Asset Custody Project rolls forward

In my 10 years of covering RIAs and their custodians as a journalist, I occasionally get a phone call that makes me realize how much more work I need to do to keep advisors informed.

Some RIAs with fewer than $20 million of assets under management call to ask me whether there are custodians in the marketplace other than Schwab Advisor Services.

Another conversation I occasionally have with smaller advisors at Schwab or Fidelity regards what they say to me as a member of the press. If they say the wrong thing, the advisors say, the custodian will drop them and they’ll have nowhere to go.

[To the best of my knowledge, that has never happened in the history of asset custody, though I spoke to a Merrill Lynch broker at last spring’s IMCA conference who said that the wirehouse came close to terminating him after he made non-compliant remarks to a local reporter in the Midwest.]

Reacted to a conversation

One more anecdote: Tom Nally of TD Ameritrade Institutional told me how one UBS veteran broker with a big book of business reacted to a conversation he had with him in his office.

The advisor was anticipating being pushed out of his wirehouse as part of the paring down that has been going on there.

Nally explained to the broker how TD helps people to convert their books of business into independent RIAs. After the broker absorbed what Nally had to say, he danced out of the office in joy.

Before this conversation, the broker had literally been under the impression that there was no alternative way to continue his career outside of the wirehouses.

Awareness spectrum

These anecdotes are about people at the far end of the awareness spectrum.

Yet I also believe that they are also indicative of how little most brokers know about RIA custodians and how little RIAs know about custodians beyond the one that keeps client assets for them.

As I get deeper into the research I have been doing for the Asset Custody Project, I am rapidly realizing that there is also plenty that I didn’t know either. One thing I didn’t have a handle on was just how many custodians are out there and what kind of a niche that they command.

List of asset custodians

Here is the list of asset custodians that I have on my radar ordered roughly according to size:

Schwab Advisor Services

Fidelity Institutional Wealth Services

State Street

TD Ameritrade Institutional

Pershing Advisor Solutions

RBC/JPMorgan [merger of RIA units scheduled for around June]

Broadcort/Merrill Lynch

Trust Company of America

LPL Financial

Raymond James

Scottrade Advisor Services

Shareholders Service Group

TradePMR Inc.

FolioFn

Wells Fargo Advisors

Stifel Nicolaus & Co.

Now here are a couple of reasons why this extensive list is still inadequate. I have two close friends who have RIA practices – both of them happen to be in my native state of Maine. Though both of these practices have assets numbering in the hundreds of millions under management, neither one makes much use of custodians on the list above.

One uses wirehouses and the other one uses a regional Maine bank. I suspect that there are plenty of RIAs that use institutions other than “RIA custodians” to hold clients assets.

Life of its own

This custody project has taken on a life of its own. I originally came up with the idea for writing recaps and outlooks over the holidays. I wanted an article I could write during a slow news cycle. I literally anticipated writing out blurbs about each custodian based on my own knowledge. I imagined it could be done in an afternoon.

Before knocking it out, I made phone calls to several custodians on the list and asked if they would donate input. Most of the custodians put the head of the unit or a top executive on the phone and gave me in-depth look at what happened in 2009 and what could be expected for 2010.

This upped the ante. The information was high-level and much of it was fresh information that I didn’t know from my day-to-day coverage of the industry. To do it justice, I was going to need to write in more depth.

Unintended consequence

Another unintended consequence of those interviews was that several good storylines for news articles arose. There was no waiting to write them. This was a good problem to have but it further delayed the Custody Project.

Next, Elizabeth MacBride, my editor, got into the act and told me that we couldn’t publish such profiles without a standardized grid to go with my commentary about past and future. It took some research and brainstorming to develop this grid and this is where it stands right now:

1.) Name of custodian:

2.) Address

3.) Parent company, if any:

3.) Founded:

4.) Total Assets in custody:

5.) Number of RIAs using platform:

6.) Head of RIA custody business and executive’s starting date:

7.) Head of RIA sales and starting date:

8.) Name of RIA technology platform:

9.) Date of Last major update on tech platform:

10.) Minimum assets for advisors:

11.) Size of biggest advisory client by assets:

12.) Custody fees [including fees for RIAs that fall under the minimum]:

13.) Brand names of [now defunct or soon to be] custodians absorbed by custodian:

With so much information needed for each custodian’s profile, I soon realized that I would never find a block of time to complete them unless I stopped posting articles for a few days.

We like to provide a steady stream of articles at RIABiz, so that seemed like a bad idea.

Current plan

The current plan is to get them done as expeditiously as possible [without ignoring news and other hot, timely stories] and publish them as they’re completed. When each one has been published, they will be compiled in a technologically marvelous form that Nevin Freeman, our webmaster, is dreaming up.

Because TD Ameritrade Institutional is having its national conference this week in Orlando, the plan is to publish the profile of that custodian first. It’s a dynamic custodian and its president, Tom Bradley — who is now the longest-tenured top executive in the RIA custody industry — provided some interesting comments. Look for the profile to be published by Wednesday.

Editor’s Note: If you don’t see the name of your custodian on this list, don’t get mad. Send me an e-mail and I’ll consider adding your firm to the Project.