Toronto-Dominion Bank is partnering with a U.S. financial technology startup to revamp its online trading platform for retail investors as well as launch a robo-advisory service that will house its own proprietary exchange-traded funds.
TD has signed a licensing agreement with Hydrogen Technology Corp., a New York-based fintech company, that will allow TD to use Hydrogen’s proprietary technology to enhance its current discount brokerage, TD WebBroker, for do-it-yourself investors.
TD already invested $125-million into its WebBroker platform to prepare for the additional trading features.
The initial phase is expected to launch in early 2019 and will focus solely on TD WebBroker to provide desktop users the ability to build their own financial plans and portfolios, while allowing them to track their progress against personal financial goals.
Later in mid-2019, a second platform will be launched, focused entirely on a robo-adviser offering that serves both mobile and desktop users.
“This new technology is going to power different experiences across different areas of the TD organization," Tony Ierullo, vice-president of wealth digital innovation at TD, said in an interview with The Globe and Mail. “While our initial focus is on improving the self-directed investor experience, our ultimate goal is to bring best-in-class digital investing solutions to all TD clients, at every stage of their financial journey.”
Online discount brokerages at the Big Six Canadian banks manage approximately $373-billion in assets, according to 2017 data by Strategic Insight Inc. TD’s plans come at a time when retail investors are paying closer attention to the overall cost of investing, opting for lower trading commissions and more mobile capabilities. As a result, the profile of investors accessing discount brokerages is broadening, and with it, a demand to access more DIY investing tools, Mr. Ierullo said.
“Traditionally, direct investing largely appealed to a more sophisticated individual who was primarily male. Now, discount brokers are appealing to a much wider segment of the population … It is more inclusive of females and includes a younger demographic."
Similar to a robo-adviser offering, the new DIY platform will offer clients the option to select a “goal” tab that will provide them a step-by-step process to set a financial planning objective and be able to track whether that goal is being met. Unlike a traditional robo-adviser, investors will self-identify their risk level (but can view examples to help them assess what level of risk tolerance they fall under), be able to build a portfolio that will include stocks, ETFs and mutual funds, and set up alerts to notify them whether a portfolio has to be rebalanced. Rather than a robo-adviser providing a preselected basket of investments, DIY investors have the flexibility to construct a portfolio themselves.
Investors can also set up personalized filters when searching through the thousands of stocks and funds offered on the platform to narrow down their portfolio choices, something TD investors were asking for, Mr. Ierullo said. Filter options include fund type, management expense ratio, asset class and star ratings.
While most discount brokers offer investors retirement calculators and other tools, Paul Clark, president of TD Direct Investing, said many existing platforms currently don’t integrate a client’s goal, accounts, stock holdings and risk levels. “Today clients are making trading decisions to drive towards their goals, but they don’t always understand the plan to get there.”
Mr. Clark said the additional tool will also help stop the churning that occurs in trading accounts, where investors unnecessarily re-adjust their holdings.
The initial phase of the design will integrate Hydrogen’s technology into the existing TD WebBroker platform. For investors who do not wish to set targeted goals or or be guided in their stock selection, they can continue to trade as usual.
“Almost every industry has been disrupted due to the pervasiveness of technology and shifting customer preferences, and the wealth industry is no exception,” said Michael Kane, president and chief executive at Hydrogen.
As a result of the improved platform, TD will now turn its attention to improving its lineup of ETFs. Three new active funds are set to trade this fall, with additional funds being introduced in 2019. Currently, the firm has only $79-million in assets under management in six ETFs.
Clare O’Hara