As Harley Nager suggests in this guest post, a custodian is probably the last thing you want to change in your business. In my experience, alongside their CRM and planning software, an advisor's custody platform is hardwired into the way they do business. But what happens when the platform is sold, changes focus, or becomes a competitor? Do you live with the changes or do you take the opportunity to look around?

In his position in Independent Advisor Solutions by SEI’s Digital Engagement and Distribution area, Harley has interviewed many advisors and carefully examined the changing landscape. He shares his insights and provides steps to help you evaluate what’s out there. Maybe the right move is to stay put, but how do you know if you don’t take a look?

Please enjoy this guest post from Harley Nager. – JDA

When I think of the foundational elements of any advisor’s infrastructure, the first thing that comes to mind is custody. As boring or commoditized at it might seem, it truly is the primary foundational component for any wealth management business. Technology and investment processes and products can be interchanged and adjusted relatively easily over time, but custody is core. It’s often the last change advisors are willing to welcome into their practice and client relationships.

In light of all of the recent custody industry consolidation, widely documented service challenges, new entrants, and more options to choose from (which could be good or bad), many advisors say that it might be time to think about their current infrastructure and start their due diligence.

Today, I’d like to share what some of what your peers are saying, and also give you some things to weigh when deciding whether or not a change is right for you.

My team and I recently interviewed RIAs about a number or topics, including custody. Here’s what they told us:

  • “My custodian was sold. Not much has changed so far, but I have no idea what the future holds for me — or my clients.”
  • “I’m concerned about being 'just another number.' My firm and my clients deserve a more personalized approach.”
  • “I’m starting to think ‘Is there a better way? What are the best custody options available for my clients and me?’”
  • “I’ve been wanting to make a switch for a while, so maybe all these changes provide an opportunity to revisit my current structure and optimize my business for the future.”
  • “If I make a change, how will the experience be for my clients — and how should I tell them?”

Do your due diligence, then do something, or nothing…

In the end, doing nothing might be the right strategy for you and your clients. But based on what your peers are saying, at a bare minimum, it probably isn’t a bad idea to embark on some version of a due diligence world tour to fully inform yourself. In the end, you’ll either feel good about your decision to stay put, or you’ll find something better to improve your offering and clients’ experience. I want to help you think through your current state, and give you some nuggets to contemplate as you move forward.

So get the band together, pack up the equipment, and hit the (virtual) road. When you do, here are some things to consider when deciding what to do next.

Four things to think about on your custodian due diligence “world tour:”

I want you to want me

Does your custodian really value your business?

In the words of Robin Zander from Cheap Trick, I want you to want me.” If you’re an advisor using a custody platform that was sold to another firm, ask yourself, “Do I look like the rest of the firms here, or did I end up here because I was just part of the deal?” You might also ask, “Am I the type of firm that my new custodian markets to and attracts?”

Most providers will say that they want advisors of all shapes and sizes, but do their actions match their words? Engage with firms that make you feel wanted and valued, because it’s no fun feeling like Pete Best, on the outside looking in.

Do they turn it up to 11?

Are they fully invested in their advisor support?

Listen to an earnings call. When you do, what do you hear? Is it the “Sound of Silence” or do they “turn it up to 11” when they speak about their advisor support business? Do their retail or other business lines substantially outweigh the importance of their advisor business? You’ll want to have a feel for all of this. If other areas are more highly valued than the space that you and your clients occupy, how do you know if they’ll truly have your back?

Nothing else matters

Your clients’ assets come first. Will your custodian have staying power for the long haul?

James Hetfield from Metallica sang, “Nothing else matters,” (but clients, of course). That’s a good reminder that the stability of your custodian and the user experience are tremendously important. Clients want to know above all else that their assets are safe. If the market drops, or the environment changes, does your custodian have a diversified and stable business to weather the storm? Do they have a track record in times of tumult? While new entrants to the custodian field might seem attractive and cutting-edge, only time will tell if they have staying power.

In fact, with so many new entrants in the field, you may want to consider the five-year test. In other words, will this new entrant be around in five years or will they be a one-hit wonder? As advisors, you’re in a challenging spot where you need to combine the stability of your business infrastructure with a modern look and feel for your clients. You need both, and finding that balance can be tricky. 

Play Free Bird

You have options. Find the answer that is right for you and your clients.

In the end, choosing the right RIA custody platform for your firm and clients is a big decision. The good news is that you have more options than ever. The bad news is that more options and new entrants can make your research process muddy. Contemplate what’s most important to you and your clients, and don’t forget to pick a partner that prioritizes your business and your clients. Doing nothing is a strategy and could be the right one for you, but make sure whatever decision you make is made with purpose. In the end, when times get tough, your clients will be looking to you for “Shelter from the Storm,” which you will only be able to provide if your foundation is solid. 


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