There are many considerations for building an RIA: your compliance consultants, technology stack, and overall investment philosophy. But your choice of custodian for your clients’ investment needs is one of the most important factors when it comes to the success of your firm.
The lifecycle of taking a lead to a client can happen fast, and once that happens, your clients will find themselves on a custodial platform where their life savings will be entrusted to you for compounding their wealth, investment guidance, and asset safe-keeping. While there are options—traditional and burgeoning—for a custodial solution for your RIA, there are also many questions to consider.
Below are 7 questions that you should ask yourself before choosing a custodial partner:
1. Do I know who I want to serve?
You’ll never have the right custodian if you haven’t first identified who it is that you want to serve. Many factors associated with your client demographic can influence the type of custodian and services needed to adequately serve them and increase client satisfaction.
Is your client demographic technologically savvy? Do they value responsive and impactful client service? Are they depositing or withdrawing money frequently? Are they using many applications on their mobile phones? By deeply understanding the qualitative and quantitative demographic of your clients, you’ll be able to reduce the options to a few contenders that can meet your high-level needs.
2. Are there assets under management minimums?
Assets under management (AUM) has been the longstanding metric for access to custodial relationships within the financial services industry. Traditionally, many custodial platforms required an independent advisor to have $10 million in assets under management or more before allowing their firm to house client assets at their institution. Today, that number varies depending on which firm you choose. If you are an emerging advisor or do not want to house all of your assets on one platform, make sure that you fulfill the asset requirements needed for your custodial partner.
3. Does this custodian increase the efficiency of my firm and clients?
My rule of thumb has always been twofold. First, if a custodial partner saves me and my staff time, then it’s worthy enough for our firm to at least look into. Secondly, and even more importantly, is that if it saves my clients time, then we’ll definitely consider the platform as a viable option for our business.
Efficiency doesn’t just stop there. If the custodian helps an advisor to trade across accounts, create model portfolios, rebalance effectively, fee bill, and has baseline performance reporting, then it allows us to serve effectively while saving time and clutter for all parties involved. This decluttering and efficiency can also take its form through key integrations that a platform might have with other technology that you might already use. Less is better when your technology works together.
