Battling for Custody
Custodians try different strategies for growth as advisors
break away to join RIA firms. By Donald Jay Korn
From one angle, the outlook for custodians serving reg- istered investment advisors looks challenging.
For starters, firms holding assets for
RIAs must cope with the same difficult
environment that RIAs and investors
now face. As Greg Vigrass, president of
Folio Institutional, says, “the high level
of economic concerns is creating a
challenging investment environment,
nationally and globally.”
Among the top issues facing RIA custodians, Vigrass also lists the retirement
income and longevity needs of RIA clients, as well as changes in regulation.
Craig Gordon, director of RBC Cor-
ties for savvy custodians.
‘Large fee-based advisors leaving the wirehouses are looking for an
integrated broker-dealer and custody solution.’
respondent Services, cites “continually
shrinking margins” as an obstacle that
RIA custodians now encounter, largely
because of competition and skimpy
yields in a low interest rate environment that is likely to continue. “It’s
difficult to be compensated for the services we provide,” Gordon says.
EXPANDING THE UNIVERSE
But the outlook is hardly bleak. In fact,
the big picture is quite positive. The
breakaway broker trend is well established and is likely to keep accelerating. “There are thousands of advisors
who are candidates to become an RIA
or join an RIA firm,” says Brian Davis,
director of Scottrade Advisor Services.
More RIAs will mean more RIA assets
to hold, so the pie is likely to keep
growing and provide profit opportuni-
going forward. “Or,” he says, “due to
the changing regulatory environment,
a hybrid RIA advisor may choose to
transition to an investment advisory
representative rather than maintain
their own RIA.”
In yet another scenario, a traditional
brokerage advisor may shift to a fee-
focused practice to take advantage of
new opportunities and convert to a
hybrid model. “Our flexible and seamless
approach allows advisors to make these
types of transitions,” Bruton asserts.
Smaller custodial firm National
Advisors Trust aims to compete by
focusing more narrowly on assets held
in trust. “Among the top issues facing
RIAs are trusts and trust services,” says
Cindy Ralls, the firm’s vice president of
marketing and advisor relations. “Those
are becoming increasingly important
includes standard and nonstandard
assets with a strong degree of person-
alization and adaptability with trust
administration services.”
WELCOME TO OUR WORLD
A focus on trusts is not the only niche
strategy open to RIA custodians. “We
work largely with new and emerging
RIAs,” says RBC’s Gordon. “Especially
if they’re coming from traditional full-
service firms, they need the most help
dealing with transition issues.”
Those issues can include finding
office space, setting up an IT system,
acquiring the necessary licenses and
dealing with employee benefits. “New
RIAs are often willing to pay for the ser-
vices they need,” Gordon says, “which
creates added revenue opportunities
for us.”
