Your Custodian of Today

You broke away for a reason. You wanted to control your own destiny, build your own brand and provide a superior client experience, without bureaucracy getting in the way.

To you, independence meant seeing your own name on the door. You’d take the wins and losses, and your growth would be limited only by your own hard work.

You’ve taken your shot and broken away, but is independence living up to your expectations?

If you signed on with a large custodian when you started your business, you may have experienced some unexpected and undesired outcomes. You’re not alone. The reality is that today, most large custodians offer a lot more than just custody. They may offer RIAs technology and support, but they’re also offering more products and more choices for retail investors than wirehouses ever have. This includes robo advice for accounts as small as $2,500, and professional separate account management for larger accounts, plus mutual fund and ETF portfolios for accounts of every size.

All advisors face stiff competition these days, and having to also stave off competition from your own custodian is likely an unwelcome addition to the mix. If your custodian is marketing its own investment products and advice to your clients—maybe even showing up in your neighborhood with retail locations and RIA-staffed branches—you may feel like you got more than you bargained for. 

In the same sandbox

When you were a newly independent advisor, you chose to custody assets at one of the four, soon to be three, major firms: Schwab, Fidelity, TD Ameritrade, and Pershing Advisor Solutions. The services of these big firms have become largely commoditized. Each offer the necessary core technology, hold a wide range of standard investment assets, facilitate the advisor’s billing, and do it for an increasingly lower cost.

After selecting a custodian, you were free to focus on the most important brand: your own. Your business priorities are to serve your clients to the best of your ability and build the firm’s brand reputation within your community. Unfortunately, the big box custodians have something else in common with each other and the RIAs they are serving. They have been building their own brands with an eye toward advertising their investment solutions. Slowly but surely, discount brokers have become powerful providers of advice, playing in the same sandbox as the advisors whose assets they custody. Advertising dollars to pay for their advice model has to come from somewhere, and advisors are helping to foot that bill.

Clearly this concept has been discussed before. But recently, advisors have been pushing back on custodians, particularly with the recent increase in consolidation across the industry. Custodians say that going after advisors’ clients is unavoidable—it’s what they have to do to compete in the marketplace and enhance shareholder value. As an advisor, you should be asking yourself: “What about my shareholder value?” 

Where do we go from here?

Your client relationships are the beating heart of your business, and you should not have to compromise or put those connections at risk in order to work with a top-notch custodian. Maybe it’s time to declare independence all over again.

You see, big-box custodians are presenting you with a false choice. They want you to believe that working with them is the only way to access world-class capabilities. But that simply isn’t true. Today, you can get comprehensive custody solutions—ranging from leading-edge technology to alternative investments—from custodians who are committed to not competing with advisors. As big-box custodians pull back on their support, a new generation of custodians is stepping up—applying their industry and entrepreneurial expertise to meet the unique needs of advisors whose shoes they’ve been in.

You need a partner who is independently owned, with no lines of business that compete with yours, and no interests that conflict with helping you grow. You want a custodian who only makes money if you do, and whose success depends entirely on yours.

Please stay tuned for our next post in this series as we explore the topic, “What does service actually mean to you?”

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.