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Deciding which custodian to do business with can be a challenging process for independent financial advisors. In recent years, the role of the custodian has expanded beyond holding client assets and executing transactions. Today’s custodians are expected to provide a host of resources that support the advisor’s business, including advanced technology platforms that integrate seamlessly.

It’s a critical decision. As a custodian ourselves we’ve seen how RIAs can be best set up for success and avoid pitfalls. The right provider can provide efficiency, improved productivity and peace of mind. Conversely, a poor fit can do just the opposite, especially if their technology is outdated.

Regardless of your business model, it’s important that custodians help produce outcomes that match your expectations. Here are some steps to consider when selecting a custodian:

Determine Your Goals and Pain Points

First, determine what you’d like to achieve through a custodial relationship. Are you looking for easy, efficient account management? Robust investment management technology that enables you to develop and trade your own models and strategies? The ability to scale your business so you can grow assets and net income without the need to expand your staff?

Consider the challenges — pain points, if you will — that you and your staff regularly encounter. What’s tripping you up each day? Maybe it’s a time-consuming trading process, too much manual billing and reporting, or arduous procedures for opening accounts.

As you review your process, consider asking your employees and RIA peers for their input. There may be inefficiencies in your day-to-day operations of which you’re not even aware.

Evaluate Your Options

You’re likely to be faced with many alternatives in your search for a custodian, so proper due diligence is critical. You’ll want to dig deep and consider the answers to these questions:

  • How well does the custodian understand your business model and organizational goals?
  • Could the provider potentially undermine the RIA/client relationship — or even compete with you for clients?
  • How robust is the provider’s technology platform? Is it easy to use? Will the provider’s technology integrate seamlessly with your business?
  • What technology is already built into the platform, such as performance reporting, fee billing, and account aggregation, and what will have to be added on at additional cost?
  • How efficient is the custodian’s trade execution? How easy is it to rebalance portfolios?
  • How easy is it to build and trade models? Can you easily create your own strategies? Can you put multiple models or strategies into a single account?
  • What is the pricing model for trades? Is it asset-based or is a ticket charged for each trade?
  • What is the service model? Does the custodian provide a dedicated relationship manager?
  • How is the client experience? Does the client portal offer private labeling for your brand?

As you do your research, identify all the options and list all the pros and cons of each so that you can focus on the custodian that is the right fit for you.

Select a Champion for Implementation and Integration

OK, you’ve done your research and have selected a custodian and technology platform for your business. Congratulations. Now you get to see the fruits of your labor. But the integration stage comes with its own set of challenges.

Start by selecting a designated point person within your business — a champion of sorts. This person should be the main point of contact between your organization and the vendor. Ideally, this person will have been involved with the process from the beginning. This point of contact should work with your new custodian to schedule team training, address pain points, answer any questions that may arise, and help achieve the desired outcomes of the partnership.

Don’t shortchange the integration period. Plan enough time for integration, testing and training. This will be key to getting the most out of the new partnership and realizing maximum benefits from what is hopefully a robust technology platform.

Your business is unique. Don’t settle for a one-size-fits-all integration. Make sure your new custodian is customizing its services and technology to your business goals.

Review Your Custodial Provider Regularly

Even if you’re pleased with the integration process, the job isn’t over. Consider evaluating your custodian on a regular basis. Are you making progress toward your business goals? Are you using your integrated technology platform to its fullest potential? There may be features that you can better utilize, including tax harvesting, account aggregation, or practice management support.

And make sure to solicit feedback from stakeholders—especially your own staff—at every step in the process. In evaluating the custodial partnership, don’t overlook training, provider support, platform functionality, and ease of use.

Today’s custodial platforms can revolutionize your business by increasing efficiency, expanding your service offerings and providing superior client outcomes. Make the most of this opportunity. Choose your custodian wisely.

— More by Mike Lover:


 Mike Lover, Vice President of Strategic Business Development at E-Trade Advisor Services, is responsible for managing relationships with RIAs and helping them to grow their business. In this role, Lover helps clients through practice management support, process improvement strategies and vendor introductions. Previously, Lover was VP of Process Improvement for Trust Company of America. Lover also held positions at Baxter Healthcare, TEG Global and LTS LLC. He received his bachelor’s degree at University of Toledo.