In last week's blog post we discussed a custodian I investigated, Interactive Brokers (IAB). This week, we'll touch on a few others and specifically, TradePMR (TPMR), the custodian I've used since February 2009. It's fairly common for other RIAs to reach out to me to for an opinion of TPMR and through these conversations, I also learn about other custodians. Here's what I learned from an advisor this past week.
The two most important aspects in the decision to select a custodian are possibly the amount of assets under management and the type of business you engage in. On the asset front, there are a few which do not have a minimum, (as far as I know). They are TPMR, Shareholders Service Group (SSG), and Scottrade. According to the advisor I spoke with, SSG has lowered its transaction costs on mutual funds and ETFs. It appears they are now lower than TPMR, assuming this is correct. However, there is one issue which remains in TPMR’s favor: advisors with TPMR have the ability to utilize most, if not all, institutional share class mutual funds. As far as I know, SSG is still limited in this area. I also learned that Scottrade is still building out its platform for RIAs, but may be an option if your amount of AUM is small.
If you have over $10 million in AUM, in addition to the aforementioned custodians, TD Ameritrade and Schwab may be an option. If I recall correctly, Fidelity had a $15 million minimum. All three were a little higher than TPMR on transaction costs for mutual funds, but lower on ETFs (last time I checked). Now, let's move on to my custodian, TPMR.
Overall, I have been pleased with TPMR. The people are helpful, the technology is great (which may be one if its strongest assets), and the transaction costs were "middle of the road." For mutual funds, they have been competitive. For ETFs, they are higher than most other custodians I've reviewed. This has not much of an issue as most of my business was in mutual funds. However, I am quickly moving toward ETFs and TPMR’s transaction cost has become an issue. Even so, the thought of moving all of my accounts to another custodian and learning a new platform is daunting.
Therefore, this remains an area of concern for now. Recently, TPMR lost its Chief Technology Officer. The advisor who called me asked if I was concerned about this. Although I am no expert in this area, I feel confident that the people TPMR has in place are fully capable of maintaining a competitive edge with technology. Moreover, with TPMR’s new platform (Fusion) already in place, I'm not concerned about the continuity and performance of it.
I hope this helps any of you who may be searching for a custodian.
Thanks for reading and have a great week!