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A small RIA custodian in San Diego faces a new challenge: accelerating growth [updated]

Peter Mangan is creating a company that resembles the old Jack White more every day

Monday, January 11, 2010 – 5:36 AM by Brooke Southall
no description available
Peter Mangan: [RIAs] like that we’re a boutique operation

Editor’s note: This article was updated with a comment from Mark Tibergien who heads Pershing’s RIA custodian.

It seems like a simple business plan but Peter Mangan was one of the few with the vision and patience to make it happen.

In 2002 he founded an asset custodian for RIAs – and only registered investment advisors — called Shareholder Services Group in San Diego. Since then, Mangan has been to content to let the company grow at an organic pace, and it has sought no media attention.

Mangan made make it a welcoming place that takes on the smallest practitioners and assures them personal service. Though Mangan declines to disclose the cumulative assets under custody at his firm, he says that his company now has more than 500 RIAs as clients and it brought aboard about an RIA per business day in 2009 — like Scottrade Advisor Services. Read: Scottrade rakes in small RIAs

Mangan founded SSG after nearly a decade of helping to build up Jack White, a place also famously welcoming of the little guy, before it was acquired by TD Waterhouse in 2000.

Starting an asset custodian is a little like starting a bank. You’re immediately thrown into battle with companies of enormous scale, with household brand names. For custodians, that includes brokers like Charles Schwab & Co, Fidelity Investments and TD Ameritrade.

Scrap for every customer

But, if you’re a small custodian, you do have an advantage. Banks might scrap for every customer, but the asset custodian business is so profitable that the big companies are content to focus on certain segments of the market.

The more successful the big custodians are, the less likely they are to want to compete with you for fledgling RIAs that are just getting their feet on the ground.

With no minimum asset requirements, SSG thrives on small advisors: Only about 5% of SSG customers have more than $100 million of assets under management.

There is little doubt that SSG can continue to thrive, though with one caveat, says Mark Tibergien, CEO of Pershing Advisor Solution.

“They are making some interesting moves” including making the hire of Dan Skiles, he says. “In terms of a niche market, they can be relatively superior as long as they don’t try to be something that they are not.”

Indeed, one good source of client referrals for Shareholder Service Group is referrals from larger custodians because of this niche focus, Mangan says.

The other source is more straightforward: “Advisors are telling other advisors,” he says.

SSG’s new clients fall into four main categories:

• de novo clients, like a brokers setting up their own business.
• colder starts, such as a mutual fund manager setting up shop as a financial planner.
• a large number of fee-based IBD reps who are bringing their business under their own RIAs.
• Finally, existing RIAs who are moving assets from legacy custodians.

Of the RIAs in the last category, some of them are pleased enough with the services of the custodian; they are merely “worried about the direction” that their custodian is headed. Many custodians engage in multiple lines of business and offer more comprehensive financial advice in their retail branches with each passing year.

Potential conflict

This potential conflict has made RIAs of a certain mindset distrustful enough of these companies that they have been motivated to move their assets elsewhere.

“[RIAs] like that we’re a boutique operation,” Mangan says.

Mangan co-founded his company with Robert Reed, SSG executive vice president, who formerly led the creation and development of Jack White & Company from its inception in 1978. The men have bootstrapped the business by outsourcing where necessary and keeping service levels high. The low-overhead approach had a quick side benefit: positive cash flow within two years of starting up.

Now the company is facing a new challenge: robust growth. It is bringing aboard on average an RIA per business day. It is seeking more space, increasing staff [by about 25% from 12 to 15 in 2009] and bringing aboard more executive talent. See: How Schwab’s top RIA tech executive ended up with a fledgling competitor

Equity stake

Mangan brought board the former head of technology for Schwab Advisor Services, Dan Skiles, last spring and gave him an equity stake – most of SSG’s employees have one —and a mandate to prepare the company to grow even faster. Skiles worked for Jack White from 1994 until it was acquired by TD Waterhouse in 2000 and then stayed on under Tom Bradley for two years.

“It’s indicative of our growth,” Mangan says.

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The CEO broke the TD promise never to compete with RIAs, took it back and got sent packing

July 23, 2019 – 4:30 AM

Robinhood gets 'brilliant' upper manager -- and a spare CEO -- by nabbing TD Ameritrade's ex-thinkorswim top exec, hopefully to throw a lifesaver to Robinhood's sinking stock

The Menlo Park, Calif., firm nabbed Steve Quirk as first-ever chief brokerage officer to 'bridge the gap between academia and reality.'

January 6, 2022 – 10:33 PM

Oisín's snippets: Charles Schwab brand goes up on Omaha's TD Ameritrade stadium, home of college baseball world series • Interactive Brokers lands an RIA custody insider, Charlie Latimer, to climb the custodian ladder

The TDA brand lives on until the techies figure out how to make two systems into one, but change is in the air in Omaha, while Interactive Brokers gets a leg up in the custody business with a new hire.

December 27, 2021 – 9:58 PM

Fidelity Investments loses Kathleen Murphy who largely caught up Fido to Schwab (near $4T) on the retail side by reversing net promoter scores

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January 23, 2021 – 2:02 AM

See more related moves

Mentioned in this article:

TD Ameritrade
Asset Custodian
Top Executive: Tom Nally

Shareholders Service Group
Asset Custodian
Top Executive: Peter Mangan

Paul Harris

Paul Harris

July 6, 2011 — 4:33 PM

Advisors seeking a solution may also want to look at using Dynamic Wealth Advisors. They have a great bundled technology platform. Complete back and middle-office solution. 40+ investment models (including DFA) an advisor can use, if they want…at no cost. They work with small advisors and RIA firms, and offer a choice of custodians.

Brian Miller

Brian Miller

November 14, 2013 — 6:45 PM

I haven’t found their service to be all they claim to be. Nice people, but not always the most knowledgable.

Tom Berghage

Tom Berghage

May 20, 2011 — 8:27 PM

I am looking for a custodian for my California registered RIA (NeuWorld Financial). We have a 20 year record with no customer complaints. Can you please send information on your services.

Thomas E. Berghage, CEO
13439 Black Hills Rd.
San Diego, CA 92129

Frederick Van Den Abbeel

Frederick Van Den Abbeel

January 14, 2010 — 1:26 PM

There is little doubt that SSG can continue to thrive, though with one caveat, says Mark Tibergien, CEO of Pershing Advisor Solution.

Interesting comment by Mark Tibergien — “They are making some interesting moves” including making the hire of Dan Skiles, he says. “In terms of a niche market, they can be relatively superior as long as they don’t try to be something that they are not.”

As a representative of a small custodian firm myself named Trade-PMR, Inc., based out of Florida, I feel SSG has every right to grow and be the custodian they want to be. Of course, it probably doesn’t help that SSG’s clearing firm, Pershing, LLC., also operates their own competiting Custodian firm headed by Mark named Pershing Advisor Solutions. To have a clearing firm also be your own competitor must make for an interesting twist on things.

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