Every RIA hopes to find a custodian that is a good match for their business and clients. But how can you tell if a custodian is a good fit before you’ve committed to the partnership?
Obviously, a custodian needs to offer products that align with your clients’ accounts and assets. But products are just one of many considerations when choosing a custodian.
Here are five factors to consider when selecting a custodian:
What is right for one RIA isn’t necessarily right for another.
Every RIA is different. Therefore, the answer to the question “Which custodian is best for my business?” varies from one RIA to the next. The services you provide, the makeup of your clients, the size of your business, and everything else that makes your RIA unique determines what type of custodian you need. For this reason, it is important to spend some time learning about different custodians’ areas of focus. A custodian that specializes in supporting well-established RIAs may not be attentive to the needs of a startup RIA. So, do your research. Don’t use a custodian simply because other RIAs do. That being said, once you’ve come up with a shortlist of candidates, it can be helpful to speak to other RIAs who have first-hand experience working with those custodians.
The value of personal relationships shouldn’t be overlooked.
It goes without saying that RIAs understand the value of personal relationships. Much of the success of your business hinges on your ability to develop personal relationships with clients. But personal service and support from a custodian, on the other hand, is becoming more difficult to find. Trends show that some custodians are opting to route RIAs through customer service call centers. Not only does this mean having to work with someone that doesn’t know you or your business, it can also take longer to get the support and resolution you need. It is becoming increasingly necessary to ask questions and truly understand a custodian’s approach to service before entering into an agreement together. Some questions to ask include:
- Who will I reach out to when I need support or have questions?
- Will I have a direct pathway to reach a dedicated team member, or will I be sent to a call center for support?
- Are there times when we will have face-to-face meetings?
Smaller RIAs may need to be more discerning.
Smaller RIAs often face challenges larger firms don’t when searching for a custodian. For example, platform minimums set by some custodians to exclude RIAs with low AUM can make it difficult for smaller and mid-sized firms to find a custodian that is willing to work with them. And, the struggle doesn’t end there. Smaller firms often get less personal attention than larger RIAs. Therefore, it is important for small and mid-sized firms to do their homework before choosing a custodian. It is helpful to ask questions like:
- Do you assign a personal relationship manager or team to every firm you support?
- How do you support and build lasting relationships with the smaller firms on your platform?
- Are there expectations that the smaller firms on your platform must hit certain growth benchmarks?
A custodian’s technology impacts the efficiency and accuracy of the services you can provide clients.
Some custodians place more importance on technology innovation than others. You should look for a custodian that offers an open-architecture technology platform and integration with leading third-party technologies. By inquiring about a custodian’s technology offerings, you will begin to get a sense of whether that custodian is a technology leader. Not only that, but you can find out what training and technology support will be available to you as a custody client.
Custodians that offer integrated banking services can help you meet evolving client expectations.
Clients have started to push their RIAs to provide a broader range of financial services. If you want to be able to offer a more holistic financial experience to your clients, it is helpful to partner with a custodian that offers integrated banking services. This can make your firm more attractive to clients seeking an RIA.
Every RIA should consider these five factors before choosing a custodian. If you are in the market for a custodian and want a practical tool to help you evaluate custodians, download “Choose Your Custodian Wisely: A Checklist for RIAs.” And, if you are interested in learning about Axos Clearing and whether we meet the needs of your RIA business, book a free consultation