Your Custodian of Today

As industry consolidation narrows options, small and medium-sized independent RIAs who custody with the Big 4 custodians are starting to feel like their futures are in lockdown. Here’s why—and how—advisors should break free.

If you’re an independent advisor, you may be starting to wonder how much freedom of choice you really have.

Like most Americans these days, you’re stuck at home. Your office is closed. Your favorite local hangouts are shuttered. The holiday gathering you planned didn’t happen. It’s hard to avoid a creeping sense of claustrophobia.

If you decided to custody with a big corporate custodian after leaving your wirehouse, you may be feeling a similar sensation in your professional life too.  Many independent advisors go down this path – only to find themselves feeling more constrained and less free to run their business the way they wanted. If you chose to go independent, you did it for a reason – you want to serve your clients as you see fit. You want to call the shots—free from red tape, subpar proprietary products, and onerous rules that overshadow the client’s best interests.

Now, you may find yourself asking: “Is this what freedom is supposed to feel like?”

When big turns too big

Today, many small and midsize advisor practices are finding their choices increasingly restricted by the Big 4 custodians through policies such as:

  • Stripped-down support delivered through call centers and DIY websites
  • More rigid rules that big-box custodians often blame on regulatory responsibilities but which are, in reality, imposed on smaller RIAs to simply lighten the custodian’s workload
  • Higher platform minimums that make it difficult for small and midsized RIAs to get the services and support they need to be successful
  • Limitations on asset classes supported, such as alternative investments

Worst of all, big-box custodians—the companies with whom advisors have shared their most sensitive client information—are now targeting those same clients with competitive offerings.

Of course, big-box custodians aren’t behaving this way out of spite. Their actions flow directly from their business models. Large custodians are part of conglomerates that earn significant revenue from their own wealth management divisions, putting them in direct competition with the independent advisors on their platform. And now, with trading commission and interest revenue drying up, these custodians need to pursue even greater scale and order flow to stay competitive.

Until recently, competition among top custodians helped to restrain some of this behavior. But with all the consolidation taking place in the custody business, that safeguard is diminishing along with the number of custodians.

It’s time for an alternative to the big-box custody model.

Serving small and midsize independent advisors is typically not the top priority for the big custodians. Finding the right level of personalized support – and that elusive freedom you desire as an independent advisor – may require looking elsewhere.

At Equity Advisor Solutions, we pride ourselves on offering advisors world-class capabilities combined with the one-on-one service of a boutique. Like you, we are independently owned, with no lines of business that compete with yours, and no interests that conflict with helping you grow. In fact, we only make money if our customers do, which is why we offer consulting to startup advisory firms to help them get off the ground and ramp up their growth. As big-box custodians pull back on their support, we’re stepping up—applying our industry and entrepreneurial expertise to meet the unique needs of advisors whose shoes we’ve been in.

The world—and the industry—may feel like they’re closing in these days. Promises of freedom sound a little hollow, especially coming from big-box custodians. But real freedom is possible. If you want to experience it for yourself, all you have to do is step outside the box.

Custody and Administration Services provided by Equity Trust Company. Equity Advisor Solutions is an affiliate of Equity Trust Company. Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.