Home Wealth Management A Quarter of RIAs Might Add a New Custodian in Subsequent 12 months

A Quarter of RIAs Might Add a New Custodian in Subsequent 12 months

A Quarter of RIAs Might Add a New Custodian in Subsequent 12 months


In 2019, Charles Schwab introduced its acquisition of TD Ameritrade, setting off a prolonged, typically criticized integration course of with TD’s RIA custody enterprise. The conversion of TD advisors to the brand new platform is now scheduled for Labor Day weekend 2023. The merger makes Schwab the most important RIA custodian by a large margin; actually, a brand new report by Cerulli Associates estimates Schwab controls $3.7 trillion, or 54% of RIA belongings, together with inflows and purchasers from the TD acquisition.

The Cerulli report states that 4 corporations—Schwab, Constancy, Pershing and LPL Monetary—management 84% of belongings custodied within the RIA market. But, one in 4 RIAs is exploring including a brand new custodian within the subsequent yr, pointing to a possibility for rising ones to fill gaps for present RIAs or assist breakaway advisors arrange new corporations.

“We’re seeing a once-in-a-generation incidence, which is Schwab buying TD Ameritrade. That in and of itself creates alternative for everybody else, just because advisors are pondering, ‘I ought to in all probability diversify,’” mentioned Tim Welsh, president, CEO and founding father of Nexus Technique in Larkspur, Calif.

Cerulli factors out that whereas many advisors wish to add new custodial relationships, they aren’t essentially seeking to swap from their present custodians. In truth, solely 4% of RIAs have switched custodians previously yr.

Welsh mentioned that factors to the truth that the chance for the rising custodian market lies on the level of sale.  

“The basic facet of the custodian shopping for determination is, ‘It’s straightforward for me as an advisor to take the subsequent account that comes within the door and begin a brand new relationship with another person,’” Welsh mentioned. “‘It’s very onerous for me to take my $100 million and 200 accounts from Schwab and transfer them over to Constancy. I’d should be actually pissed off to try this.’”

“The logistical challenges of switching custodians make it uncommon that RIAs drop an present custodial accomplice fully,” mentioned Marina Shtyrkov, affiliate director at Cerulli, in a press release. “As an alternative, RIAs are extra doubtless so as to add a brand new custodian to fill any perceived gaps in service or capabilities.”

The plurality of RIAs (44%) work with only one custodian, but RIAs with increased belongings below administration are inclined to have extra custodial relationships, Cerulli finds. Seventy-one p.c of RIAs with three or extra custodians handle $500 million or extra in belongings.

“Now, everybody has a motive to diversify their custodian as a result of, ‘If I’m Schwab/TD, now I simply have one. I nonetheless wish to present shopper alternative. I nonetheless wish to have the power to variety my back-office for quite a lot of causes,’” Welsh mentioned.

There are a variety of newer gamers coming into the RIA custody house, and plenty of of them are constructing refined expertise from the bottom up. Corporations like Apex, Goldman Sachs, Axos Monetary and Altruist, a custody answer, have entered the market in recent times. Smaller incumbents embody Interactive Brokers, Shareholders Service Group, TradePMR and Fairness Advisor Options.

“The expertise that’s popping out of those platforms—like an Apex, like an Fairness Advisor Options, like an SEI—all of them have these alternatives to construct a greater mousetrap,” Welsh mentioned.



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