I have worked with countless independent broker dealer-affiliated advisors and registered investment advisers and have learned there are varying opinions about what an advisor should expect from a custodial partner, or how their relationship should be viewed. For example, some advisors view custody as a synonym for plumbing — a mere commodity that’s kept out of sight — and their service expectations are limited to transactional support. In fact, often they actually expect mediocre service and support, which is unfortunate. They aren’t aware that they may have a choice beyond proprietary custody. 

However, others embrace a more progressive stance, recognizing that custodians have evolved and can provide an ecosystem that enhances the value advisors provide to their clients. 

To complicate things further, there is a parallel point of view that custody should be “free.” Of course, most advisors intuitively shy away from the word “free,” instead gravitating toward phrases like, “zero pricing,” or “no fees.” After all, as astute business owners, advisors know there is no such thing as a free lunch, or free custody, even if you can’t always see the costs. 

How much does your choice of custodian really matter?

One thing is for sure, all advisors recognize that custody is a primary foundational component of their business and that adopting a custody partner should not be an afterthought or a passive decision. 

Being deliberate and thoughtful about choosing a custodian has long-term benefits and the selection process should be approached with purpose. The right choice can increase your control over the business, provide flexibility for you and your clients, and potentially increase the value of your practice over the long run. Conversely, selecting a custodian that might only be able to support your business for the short term will certainly cause issues down the road. 

Financial services firms, whether they are custody, fintech, asset management or retail, compete on the basis of user experience probably more than on anything else. The firms with the most amount of scale have been able to drive costs of custody to a perceived level of zero — and largely compete on the basis of price and brand. This has left room for other providers to differentiate by providing more. For advisors seeking to provide more personalization, more support, and more core functionality than traditional providers, there are available choices in terms of quality and options. 

Enter the TechstodianSM

Some custody providers, like SEI Private Trust Company (SPTC), have succeeded at providing business ecosystems that go far beyond the traditional view of what custody could and should be. We’ve coined the word Techstodian℠ to describe a provider with built-in technology that connects your business to your clients. In other words, there is no assembly required because custody and wealth management technology are combined into one singular offering.

Back to the discussion of “free.” Why have custodial partners been put into a position of finding ways to derive revenue that can’t easily be seen? Advisors and clients agree that custodians must have a revenue model that allows them to be supportive to both investors and advisors, but with the caveat that the revenue needs to be invisible (which is not a belief SEI subscribes to) Not to mention, if a custodian is truly foundational, and its health has a major impact on the success of an advisor practice, wouldn’t having a solid understanding of your custodial relationship be in everyone’s best interests?

Go ahead — set your expectations high. You and your clients deserve it

The relationship between a custodian and an advisor can be so much more than the mere exchange of basic functions. There is more choice today than ever before, and that competition is breeding innovation. Having high expectations for our custodial partners should be the norm. It’s time to expect more.

Custody services provided by SEI Private Trust Company, a federally chartered limited purpose savings association and wholly owned subsidiary of SEI Investments Company.


Legal Note

Information provided by Independent Advisor Solutions by SEI, a strategic business unit of SEI Investments Company. The content is for educational purposes only and is not meant to provide investment advice or as a guarantee of any specific outcome. While SEI welcomes comments, SEI is not responsible for, and does not endorse, the opinions, advice, or recommendations posted by third parties. The opinions expressed in comments are the view(s) of the commenter(s), and do not represent the views of SEI or its affiliates. SEI reserves the right to remove any content posted by users of this site in its sole discretion.

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