As companies cut back or eliminate traditional defined benefit plans, the 401(k) plan continues to evolve into the premier retirement savings vehicle for most Americans. The need for independent, unbiased investment advice is likewise on the rise in the 401(k) segment, which presents a tremendous opportunity
for Registered Investment Advisors.

Now advisors working with TD AMERITRADE Institutional can tap into the $3.7 trillion defined contribution plan market1 with greater ease and flexibility, using the new TD AMERITRADE Retirement
Planning Solution. Through our relationship with International Clearing Trust Company (ICTC), TD AMERITRADE has developed a solution that provides custody and trust services to retirement plan providers. These services, packaged with the investment expertise of an independent RIA and the recordkeeping services of a third-party administrator (TPA), provide the necessary tools to meet the 401(k) needs of your clients.

“We’re giving advisors who work with us a way to enter the 401(k) arena and be competitive,” said Matt Judge, Director of Product Management for TD AMERITRADE Institutional. “This program can increase the suite of services you offer to business owners. You can start to serve their full needs—not only personal accounts, but also corporate and retirement plans.”

Under this new solution, ICTC serves as custodian and/or directed trustee for the 401(k) assets. ICTC has developed a completely electronic interface enabling it to trade assets via the National Securities Clearing Corporation’s Fund/SERV® platform and link with most thirdparty administrators. ICTC provides extensive trust accounting reports and, when applicable, supplemental ERISA Form 5500 schedules. All reports are generated in PDF format and posted to a secure website on the first business day following the end of the period. ICTC can also support plans that feature self-directed TD AMERITRADE brokerage accounts, alongside the mutual fund options, for participants. Advisors or participants can manage these brokerage accounts through the TD AMERITRADE platform.

Open architecture for funds and 100% pass-through
There are many features that set the TD AMERITRADE Retirement Planning Solution apart from the competition. First, the solution’s open architecture gives you flexibility and access to a broad array of mutual fund choices to offer plan participants. ICTC is able to offer virtually any fund open to investors on the NSCC Fund/SERV platform—a universe of more than 30,000 funds. This includes low-cost index funds and NTF funds with eligible plan expense reimbursement.

“We are fund agnostic,” said ICTC President Gail Weiss. “We can get whatever fund you want, as long as [the plan] qualifies for it. We want to be able to support the advisors’ needs for specialty funds.”

Second, ICTC will pass through 100% of all plan expense reimbursement to the plan sponsor, which can help offset plan costs. “We fully disclose the expense reimbursement on our statements,” said Weiss. “Everyone can see where the transfers are coming from and going to.” The pass-throughs will help you keep down the cost of the plan offering to the client—and you can stress that not every 401(k) vendor offers a full rebate of those fees.2

Third, TD AMERITRADE and ICTC believe in simple, straightforward pricing. Custody pricing consists of a $500 annual base fee plus an annual asset-based fee of 3 to 5 basis points, depending on plan size. There are no transaction fees for trades. Directed trustee services are available at an additional cost of $1,000 annually. TPA fees, your advisory fee, and the expenses embedded in the mutual fund options make up the remaining costs to the plan.

Because many 401(k) plans are bundled as one plain-vanilla product by giant financial firms and insurance companies, plan sponsors often are at a loss to understand and compare fees. This low-cost, transparent approach arms you with an immediate advantage over bundled plans when presenting this product to
prospective clients.

Finally, ICTC delivers true trust reporting, which codes plan contributions by their source, such as employee deferral and company match. “It’s a big bonus to the plan sponsor to get that data,” said Weiss. “Every broker-dealer struggles with this.” ICTC also generates the annual financial schedules required for plans,
which can be plugged into their tax returns. And, if needed, ICTC can act as the directed trustee for the plan, relieving the advisor of that obligation. “You get the plan, we’ll be the directed trustee,” said Weiss.

Opportunities for plan management
Not sure if you have good prospects for 401(k) management on your client roster? It’s likely that many companies in your community could be approached. According to a recent survey, of the 250,000 small to mid-size businesses in the U.S. that offer 401(k)s, about 15,000 reviewed their plans in 2005. Notably, half
of those went on to look for an outside advisor for their plan. Overall, about 37% of plan sponsors offer outside advisory services to employees.

Moreover, the Pension Protection Act of 2006 passed by Congress in August makes it easier for plan sponsors to seek out professional retirement investing advice for plan participants. Your personalized service and independence as an RIA gives you a competitive advantage over generic computer-based advice
models.

“Most plan sponsors are not in the position to take on fiduciary responsibility for investment management,” which ERISA requires for plans, said Mark Klein, an attorney with Professional Capital Services, a specialist in designing and administering 401(k) and other qualified plans. “The independent advisor is uniquely positioned to address this. An RIA can acknowledge it’s an investment manager and accept the fiduciary responsibility in writing. The advisor has no funds to push, no agenda.”

Wide choice of independent TPAs
With the help of independent TPAs like Professional Capital Services, you don’t have to worry about adding huge burdens to your practice. In essence, you can oversee 401(k) plan management in much the same way that you provide investment advice to your individual clients—by deciding on the appropriate funds to be offered to plan participants and monitoring the funds’ performance.

“You can provide a much better retirement program for your client when you can go out and do your due diligence [on funds] and offer best in class, rather than just one fund company or sub-advised funds,” said James Marx, National Sales Director at PCS. “You are sitting on the client’s side of the table.”

While you focus on the plan’s investment options and client service, the TPA you work with will handle plan administration and record-keeping. The TPA can help with plan design, investment policy statements, compliance, education and participant reporting. You can work with any TPA willing to develop an electronic interface to ICTC.

With all of these 401(k) services integrated as a single offering, there’s no better time to get your share of the retirement market.

_{1 Source: Investment Company Institute, asset level as of 2005.
2 Please note, self-directed brokerage accounts are not eligible for plan expense reimbursement.
TD AMERITRADE and Professional Capital Services are separate and unaffiliated firms.
TD AMERITRADE and certain service providers or investment advisors specified by TD AMERITRADE that do business with TD AMERITRADE or its customers may promote ICTC’s services and refer retirement or savings plans to ICTC for trustee or custodial services. ICTC has agreed to compensate TD AMERITRADE for TD AMERITRADE’s promotion of ICTC’s services and referral of plans. Currently, ICTC has agreed to pay TD AMERITRADE 40% of the fees that the referred plans pay to ICTC under their agreements with ICTC. ICTC may also provide TD AMERITRADE with administrative support services in connection with TD AMERITRADE’s brokerage services to referred plans or their participants. The compensation payable to TD AMERITRADE, ICTC’s provision of administrative and support services, are factors considered by TD AMERITRADE in promoting ICTC’s services and referring plans to ICTC.}