First Thoughts on The Acquisition

The two largest institutional custodians are joining forces.  What does that mean for the profession, and what are the options for advisors looking elsewhere?

remember back in 1999 attending the TD Waterhouse annual event for financial advisors, less than a year after the firm had acquired the advisor services back office of Jack White & Co.  The firm had tapped a young Waterhouse executive named Tom Bradley to run the new advisor services division, and after he offered a gracious welcoming address and promised a continuation of the (actually quite good) service the advisors in the room had come to expect, I walked over to congratulate him, and give him one small piece of advice.

“What this profession really needs is a viable alternative to Schwab in the custodial space,” I told him.  “You will have been successful if someday, when people talk about institutional back offices for advisors, you’ll be large enough that they’ll talk not just about Schwab, but include TD in the same sentence.”

In the years since then, Bradley, his successor Tom Nally and TD overall made that happen, and TD—now TD Ameritrade Institutional—has successfully positioned itself as the anti-Schwab.  Where Schwab Advisor Services discouraged smaller RIA firms from affiliating on its platform, TDAI welcomed them.  Where Schwab executives delivered speeches at their annual conference about their corporate achievements, and said that they were loyal to the advisor channel because it was such a profitable enterprise for them, TD executives mingled freely with advisors and, at their annual and regional meetings, talked aspirationally about how fiduciary advisors were changing the marketplace conversation regarding service and a fiduciary commitment to clients.

TD Ameritrade gave the profession a regulatory and fiduciary advocate in Skip Schweiss, and a diversity advocate in Kate Healy, while the Schwab organization largely kept silent about those issues when it wasn’t arguing to the SEC for a watered-down fiduciary standard. (See if you agree:,,,

Of course, this is a lead-in to a lot of news that took all of us by storm here at the end of the decade, and threatens to roil a formerly complacent RIA marketplace in the coming year.  There’s the blockbuster announcement that Schwab had reached an agreement to buy TD Ameritrade—most prominently its retail operations, but of course the custodial business is part of the package.  There was the announcement that Schwab-affiliated advisors with under $200 million AUM would no longer be served by dedicated service teams, and a quieter announcement that Schwab was instituting a reduction in service team personnel.

Then Bradley suddenly triumphantly appeared back on the scene, named to oversee Schwab’s custody business serving RIAs with $100 million or less (basically, state-registered advisors).

And of course there was the announcement that Schwab’s retail division (and the advisor division along for the ride) had decided that to maintain market share, it would meet, head on, Robinhood’s price point of zero commissions on stock and ETF trades (but not mutual fund trades).  Very quickly, TD Ameritrade, apparently caught by surprise, announced its own zero commission policy on the discount brokerage side—and also (like Schwab) for advisors.

There are a few points to make here that I believe advisors should keep in mind as we sort all this out:

1)  This is NOT a merger.  It is an acquisition.  The united company will be controlled by Schwab and live under Schwab’s culture.  The company will almost certainly convert TDAI advisors from Veo One (and the open architecture concept) to Schwab Advisor Services technology.  This is not a disaster; most advisors I talk with who clear through Schwab generally like the tech they’re using.  But it will certainly reduce the opportunities for innovation.  When I talk with emerging tech companies, they inevitably tell me that TDAI was the first custodian to welcome their integration, and the open APIs in Veo One allowed them to create their own direct feed into the custodial system.

2)  Unless something strange happens, TDAI advisors will NOT have to completely repaper their clients—as I and others originally speculated.  I talked with several advisors who went through TDA’s acquisition of Scottrade, including its advisor custodial division, and they report that their clients went through a very smooth “negative consent” process, where clients were sent email messages about the impending transfer of assets, and were invited to object—or not.  Few objected.

“Honestly, it was a pretty smooth transition,” says Erin Baehr, founder of Purposeful Money in Stroudsburg, PA—who was forced to switch from Scottrade to TDAI after the acquisition.  “I had to do a new advisor agreement with TD Ameritrade for my RIA,” she says (and TDAI advisors can expect the same when they move to Schwab), “but for clients, it was all done automatically.  They got lots and lots of communication—so much that after a while they just basically ignored it.”

That doesn’t mean there would be no paperwork.  Robb Baldwin, founder and CEO of TradePMR in Palm Beach, FL, notes that there can be a lot of legalese around IRA designations and custodial arrangements, cashiering agreements and occasional FINRA qualification rules.  “People think of repapering as always establishing new account documents,” he says.  “But there are a lot of arrangements that have to be properly re-documented.”

Peter Mangan, CEO of Shareholders Service Group (SSG) in San Diego, found it interesting that in a recent conference call, Schwab CEO Walt Bettinger declined to say definitively that TDAI advisors wouldn’t have to repaper their clients once the acquisition was consummated.  “They might not need everything repapered,” he says, “but if there are margin agreements, they might not transfer over smoothly.  If there are any extra services you’ve turned on at TD, you might need to sign a new form for those.”

SSG President Dan Skiles adds that ancillary agreements are likely to be complicated.  “As an example, it’s no secret that TD has paid Orion on behalf of advisors to get new assets on their platform,” he says.  “Will Schwab be willing to continue that?”

Baehr says that her firm’s transition was accomplished over a weekend, with clients receiving new account numbers, but keeping their same logins to the new custodial website where their account data would be stored.  “We didn’t have to do transfer paperwork or new account applications; that would have been horrible,” she says. 

Even so, with less than $50 million in client assets under management, Baehr is multi-custodial “just in case.”  “Hopefully, Schwab will keep us around,” she says.  “If not, I’ll just move the rest of my money over to Shareholders Service Group.”

What was the biggest downside to having your custodian acquired?  “I miss having all the history on the account,” says Baehr.  “With the changeover from Scottrade to TD, we had to give up access to a lot of the older data.  I miss being able to see all the history going back.”  (This may be something for TDAI-affiliated advisors to ask Schwab about.)

3) There is no reason for advisors to act precipitously.  The actual merger may not be consummated for a year or more, and then there may be another year or two while Schwab decides how to incorporate TDAI advisors into its support structure (and who to fire and who to retain in the TDAI support system). 

“In my experience,” says Mark Tibergien, CEO of Advisor Solutions at BNY Mellon’s Pershing, “it takes three years before there is a full integration.  Once you consummate the transaction—and obviously there are a number of hurdles to go through for that—then [the acquiring company] has to think about which people it’s going to keep.  Then you have to figure out what locations you are going to invest in, what your client experience is going to be, and how you integrate not just the technology, but the workflow, operational elements and service.”

He estimates it could be up to two years, potentially longer, before TDAI advisors are directly impacted, and up to three before the full impact of the transition is well understood.

That doesn’t mean they shouldn’t be examining their options—and later in this article, we’re going to profile some of them.  But Tibergien says that advisors should ALWAYS be exploring their options, and the startling litany of announcements is simply prompting more of them to do what they should have been doing as a matter of administrative routine.  Even with one of the competitors moving off the table, he says, there are still a number of custodial choices—and this is also an opportunity to reevaluate your software suite and other crucial outside relationships. 

“Regardless of what platform you’re using,” says Tibergien, “a helpful process to go through is to create a scorecard.  What are the five things you find most important to do in your business?  Form an internal committee to evaluate this on a quarterly basis, to say: what is working, and what’s not, and how do we judge the progress?

In other words, the merger may not be an imminent crisis.  But there is never a time when you can afford not to review your options.

4) The zero commission decision was primarily motivated by the desire to hang onto market share, and perhaps generate new business, on the retail side.  It was never intended to be a selling point on the institutional/custodial side, and there’s every indication that it would not have been.

One clue that this is true is the fact that many of the custodial competitors didn’t follow Schwab and TD into zero-cost trading territory, and didn’t suffer any pushback as a result. 

“We reduced our ticket charges down to what we consider to be a minimum,” says Baldwin.  “But when we did our phone calls with advisors, they told us: just keep offering the services you offer, answer the phone, don’t send me to a call center in India, and I’ll pay ticket charges as long as I get good service.” 

“We went through an analysis in the last couple of months,” adds Mangan.  “We decided that [zero commissions] doesn’t treat our business or the customer’s relationship with us in the right way.  If we’re giving away for free something where there is actual cost and risk to the firm, it suggests there is no value to it, which is entirely false.”  He adds: “Advisors told us really clearly that the cost of a trade is a way of paying for our service, and they’re happy to pay if we intend to keep our service levels high.  That cost [currently $4.95 a trade] is easily justifiable.”

One advisor, he says, actually said he would have been very disappointed if SSG had followed “the lunacy” of zero commission trading.  “He told us, I feel it is easy to explain to clients that there is no such thing as a fee lunch,” Mangan recalls; “that there is a cost and a value to executing a trade.”

Mangan says that his firm intentionally doesn’t participate in some of the revenue streams that Schwab is using to make up for the loss of trading commissions, including mutual fund 12(b)-1 fees and payment from the entities that do the actual clearing. 

“On many of those free trades, they actually receive some payment for order flow,” he says.  “So it is not exactly true that there is no cost to the customer in giving their order to Schwab.  We don’t get any payment for order flow; we route our trades to the best bid or offer.  Those order flow payments are perfectly legal,” Mangan is quick to add, “but we decided not to do it because we think it muddies the water.  When we’re working with advisors who are fiduciaries for their clients, and that is all we do, it doesn’t make sense for us to be selling their orders for our benefit.  We’d rather charge a commission.”

Cultural shifts

It’s hard not to think that all these major shifts will have an impact on the working environment for financial planning firms.  The cut to zero (and the need to maximize other revenue sources), plus the giant acquisition and a renewed focus on gathering retail market share—all these things will affect not only the culture of the acquired TDAI entity, but also Schwab Advisor Services itself. 

So the question for many advisors, Schwab Advisor Services-affiliated or TDAI-affiliated—becomes: What will my custodial partner look like in a year or two?

You can already see glimpses of a cultural shift as Schwab Advisor Services is reportedly getting much more liberal with margin accounts and more aggressive in portfolio margining.  The firm is actively pushing client upsells to Charles Schwab bank and Charles Schwab mortgage services.  Schwab, unlike TD, also has proprietary funds, ETFs and its own investment platform.  [Yes, Schwab Intelligent Portfolios is nominally free, but it requires its investors to keep a large percentage of customer accounts in cash, in a sweep account where the company earns at least a 1% margin.]  Will there be subtle or unsubtle pressure to shift the ex-TDAI advisor’s current business?  Will this pressure change the way Schwab-affiliated advisors do business with their clients?

Meanwhile, the shift of smaller advisors from service teams to call centers at least suggests a new spirit of frugality on Schwab’s service side.

Schwab’s traditional preference for larger RIA relationships might suggest another cultural shift for advisory firms under $200 million in AUM.  John Malzone, of JJM Financial Group in Newtown, PA and Long Island, NY, expects to see Schwab proactively “clustering” smaller advisory firms, encouraging them to consolidate to gain critical mass.  “They will facilitate the introductions of smaller advisors to larger teams,” he says. 

Malzone also speculates that Bradley will encourage organic growth by offering incentives to multi-custodial advisory firms to move assets away from other custodians—or even institute penalties in the form of higher fees if they do not.  You might see Schwab facilitating business succession plans for its larger relationships, and given that it has its own in-house RIA organization, it might buy some of those larger firms and fold them into Schwab Wealth Management with minimal client repapering.  (More competition for Schwab-affiliated advisors?)

On the darker side, Malzone can envision the new giant custodian having proportionately more clout with the regulators, and making compliance-based recommendations where all RIAs would have to hire a full-time CEO and pay enhanced registration fees—which would have the impact of forcing smaller firms to acquire scale.

Another advisor, who prefers to remain anonymous, undoubtedly speaks for many planning firms when he wonders if Schwab will match TDAI’s discounted $9.95 ticket charge for DFA funds.  “I think having to pay more than that would send a lot of us packing,” he says.  (Schwab reportedly charges $49.95 on most non-NTF funds to RIA firms who were unable to negotiate one of the custom commission arrangements.)

Of course, I asked, through public relations intermediaries, about the plans that TDAI and Schwab Advisor Services were making re: the post-acquisition period, and both said (understandably) that they couldn’t really talk to the press about any specifics until after the merger receives approval.  “We’re committed to making this a smooth transition for advisors’ firms and their end-clients,” wrote Joe Giannone, Senior Strategist of TDAI’s Communications and Public Affairs.  “I’ll reach out when I have more to share with you.”

What we know definitively is that many TDAI-affiliated advisors are not looking forward to moving from the “anti-Schwab” to “Schwab.”  “I know that I am not alone when I say that I am very, very sad (almost angry),” one advisor wrote to me.  “I attended one of my study group meetings yesterday, and we were quite unanimous in our very loud of objection to this being foisted on us.  Many of us have learned through the years that Schwab is not an Ameritrade.  We all get much, much better service for our clients with Ameritrade.  Schwab has an attitude that does not include making life easier for advisors.”

At the very least, the merged entity has its work cut out to retain a high percentage of the acquired RIA relationships.  Hiring Tom Bradley in his new position was a darned good start.  But advisors will need to hear more reassuring things about the environment they’re being forced to move into—and they will be reassured to know that if they don’t like the answers to their questions, they have alternative custodial options who will be actively competing for their business. 

To see a profile of these, continue to the next section.

SSG: A conflict-free relationship

Peter Mangan at Shareholders Service Group ( in San Diego, CA says jokingly that the Schwab acquisition announcement was “the biggest increase in our marketing budget (that we haven’t had to spend any money on) in years.  It has generated more prospect calls than anything we could have done on the marketing end,” he says.

SSG was born during the TD Waterhouse acquisition of Ameritrade: Mangan and SSG Marketing Executive Vice President Barry Boyte were actually veterans of the Jack White organization, and became key executives in the TDW advisor service platform before launching SSG.  Dan Skiles serves as President, after having served as Schwab Advisor Services’ chief technology officer.

The calls are coming because SSG has a reputation for accepting and fully serving without qualification new advisors or advisors without high AUM levels—exactly the people who are most unnerved by the proposed TDAI acquisition.  “We’re hearing, I used to be at Schwab, and I left them, and I don’t want to go back,” says Skiles.  “Or: I have assets with both firms, and that was by design, but now I need to have assets somewhere else.  Or: They’re going to be huge now, and I’m very anxious about what ‘huge’ means to me and my firm.”

Mangan adds that some dual-custody advisors are now allocating all new money to SSG, just to hedge their bets.

SSG clears through Bank of NY/Pershing, and can no longer be considered a small competitor, since it now supports 1,600 RIAs.  Trading fees are $4.95 per trade.  Like BNY Mellon/Pershing, the firm makes a point that it doesn’t have a retail division.  “Our advisors said, paying trading fees is better than zero if the effect is that we don’t compete with them,” says Mangan.  “The response was: please don’t look like [TDAI or Schwab].  Please don’t play the same revenue games.”

That basically means that the firm doesn’t have product-based incentives to recommend one fund or category of ETF over another.  And SSG doesn’t generate its revenue from cash sweep accounts.  “If our advisors decide to have any cash at all, they’re managing it,” says Skiles.  “At other custodians, advisors have to trade out of the sweep accounts into money market products to get a little more yield.  In addition to the time and effort, it also slows everything down,” he adds.  “Suppose a client calls today and says, hey, I forgot to tell you but the tuition is due for my son’s college education.  I need to get $20,000 immediately to the university.  If that money isn’t in the sweep, it’s going to take at least a day until it’s available to the client.”

Skiles recently conducted an informal survey, and found that the difference between SSG’s FDIC-insured sweep and what was offered at TDAI and Schwab was more than 100 basis points.

Another selling point for SSG is the lack of advisor segmentation.  “We all just read how Schwab advisors under $200 million are going to get a different service experiences vs. firms above that, and firms over $1 billion get more,” says Skiles.  “All those segmentation games are directly tied to revenue and profitability from the advisor.  We don’t do that at SSG,” he adds.  “If you call in here, we don’t route your call based on how much assets you have; you speak to an associate directly and immediately.”

Later, he said: a lot of custodians are telling their clients they have to meet year-end deadlines if they want to get things done for their clients, like required minimum distributions, setting up new types of accounts that must be set up in 2019, etc., etc.  We don’t tell them they have to get everything in by the 20th or whatever.  When they send it in, we do it and get it done on time.”

Mangan adds:  “We believe we can run our business on the theory that all of the advisors we support are important.  This strategy has been very successful for us.”

TradePMR: personalizing the platform

TradePMR (, located in Palm Beach, FL, currently serves as the back office and custodial conduit for 415 hand-selected advisory firms.  The firm custodies assets at Wells Fargo Clearing Services.  Interestingly, the firm was born out of a similar acquisition event to the one making headlines today; when TD bought Waterhouse, there were a number of back office snafus, including clients receiving client statements that previously had seven digits on them, and now were (alarmingly) listed as $0. 

TradePMR CEO Robb Baldwin, who at that time ran a sizable RIA, decided in anger to take matters in his own hands and create a back office platform that he and some of his best friends in the business could rely on—because he owned and designed it himself.

“I wanted to provide a home for advisors who wanted white glove service and a real relationship with their custodian,” says Baldwin.  “And top-rated technology.”

The company offers a total turn-key package of software solutions integrated into its Fusion trading platform, which makes it ideal for breakaway brokers who are accustomed to an integrated in-house package of tools.  But other advisors use their own software suites through a variety of Fusion integrations. 

When asked to define the “sweet spot” of ideal advisor relationships, Baldwin said: “We don’t look at them from the perspective of assets.  In fact, one of the last things we gather from them is their asset size.  We want to know how they work with their clients, how they manage money, their growth perspective and what it has been for the last five years.  What stage of the business are they in?  How many households do they serve?”

The model is to get to know advisory firms the way a financial planner will do the up-front discovery process in order to better understand how to customize advice and service with new clients.  Baldwin cites the example of the needs of a firm that services 1,000 households with an average account size of $50,000, vs. a firm that primarily recommends DFA funds to its 25 households with $300 million under management.  Different firms have different commission ticket charges, ranging from $0 to $9.95 on stocks; $0 to $14.95 on mutual funds.

Most importantly, Baldwin says that TradePMR is a true fiduciary platform that doesn’t offer its own products and is not biased toward recommending any products or services.  And, responding to a question I asked all the custodians, the firm doesn’t require—as Schwab and TDAI do—every advisor client to sweep cash into a single account, which pays percentage points below market rate.  (The spread is a significant revenue source for Schwab Advisor Services and TD Ameritrade Institutional.)   “Our advisors have the option to choose any and all money fund alternatives,” says Baldwin.  “We don’t block Vanguard or Fidelity money market funds from being available to our advisors, if they’re looking for a more permanent solution for cash management for their clients.”

Baldwin says the phones have been ringing since Schwab announced its proposed acquisition. “There’s a lot of uncertainty right now,” he says.  “All we’re saying is: this is what we do, this is what we deliver, this is what we plan to continue to do.  Depending on your needs, we might be a great solution for you.”

The expectation is that the usual inertia that makes it hard to attract new advisors (nobody wants to go through the hassle of changing custodians) will be much lower going into the new decade.  That creates some potential opportunities for a smaller competitor that can still offer 22 years of track record. 

“Many people had the choice, and they chose TD,” says Baldwin.  “I think there is going to be a huge battle going forward for Schwab to assure everybody that they will continue to support these firms, whether it be below $200 million or even $500 million.  That is still considered pretty small on their platform.”

E*TRADE Advisor Services: Building from the ground up

You’ve probably heard of Trust Company of America’s custodial operations, and I’m sure you’ve seen the ads for E*TRADE’s discount brokerage services on the retail side.  You may not know that E*TRADE purchased TCA’s custodial platform in 2017 to form E*TRADE Advisor Services (  The firm now serves 225 RIA firms, but the recruiting goals are ambitious, including building a brand new tech platform which will be more traditionally custodial.  (TCA’s Liberty platform trades through the banking system.)  Gabe Garcia, Senior Vice President and Head of Business Management and Strategy, says the new platform should be operational this summer, which would perfectly fit with the growing surge of interest in custodial alternatives to Schwab Advisor Services. 

“We’re building a de novo tech platform that will have an open architecture platform for folks to integrate via APIs and other connective capabilities,” says Garcia, “along with UMA capabilities, model management, billing, performance reporting and aggregation that we already offer.”

“The phones have definitely been ringing,” adds Matthew Wilson, head of E*TRADE Advisor Services.  “This has been a really good opportunity for us to fast-forward our business and our value proposition in the marketplace.”

Garcia and Wilson expect advisors to recognize E*TRADE’s record of tech innovation in the retail space, and their goal in the coming months is to overlay a service model that they both became familiar with in their careers—at other custodians.  Garcia was, until recently, Managing Director for BNY Mellon’s Pershing platform.  Wilson’s background includes service as President and CEO of Scottrade Brokerage, and head of retail sales and guidance solutions at TD Ameritrade.

What is the company’s sweet spot?  “We’re targeting the core wealth management firm,” says Garcia; “entrepreneurs who make up most of the population in the advisory marketplace.”  He defines this rather broadly as the $50-500 million AUM advisory firm, who collectively make up about a third of the assets in the RIA space.  And he adds that there may be another 4,000 brokerage teams who might entertain the possibility of independence.  “We want to make sure they’re aware of our brand and value proposition,” adds Garcia.

On the service side, E*TRADE Advisor Services is still small enough that advisors can get to know Wilson and Garcia.  “We’re taking calls regularly from some of our top clients, and we’ll continue to do that,” says Wilson.  “We’re here as a business consultant, helping them with technology, helping them with sales training.”

Offering an open technology platform could be a sales feature for very large advisory firms, which have created their own integrations with TDAI’s Veo One open APIs.  Schwab Advisor Services went down a different evolutionary path from the open API concept, so those advisory firms might be looking at ways to salvage their custom-built user experiences. 

Meanwhile, breakaway advisors and startups might prefer the E*TRADE suite of bundled solutions.  And Wilson says that maybe the firm’s biggest advantage is the chance to build an entirely new platform, without having to deconstruct legacy constraints, and to do it with the input of the advisors themselves.  “We’re working alongside advisors to make sure we hit the mark,” says Wilson.  “We’re bringing them in as we do the development, to make sure that the capabilities are right when we’re ready to go.”

E*TRADE Advisor Services’s cash sweep account pays an interest rate of 0.07% at this writing.  On the retail side, E*TRADE has been at zero commissions for a while, while advisors on the existing banking platform pay a basis point fee for access—which covers all trading activity. 

“As we convert in the summer from banking to brokerage, we’ll have similar pricing schedules as the other custodians in the marketplace,” says Wilson.  “There is no intent to assess ticket charges on a per-trade basis.”

Garcia senses opportunity as we move into a new decade.  “We are entering the space as a disrupter to the incumbents at a very opportune time,” he says.  “It’s a time when advisors, through no fault of their own, are being put in a position to take a step back and reassess their businesses and their relationships.”

Altruist: Rethinking custodial functions

The brash newcomer alternative platform on this list is something called Altruist ( in Venice, CA.  Altruist’s founder is Jason Wenk, who has a track record of successes starting with the founding of the Retirement Wealth RIA, which currently employs 100 advisors and has nearly 15,000 clients—who paid $600 for their initial financial plan.  Wenk followed that up with Formula Folios, a turn-key asset management platform (TAMP) which now has roughly $4 billion in assets serving 30,000 customers, and is morphing into a tech platform that automates client acquisition for advisory firms.

Altruist was born somewhat accidentally, after Wenk’s team of programmers developed fancy new onboarding technology for his firm to link with the custodians it was clearing through.  The new software dispensed with paper and even the actual forms themselves, would auto-fill and integrate, and most importantly automatically check account opening and other electronic forms for not-in-good-order (NIGO) problems. 

“We had about 30 engineers on the project, and built a really, really great user experience,” says Wenk.  “But then, when we tried to tie it into the APIs at the custodians, it was not, to put it delicately, the most elegant solution.”

Meanwhile, the account servicing process that Wenk’s various firms were receiving from its three custodians seemed to involve a lot of paperwork and too many back-and-forth conversations.  Wenk stepped back and took a hard look at his other frustrations with traditional custodial service. 

“I hated that you had to use those revenue-sharing ETF funds and revenue-sharing mutual funds to avoid commissions,” he says.  “There weren’t any truly good fractional share platforms.  I thought: there has to be a better way.  Why is it that I can go on my phone and open an account at Robinhood, and be buying and trading positions way more elegantly at a way lower cost than I can as a professional RIA managing millions of dollars?”

A related question intrigued him also: what software capabilities should rightly be custodial functions—rather than being handled by independent software from the outside? 

“When you’re running a multi-billion dollar TAMP, it seems ridiculous that you’re dropping $150,000 a month on external software just to power your business,” says Wenk.  “Even a firm with $50 million in client assets has to spend the equivalent of ten basis points on their assets, going out to software vendors.  To me, that made no sense.”

This is a long buildup to Wenk’s new custodial platform called Altruist, which is due to come out of beta in January, just in time to meet the sudden interest among many advisors who are exploring their options.  Altruist offers custody through Citigroup, and uses a firm called DriveWealth to clear mutual fund trades.  It intentionally offers a much more comprehensive software suite than the other custodians, combining trading with an account-level (but not yet household-level) rebalancing engine that rivals the commercial products, tied directly into its asset database.  There’s a client portal, plus the aforementioned seamless onboarding that is all handled electronically and largely automated.

The onboarding process makes you realize just how clunky and antiquated the traditional wet signature process has become.  “When people are opening accounts, why doesn’t the process itself do a quick check whether that name matches that social security number, is the date of birth correct, and do the addresses match up?” Wenk asks, talking about features of his custodial software.  “Why not do a quick ping on the USPS API to see if that’s a real legal mailing address?”

Wenk says that his beta test advisors don’t actually send in paperwork; everything is in database format, including the documents and disclosures.  There is a trading desk, and the fact that the company offers fractional shares means that advisors can serve smaller and smaller clients.  “If a client has $10,000 and they want to put $500 a month into their account, that is almost not even worth it at a place like TD or Schwab,” says Wenk.  “For us, it is super-easy.  Our cost of acquiring that client is basically zero; there is virtually no work involved.  A lot of advisors,” Wenk continues, “are really excited about the idea of, hey, I can serve clients of all sizes, all wealth levels.

With the asset management features built into the software, the firm is not only challenging in the custodial space; it also competes directly with asset management and rebalancing software programs in the advisor marketplace. “The first thing we built into the custodial package was a fully-automated portfolio accounting system and reporting system,” Wenk explains.  “And it actually integrates with us, TD, Fidelity and Schwab,” he adds.  “If an advisor is multi-custodial and they happen to use us as one of the custodians, they’ll have all the software they need with the other platforms.  They don’t have to pay for any external fee-billing software, performance reporting software—with us, all of this stuff is free.”

Wenk says that this added technology sophistication will enhance service to RIA firms without requiring a lot of service teams.  “When you go to Schwab and TD and Fidelity,” he says, “they’ll tell you that 40% of the calls that go into their service center is just a status checkup.  Hey, I wanted to follow up on the paperwork that we sent in last week.

“We have real-time status on everything,” Wenk adds.  “So there is not really ever a need to pick up the phone and say, hey, I’m following up on this status request.  Everything is live and in real time, and it’s easy to know what the status is.”

Altruist was built with advisory firms under $100 million in assets in mind, but that may not be its only market.  “The great irony is that a lot of larger firms are now beating down our doors,” says Wenk, “trying to get a chance to test out our software and get on our beta group.”

Suddenly, Wenk addresses me, not as the interviewer, but as the long-time industry observer.  “You’ve been covering practice management and technology for a while,” he says; “it’s not like any of this is news.  I’ve felt like these were the challenges that needed to be addressed for years.  In the past, it was easy for the institutional platforms to be fat and happy.  But in this environment, advisory firms need better pricing and true digitization.”

BNY Mellon/Pershing: Aiming at a target market

Most of you have some experience with Mark Tibergien, CEO of BNY Mellon’s Pershing division ( in Jersey City, NJ—one of the Big 4 custodians and, if Altruist doesn’t roar ahead, soon to be one of the Big 3.  Tibergien has publicly commented that almost the entire rationale for Schwab’s TD Ameritrade acquisition was on the retail side, and he notes that most of both custodians’ advisor-related technology bears a striking resemblance to what might be called a hand-me-down from the discount brokerage tech stack.

“Everything they have engineered within their organizations has a strong retail look and feel,” says Tibergien.  “And I think you have to acknowledge, when you look at their overall mix of revenue, that the driver is the consumer side of the business.  That is not to say,” he adds, “that they don’t value the custody business.  But the custody business is the lowest revenue part of the investment business, and also the highest risk.  It is a part of the business that is balance-sheet-heavy, that requires a lot of capital, that invests in a lot of cybersecurity.”

This hints at Pershing’s positioning in the marketplace.  “We don’t have any brand conflict,” says Tibergien.  “We are not in the marketplace advertising Pershing as dealing with your clients.  Advisors can look at us as a true B to B solution that doesn’t experience that conflict.”

Pershing is somewhat unique in this roundup because the company has a very clearly-defined target market of RIA firms where it provides the greatest value.  “Our minimum for a direct relationship is $250 million in assets, but our average is just over $1 billion,” says Tibergien.  The firm has $760 billion under custody and works with 740 advisory firms. 

The other part of the profile is sophistication; Pershing seeks out more complicated, sophisticated, high-growth (and therefore high-service) relationships.  The back office offers bank as well as brokerage custody—helpful for advisory firms whose clients have trusts or foundations.  Pershing has a team of dedicated private bankers who work only with RIAs.  And as a global custodian, the firm can handle the needs of cross-border clients.

Tibergien says that his platform has no interest in moving to zero commissions, which he views as nothing more than a move from transparent to opaque pricing.  “If you want free transaction processing, we’re happy to do it,” he says.  “To pay for it, we would sweep cash into a 12 basis point proprietary product, and we’d make money as a result.”  Instead, Pershing offers advisors a choice of cash sweep accounts, whose yields range up to 140 basis points.

Has the phone been ringing?  Tibergien says that in truth it has been ringing for quite some time.  “We’ve seen an acceleration in our growth over the last five years,” he says.  “But one of the things I’ve noticed since the announcement is, naturally we’re talking with a lot of firms who have taken a look at us, and before those were nice conversations.  Now,” he says, “they’re serious conversations.”

In addition, Pershing has been getting a greater share of the business from multi custodial advisory firms who also custody at Schwab or TDAI.  “We’re open to being the secondary custodian,” says Tibergien.  “If diversification is your principle in investing, shouldn’t it also be the principle in your business partnerships?” he adds.  “If you’re going to diversify, look for something that is truly different.”

Regardless of whether you fit Pershing’s profile, Tibergien expects this to be a time to reflect on the value of your custodial relationship.  “This is one of those moments when you take stock, and ask: Do I have the right relationships with the right people doing the right things?” he says.  Am I leveraging custodial and software relationships to the optimum level, or is it just the purchase of a CRM or financial planning solution or plugging into a custodian or whatever?  I think,” he adds, “that sometimes small businesses don’t realize how much leverage they have with their partners that they can maximize to a greater degree.”

Yes, there are two obvious omissions in this article.  After the Schwab acquisition announcement, I reached out to both Fidelity Advisor Solutions ( and FOLIOfn (—but for whatever reason, neither of them were able to get around to setting up an interview with me.  I may catch up with a profile at some point in the future, but for now just be aware that they’re the other significant platforms available to the planning community. 

And good luck—sincerely—as we together navigate an interesting new decade.