Five months after trading commissions for RIA investor clients fell to the wayside at Charles Schwab, TD Ameritrade and later Fidelity, Pershing jumped into the act with a zero-commission model tied to a low-yield cash sweep program and the option for advisor clients to pay at least $25 a month with fees tiered to assets.
What does the news mean for advisors — grappling with Schwab’s impending purchase of TD Ameritrade and other disruptive forces, like newbie Altruist’s entry into the custodial space this week?
“What Pershing has done — at first glance — is innovative because it essentially gives advisors more options,” said John Furey, managing partner at the consulting firm Advisor Growth Strategies.
“There’s a flat fee if you want it, which is a bit different from charging basis points on assets,” Furey said. “Advisors will look at this and see opportunities to use it for some clients. Pershing is trying to attract large advisors and large clients [with this pricing model].”
Altruist CEO Jason Wenk, though, is more skeptical about the attractiveness of Pershing’s Netflix-like offering. “In regards to the subscription plan, I can’t understand why an RIA would find this desirable,” he said in a Twitter message. ” … changing how they make money but not changing how much they get; doesn’t seem like progress to me.”
A Test for Schwab?
Meanwhile, to win over TD Ameritrade RIAs concerned with what the acquisition could mean for them and their practices, Schwab says it has no asset minimums, no custody fees and “no intention to raise them.”
But that pledge could be sorely tested with Pershing’s move, says Tim Welsh of Nexus Strategy (and a former Schwab executive).
Before Thursday, Pershing had no official custody fees. “Now, they [have] explicit fees, with alternative pricing options,” Welsh said.
Schwab’s pledge “backs [it] into a corner by removing any ability to maneuver, because they can’t charge any custody fees and thus [can’t offer] flexible pricing options,” he explained. “And [Schwab has] no ability to increase revenues while … every other custodian is raising fees.”
Ultimately, Welsh thinks, “It’s only a matter of time until they break the pledge.”