As a fiduciary, we are required to utilize a due diligence process in selecting service providers, including the selection of custodians. We are also required to periodically re-evaluate these relationships. Sparrow Wealth Management clients have utilized Charles Schwab as your custodian for about ten years now. During the past year, we have evaluated a number of custodians, and we have determined that a recommended change to TD Ameritrade would be in our clients’ best interest.
The custodian has four primary responsibilities: to hold securities for safekeeping, to report on holdings and transactions, to collect interest and dividends and, if required, to effect trades. Beyond this, many custodians offer additional services to their clients. During our evaluation, we have determined that TD Ameritrade is an appropriate choice for our clients for a number of reasons:
- TD Ameritrade is the leading custodian as it relates to supporting fiduciary advisory practices and the fiduciary standard of care. TD Ameritrade is also a leader in trade execution.
- TD Ameritrade offers over 4500 “No Transaction Fee” mutual funds, including the American Century Inflation-Adjusted Bond Fund that is already used in our client portfolios.
- TD Ameritrade offers significantly lower mutual fund trading fees at $24 per trade (compared with $31 – $50 per trade at Schwab), resulting in a 50% savings on trades for most clients.
- TD Ameritrade will provide SWM with a small “regional” service team, allowing us to provide you with a higher level of service than what we can provide through Schwab’s National Service Team.
- TD Ameritrade is a financially strong company and enjoys the benefits of a partnership with Toronto Dominion Bank. Toronto Dominion Bank is one of the ten largest banks in North America.
As many of you know, we considered changing custodians several times in the past, but we decided to hold off for various reasons. While attending NAPFA’s National Conference in May 2011, I had the opportunity to spend a lot more time with fellow advisors discussing the pros and cons of different custodians. I was very impressed with the positive reviews that so many of my colleagues have given to TD Ameritrade, which has developed a particularly strong relationship with DFA advisors.
Most of the work involved in this custodial transition will be on our shoulders. There will be three basic steps to the transition: 1) accounts will need to be opened; 2) assets transferred; and; 3) automatic deposits and payments will need to be re-routed. We will work with TD Ameritrade to ensure the smoothest transition possible. We anticipate that the conversion to TD Ameritrade will be in full swing by mid to late July and should be complete for most clients by the end of August. You will be receiving a package of account applications, transfer of asset and other pertinent forms that will require your signature in order to effectively complete this transition. Timely completion and return of these forms is integral in our ability to keep to the time schedule we’ve outlined. Signing these forms should take no more than an hour. Please execute and return these in the postage paid envelope that will be provided as soon as practical following your receipt of this package.
Most of us would prefer to avoid change in our lives. We generally like the comfort and consistency of our daily lives. While you may not welcome a change in custodian, I believe that this change will be better, overall, for each of my clients. Should you have any questions or concerns, I welcome hearing from you. Please contact me as soon as possible, via email (firstname.lastname@example.org) or telephone (877) 330-9191, ext 1.
About Christopher M. Jones, CFP®
Christopher M. Jones is the Founder and President of Sparrow Wealth Management, a fee-only financial planning and investment management firm based in Hermosa Beach, CA. Before entering the investment field, Chris was a management consultant for Deloitte Monitor. He graduated summa cum laude from Brigham Young University with a B.S. in Economics and a minor in Business Management. Chris is a CERTIFIED FINANCIAL PLANNERTM practitioner.