Pershing finally matches Schwab on zero-fee trades but it offers big incentives to pay a subscription fee to score perks like auto-sweep to in-house Flourish/Stonecastle-type FDIC cash manager
The Jersey City, N.J. custodian is seeking to disrupt custody's Big Three on value and price by giving RIAs a much better cash choice than having it swept to an in-house bank
Brooke's Note: Read this article with care. Pershing is announcing assaults on three new fronts -- in custody, its own line of members-only ETFs and in FDIC cash management. It's all selling for as low as a $25 per month "subscription fee." It's all brought to you by Mark Tibergien, Ben Harrison and Jim Crowley with Ben doing the talking now that he's soon to take over the executive suite from Mark.
Pershing was the slowest of the larger custodians to respond to Charles Schwab & Co.'s zero fee assault last fall, but the race is not always to the swift.
The RIA custody and clearing unit of BNY Mellon has finally, as of today (Mar. 5), matched the San Francisco broker's freemium play with zero commissions for its own RIAs.
But it did so simultaneously with a non-zero premium offering that it thinks RIAs will, perhaps, like it much more because of its transparency and big-time perks. Pershing is calling its custody fee a "subscription" fee.
“As the only remaining custodian that does not compete with advisors for retail assets, we are setting a standard for transparency and how custodians should engage with advisory firms,” said Jim Crowley, Pershing’s CEO.
Ben Harrison the longtime understudy of Pershing Advisor Services CEO Mark Tibergien will take over the executive suite when Tibergien retires May 31. See: The great Mark Tibergien is set to step down from CEO of Pershing Advisor Services to make way for heir apparent Ben Harrison
He'll hit the ground running with the new model.
“Our new pricing strategy is designed for advisors, in consultation with advisors, taking into consideration some of the long-term trends we see in the industry,” says Harrison, who currently heads business development and relationship management.
“It empowers advisors to choose what’s best for their clients and better aligns us with the fiduciary model."
The two biggest perks with the Pershing "subscription" model -- compared with its zero-transaction model -- are fixed income securities and mutual funds that will fall under the "zero" umbrella along with equities and ETFs. Pershing will sweep cash to high-yield FDIC accounts insured up to $2.5 million.
The cash offering is a direct shot at third-party providers like Flourish, MaxMyInterest and Stonecastle that have blossomed in recent years, in part, because wirehouses, broker-dealers and RIA custodians have declined to compete. See: Buckingham Strategic Wealth and Private Ocean hire startup Flourish as agent of FDIC-insured cash in rebuff to more established players like MaxMyInterest
"It's going to be extremely competitive," Harrison says. The cash tool is already built, and RIAs are likely to find it has one advantage over third parties because Pershing sweeps it directly, he adds.
But custody rivals -- handcuffed by their business models -- will find the offering hardest to compete against.
"No other custodian is doing this [cash sweep to high-yield third parties] because it cuts too much into their revenue stream," Harrison says
RIA subscribers also get access to BNY Mellon's ultra-cheap, yet to-be-launched ETFs. Those assets won't figure in the asset-based subscription fee calculation.
Another way Pershing is differentiating its pricing offering from the coming 'Schwabitrade' monolith is by pledging that all clients will get the same "high-touch" service, says the newly named RIA chief.
""That's not our model," he says. "We're a B2B model. We don't have a call-center environment." See: Schwab sends most RIAs to 1-800 custody service -- a downgrade the mass of incoming TD Ameritrade RIAs will have to swallow
Pershing declined to say how the subscription fee will work other than to offer it can go as low as $25 per month and that it rises with the amount of assets in custody.
That scheme is similar to Fidelity's custody on a few hundred of its RIAs and hugely different from Schwab, which went so far as to pledge never to charge a custody fee. See: Fidelity Investments will broaden custody fees in July, while Schwab counters with pledge: 'No custody fees and no intention to raise them'
"As the rest of our competitors double down on the direct-to-consumer retail channel, we are proud to be the only custodian doubling down on the future of the RIA business,” Harrison says.
Behind the scenes, Ben Harrison's rise to replace Mark Tibergien at Pershing was more shock and awe than a symphonic succession
Harrison's appointment was baked in the cake -- or not -- and Tibergien departed with Swiss-watch precision in Moss Adams-style--or not.
March 13, 2020 – 7:22 AM
The great Mark Tibergien is set to step down from CEO of Pershing Advisor Services to make way for heir apparent Ben Harrison
The RIA custody chief is a tireless and personable leader, consultant and guru who leaves BNY Mellon's RIA custody unit as its mission radically shifts
March 4, 2020 – 4:16 AM
BNY Mellon's new CEO is an RIA fan, and Pershing Advisor Solutions made a big personnel move to reflect it
Charles Scharf loosened the Pershing purse strings for Mark Tibergien who created 'head of platforms' position for Christina Townsend
March 12, 2019 – 10:14 PM
Pershing poaches a chief operating officer from Goldman Sachs, citing her experience doing client-onboarding revamps as a key
The Jersey City, N.J., clearing and custody company hired Emily Schlosser to fill the talent gap when Lori Hardwick left in 2017
July 23, 2020 – 11:19 PM
See more related moves
Pershing Advisor Solutions
Top Executive: Mark Tibergien