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Small Accounts Present Opportunities for Advisors, Says Trust Company of America
[March 19, 2014]

Small Accounts Present Opportunities for Advisors, Says Trust Company of America

DENVER --(Business Wire)--

Financial advisors have long struggled with how to serve clients with small account balances. Through ever-increasing account minimums, the large wirehouses - and many RIA custodians - have indicated that small accounts should be avoided.

But Trust Company of America (TCA), the only independent RIA custodian offering fully integrated real-time technology, consultative services and back office support built exclusively for RIAs, sees an opportunity in small accounts and has solutions that can make them more viable and profitable for advisors.

TCA outlines some strategies for effectively managing small accounts in a new Trend Advisor paper, "Small Accounts, Big Opportunities."

While small-balance accounts can be a good source of referrals and an investment in a firm's future growth, the Trend Advisor paper notes that portfolio management and client meetings take up the majority of an RIA's time - a time commitment that can be the same for a $5 million account as it is for a $5,000 IRA, making serving small accounts a difficult value proposition for advisors.

To address this challenge, TCA polled numerous successful advisors who are known for managing accounts as small as $5,000 and asked them what strategies allow them to manage these accounts more efficiently. Advisors provided common pieces of advice:

  • Tailor fees: Termination rates tend to be higher among small accounts because, in general, investors with small accounts have less experience and are less willing to wait for a strategy to develop. Advisors should tailor fees for small accounts to reflect this reality. A higher startup fee, offset by lower fees down the road, can help advisors cover costs while incentivizing clients to be patient.
  • Set minimum balances for each strategy: Advisors who are willing to work with small accounts should still set a minimum for each strategy. Otherwise, assets cannot necessarily be allocated according to the diversification the strategy requires.
  • Use asset allocation models to manage small accounts: Models save advisors time by allowing them to create investment strategies for broad investor profiles, accounting for age, risk tolerance and needs. With models, advisors can provide small-balance clients with managed portfolios while at the same time managing them effectively and efficiently.
  • Invest in the right technology: To effectively oversee small accounts, advisors need the right tools. With the right technology, advisors can rebalance accounts in just a few clicks, bill clients quickly and efficiently, and save clients money through asset-based pricing and model-level fees.

TCA's technology platform does exactly that. Plus, advisors who use TCA's technology also have the benefit of being able to offer clients exclusive TCA services, such as mobile portfolio monitoring, at no extra cost.

"The TCA platform makes it possible for us to deliver discretionary advisory services to accounts of all sizes in a way no one else can, especially when it comes to operational and cost efficiency," said Gordon Wegwart, President of Verity Asset Management.

While large wirehouses continue to raise account minimums to focus on high-net-worth clients, there are compelling reasons for advisors to serve small accounts to the best of their abilities, even if the payoff isn't as immediate as for larger accounts. With the right technologies and strategies, the payoff can be significant.

"In the first 3 years after we implemented TCA's technology, small accounts were the most profitable segment of our business," said Jerry Wagner, President and Chief Information Officer, Flexible Plan Investments, LTd.

"Quality service is the best way to ensure client satisfaction," said David Berry, CEO, Trust Company of America, "Our goal is to enable advisors to provide their best service to all clients, big and small, and we hope our latest paper advances that goal."

About Trust Company of America

Since 1972, Trust Company of America (TCA) has been a champion of Registered Investment Advisors, dedicated to helping them realize their full potential. TCA is the only independent RIA custodian offering fully integrated real-time technology, consultative services and back office support built exclusively for RIAs. Headquartered in Colorado, TCA is a partner to advisors, providing the technology and support they need to manage their practices and clients' financial futures. See more at:

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