This is one of the most important decisions you’ll make if you become an RIA. If you have over $30 million in assets under management, you can choose most any RIA custodian. If over $10 million, you still have a number of options. However, if your AUM is under $10 million, your choices are more limited. Hence, this should be your first question to any custodian.

Before I chose TradePMR as my custodian in February 2009, I put together a spreadsheet to help with this decision. Each column was a different item I wanted from a custodian and each row was a different custodian. This allowed me to keep track of all of the nuances from one custodian to the next. Here is a list of some of the items I was looking for from my custodian:

  • AUM minimum
  • Transaction costs for mutual funds, ETFs, stocks, fixed income, etc.
  • Annual account fees for IRAs and other accounts
  • Liquidation fees for all account types
  • Statement frequency and details (e.g., cost basis, adding your logo)
  • Client online account access
  • Products offered (e.g., number of no-transaction fee funds, alternative investments, fixed income, CDs)
  • Transition team to help move your clients
  • Insurance coverage in excess of SIPC
  • Total number of advisors that custody with them
  • Total assets under management
  • Year custodian began to operate in the RIA space
  • Fee deduction process and when is it credited to your account
  • Performance reporting capabilities
  • Technologies available on their platform (including outside partners)

The more organized you are before you form your own RIA, the more time it will save you and the better informed decisions you will make.

I should mention that no matter how many questions you ask up front, there will always be things you didn’t ask but wished you had. However, this process will help you minimize the potential for a bad decision.