021 07:05 AM 3 Comments CATEGORY: Practice Management



For most independent RIAs who want to manage client portfolios (and be compensated for doing so), having an independent RIA custodian to work with is a necessity. As in practice, RIA custodians not only actually hold client assets (an important consumer protection) but also provide the core technology platform to open client accounts, to make deposits into and withdrawals from those accounts, to keep track of and trade in client accounts, to bill advisory fees from client accounts, and to integrate client investment data to the advisor’s CRM and other key components of the advisor’s technology stack.

Because of the similarities in these core investment functions from one RIA custodial platform to another, though, it’s often hard to differentiate between them. And because RIA custodians make very little (and now, for many, absolutely nothing) from each trade in a client’s account, the businesses must operate with enormous volume to achieve the requisite economies of scale to be able to compete. Which in practice has led to a wave of RIA custodial consolidation in recent years, from E*Trade acquiring Trust Company of America (and then being acquired by Morgan Stanley), to TD Ameritrade acquiring Scottrade Advisor Services and then being acquired by Charles Schwab to form the largest RIA custodian that houses the majority of all RIA assets.

Yet in practice, while RIA custodians often seem substantively similar, there are differences from technology to service to culture. Such that the mega-merger of TD Ameritrade and Schwab in particular – two firms that in the past had very opposite approaches to technology and very different cultures – has left many RIAs (from those already at Schwab or especially TD Ameritrade, to those looking to form an RIA and decide on a custodian, or break away from a broker-dealer and get started with a new platform) wondering whether “Schwabitrade” is the right place to be in the future. And if not, where else to go and how else to choose between Schwabitrade, Fidelity, and a litany of mid-sized-to-smaller RIA custodial options available.

In this guest post, industry commentator Bob Veres shares his perspective on 5 of the “lesser-known” alternatives to Schwabitrade (and Fidelity) for RIA custodial services, including BNY Mellon’s Pershing Advisor Solutions and its “Menu of Models” approach, Shareholder Services Group’s (SSG) high-touch service approach for advisors with no AUM minimums, TradePMR’s custom-built advisor technology platform, SEI’s all-in-one investment platform for RIAs, and newcomer Altruist’s efforts to build a ‘next generation’ RIA platform unencumbered by the legacy constraints of today’s existing RIA custodians.

Ultimately, the reality is that Schwab is the dominant player in the marketplace because the RIA custodial model is one where size and scale matters, allowing the company to provide the widest breadth of services at the lowest cost (for “free”, as Schwab only makes money on clients’ underlying holdings and doesn’t charge advisors directly). Nonetheless, the reality is that like the financial advice business itself, one size rarely fits all, many clients (and their advisors) have unique needs that necessitate a more specialized solution… and many advisors still see the value in sometimes paying a little more in order to get the service and/or capabilities that are most meaningful for their RIA firm and the clients they serve.




Bob Veres is the editor and publisher of Inside Information, and contributing editor and columnist for Financial Planning magazine. Bob also co-produces the Insider’s Forum conference for independent financial advisory firms, which was selected as one of Nerds Eye View’s 15 best conferences for 2017. If you’re interested in Bob’s newsletter, you can sign up for Inside Information here, or receive a discount when subscribing simultaneously to Inside Information and the Kitces.com Members Section. You can also follow Bob Veres on Twitter at @BobVeres.

RIA Custodians Featured In This Article:

BNY Mellon/Pershing | Shareholders Service Group (SSG) | TradePMR | SEI | Altruist

The acquisition of TD Ameritrade by the Schwab organization was, by most accounts, primarily driven by the Schwab executive team’s desire to nearly double the retail side of its business. But the corresponding impact on the advisor space is the (largely involuntary) movement of an estimated 7,000 RIA firms to a custodian that they did not, of their own volition, choose to affiliate with. Add to that the fact that in many ways TD Ameritrade was regarded, culturally, as the opposite of Schwab, and you have the possibility that many advisory firms are now weighing their custodial options.

What ARE their options? They could make a definitive decision to stay with the new custodian, which means they won’t have to repaper their clients—a chore most advisors would rather avoid if they can. They could wait and see how their service level changes—with questions abounding of whether there will be a service downgrade for “smaller” firms with less-than-$200 million, and especially those with less than $20 million who in the past were often rejected from Schwab for being “too small” (thus why they built their practices on the more accepting TD Ameritrade in the first place).

Or they could take advantage of the increasingly convenient remote onboarding technology to move their clients to a custodian whose culture more closely resembles what they experienced at TD Ameritrade.

In this article, I’m going to profile some custodial alternatives that the latter group of advisors might consider—a first step in their own due diligence process of looking at the alternatives. The alternatives range from Pershing, which was, even before the merger, the second-largest independent custodial option when measured by client assets (at least when including their broker-dealer hybrid RIA assets), to newcomer Altruist, which (by virtue of its newness) offers the most advanced software platform. There are long-established firms like Shareholders Service Group and TradePMR. There is a newer platform created by the SEI organization, which services the largest TAMP operation in our profession.

In other words, there is no shortage of attractive options for advisory firms that are looking for a new custodial relationship. In fact, in the minds of many observers, the merger that seems to diminish competition in the RIA custodial space might end up increasing it, by ultimately driving more advisors and assets to alternative platforms, whose cultures are a better fit, and whose scale could rise dramatically in the next year or two.

There are a few points to make here that I believe advisors should keep in mind as we sort all this out:

1) The “Schwabitrade” transaction was NOT a merger. It was an acquisition. The united company is controlled by Schwab, and the acquired firm will be expected to live under Schwab’s culture. The announcements have been mixed, but Schwab executives have pointedly not promised to port over all the software integrations that TDAI had facilitated, and advisory firms will be required to convert from Veo One (and the open architecture concept) to Schwab Advisor Services technology. It will be difficult for Schwab’s legacy platform to “integrate” with Veo, though it has been announced that the free iRebal program will be available to all Schwab-affiliated advisory firms.

The diminished integration, and diminished openness to integration, is not a disaster; most advisors I talk with who clear through Schwab generally like the tech they’re using and seem not to miss (too much) the integrations that have never been available to them in the first place. But the platform shift will certainly reduce the opportunities for innovation in the advisor software space. When I talk with emerging tech companies, they inevitably tell me that TDAI was the first custodian to welcome their integration, and that the open APIs in Veo One allowed them to create their own direct feed into the custodial system. That welcoming environment has already come to a halt. But, as you’ll see shortly in the profiles of custodial alternatives, the open platform concept is being widely embraced pretty much everywhere else, so emerging tech companies will be able to get deeper software integrations with Schwab rivals, and advisors who want to be closer to the cutting edge of innovation may migrate to these open platform alternatives.

2) As mentioned earlier, former TDAI advisors do NOT have to completely repaper their clients who move to the Schwab platform. I talked with several advisors who went through a similar experience—TDA’s acquisition of Scottrade, including its advisor custodial division—and they report that their clients went through a very smooth “negative consent” process, where clients were sent email messages about the impending transfer of assets and were invited to object—or not. Few objected.

“Honestly, it was a pretty smooth transition,” says Erin Baehr, founder of Purposeful Money in Stroudsburg, PA—who was forced to switch from Scottrade to TDAI after the acquisition, and is now moving client assets to Schwab. “I had to do a new advisor agreement with TD Ameritrade for my RIA,” she says (and TDAI advisors have been going through the same process as they move to Schwab), “but for clients, it was all done automatically. They got lots and lots of communication—so much that after a while they just basically ignored it.”

That doesn’t mean there is no paperwork hassle. Robb Baldwin, founder and CEO of TradePMR in Palm Beach, FL, notes that there can be a lot of legalese around IRA designations and custodial arrangements, cashiering agreements, and occasional FINRA qualification rules. “People think of repapering as always establishing new account documents,” he says. “But there are a lot of arrangements that have to be properly re-documented.”

Peter Mangan, CEO of Shareholders Service Group (SSG) in San Diego, agrees that the process can become more than just a negative consent message. “They might not need everything repapered,” he says, “but if there are margin agreements, they might not transfer over smoothly. If there are any extra services you’ve turned on at TD, you might need to sign a new form for those.”

SSG President Dan Skiles adds that ancillary agreements can be complicated. “As an example, it’s no secret that TD has paid Orion on behalf of advisors to get new assets on their platform,” he says. “Will Schwab be willing to continue that?”

What is the biggest downside to having your custodian acquired? “I miss having all the history on the account,” says Baehr. “With the changeover from Scottrade to TD, we had to give up access to a lot of the older data. I miss being able to see all the history going back.”

3) There is no reason for advisors to act precipitously. The merger was consummated, but the transition from one software platform to another may not happen for a year or more, and then there may be another year or two while Schwab decides how to tier its support levels to different size RIA firms.

“In my experience,” says Mark Tibergien, former CEO of BNY Mellon/Pershing, “it takes three years before there is a full integration. Once you consummate the transaction, then [the acquiring company] has to think about which people it’s going to keep. Then you have to figure out what locations you are going to invest in, what your client experience is going to be, and how you integrate not just the technology, but the workflow, operational elements, and service.”

He estimates it could be up to another year, potentially longer, before TDAI advisors are directly impacted, and another two before the full impact of the transition is well understood.

In other words, the merger may not be an imminent issue for advisors who are swept up into the new custodian. But there is never a time when you can afford not to review your options.

4) The zero commission decision was primarily motivated by the desire to hang onto market share, and perhaps generate new business, on the retail side. It was never intended to be a selling point on the institutional/custodial side, and there’s every indication that it would not have been.

One clue that this is true is the fact that many of the custodial competitors didn’t follow Schwab and TD into zero-cost trading territory, and haven’t suffered much apparent loss of market share as a result.

“We reduced our ticket charges down to what we consider to be a minimum,” says Baldwin. “But when we did our phone calls with advisors, they told us: just keep offering the services you offer, answer the phone, don’t send me to a call center in India, and I’ll pay ticket charges as long as I get good service.”

“We went through an analysis in the last couple of months,” adds Mangan. “We decided that [zero commissions] doesn’t treat our business or the customer’s relationship with us in the right way. If we’re giving away for free something where there is actual cost and risk to the firm, it suggests there is no value to it, which is entirely false.” He adds: “Advisors told us really clearly that the cost of a trade is a way of paying for our service, and they’re happy to pay if we intend to keep our service levels high. That cost [currently $4.95 a trade] is easily justifiable.”

One advisor, he says, actually said he would have been very disappointed if SSG had followed “the lunacy” of zero commission trading. “He told us, I feel it is easy to explain to clients that there is no such thing as a free lunch,” Mangan recalls; “that there is a cost and a value to executing a trade.”

Mangan says that his firm intentionally doesn’t participate in some of the revenue streams that Schwab is using to make up for the loss of trading commissions, including mutual fund 12(b)-1 fees and payments from the entities that do the actual clearing.

“On many of those free trades, they actually receive some payment for order flow,” he says. “So it is not exactly true that there is no cost to the customer in giving their order to Schwab. We don’t get any payment for order flow; we route our trades to the best bid or offer. Those order flow payments are perfectly legal,” Mangan is quick to add, “but we decided not to do it because we think it muddies the water. When we’re working with advisors who are fiduciaries for their clients, and that is all we do, it doesn’t make sense for us to be selling their orders for our benefit. We’d rather charge a commission.”

Cultural Shifts Amongst RIA Custodians

It’s hard not to think that all these major shifts will have an impact on the working environment for financial planning firms. The cut to zero commissions (and the need to maximize other revenue sources), plus the giant acquisition and a renewed focus on gathering retail market share—all these things will affect the culture of the acquired advisors and the overall professional landscape of custodial platforms for RIAs.

So the question for many advisors becomes: what will my custodial partner look like in a year or two?

You can already see glimpses of a cultural shift as Schwab Advisor Services is reportedly becoming much more liberal with margin accounts and more aggressive in portfolio margining. The firm is actively pushing client upsells to Charles Schwab bank and Charles Schwab mortgage services. Schwab, unlike TD, also has proprietary funds, ETFs, and its own investment platform. [Yes, Schwab Intelligent Portfolios is nominally free, but it requires its investors to keep a large percentage of customer accounts in cash, in a sweep account where the company earns at least a 1% margin.] Will there be subtle or unsubtle pressure to shift the ex-TDAI advisor’s current business? Will this pressure change the way Schwab-affiliated advisors do business with their clients?

Meanwhile, shifting smaller advisors from service teams to call centers at least suggests a new spirit of frugality on Schwab’s service side.

Schwab’s traditional preference for larger RIA relationships might suggest another cultural shift for advisory firms under $200 million in AUM. John Malzone, of JJM Financial Group in Newtown, PA and Long Island, NY, expects to see Schwab proactively “clustering” smaller advisory firms, encouraging them to consolidate through mergers and acquisitions to gain critical mass that make them easier for Schwab to service as a group. “They will facilitate the introductions of smaller advisors to larger teams,” he says.

Malzone also speculates that the firm will encourage “organic” growth for itself by offering incentives to multi-custodial advisory firms to move assets away from other custodians—or even institute penalties in the form of higher fees if they do not. You might see Schwab facilitating business succession plans for its larger relationships, and given that it has its own in-house RIA organization, it might buy some of those larger firms and fold them into Schwab Wealth Management with minimal client repapering. (More competition for Schwab-affiliated advisors?)

Another advisor, who prefers to remain anonymous, undoubtedly speaks for many planning firms when he wonders if Schwab will match TDAI’s discounted $9.95 ticket charge for DFA funds. “I think having to pay more than that would send a lot of us packing,” he says. (Schwab reportedly charges $49.95 on most non-NTF funds to RIA firms who were unable to negotiate one of the custom-commission arrangements.)

What we know definitively is that many TDAI-affiliated advisors did not, of their own free will, shift their client assets from the “anti-Schwab” to “Schwab.” “I know that I am not alone when I say that I am very, very sad (almost angry),” one advisor wrote to me. “I attended one of my study group meetings yesterday, and we were quite unanimous in our very loud voice of objection to this being foisted on us. Many of us have learned through the years that Schwab is not an Ameritrade. We all get much, much better service for our clients with Ameritrade. Schwab has an attitude that does not include making life easier for advisors.”

At the very least, the merged Schwabitrade entity has its work cut out to retain a high percentage of the acquired RIA relationships. Hiring ex-TDAI CEO Tom Bradley in his new position with Schwab (overseeing services to RIA firms with under $100 million in client assets) was a darned good start. But advisors will need to hear more reassuring things about the environment they’re being forced to move into—and they will be reassured to know that if they don’t like the answers to their questions, they have alternative custodial options who will be actively competing for their business.

On the pages that follow, I invite you to browse through these profiles of alternative custodial platforms, looking for a cultural fit, more advanced technology, or a firm that will give a firm your size the same services that the profession’s largest custodian reserves for its largest RIA relationships.

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