I am in the process of going indy and wanted some feedback on the best custodians from two perspectives, ticket charges and advisor services. Your thoughts? Thanks in advance.
We are with Pershing. Ticket charges are $22 for equities and $11 for mutual funds. Their advisor workstation is NetExchange. I haven’t had any problems with it. I’m sure some people might think it’s too basic for them, especially if they’re coming from a wirehouse. But there are add-ons you can subscribe to. As far as service goes, we deal directly with our broker dealer who has a specific contact at Pershing they talk to. Questions can be answered pretty quickly. All in all, Pershing is a big clearing firm, but we have been pleased.
We looked at Schwab and Fidelity as the two primary options for our firm. In the end, Fidelity seemed to have the drive and desire to invest the most (going forward) in their platform in terms of service and technology. We’ve been very happy with their service and ability to provide us with a strong platform for trading.
As for costs - we pass the transaction costs off to the client ($12 equity trades) and a small similar charge on non 12B1 mutual funds.
As for ticket charges for our firm, Fidelity only makes money through the client relationships and does not ‘bill’ our firm for anything. On a regulatory note, make sure you understand the implications of paying for those ticket charges on your own. If you plan on doing so, you will be deemed the sponsor of a ‘wrap fee’ program and will be subject to enhanced scrutiny from the SEC during audit time. It can create a serious conflict of interest between the advice you provide and the expenses you will incur as a result.
We pass on those costs (and they are truly minimal) to the client. Ticket charges are a non-issue.
[quote=iceco1d]Captain…you are fee only RIA though, correct? Sounds to me like he’s going indy with a b/d.[/quote]
It’s a bit hard to know exactly what the original poster might be
asking with his original question, ice, as he really wasn’t very
specific. Although generally when someone specifies a custodian as
opposed to a B/D I tend to assume they are
referring to RIA. Whether or not that is the case here is unclear
until the original poster clarifies.
I’m with Captain though. Schwab and Fidelity are the two leading RIA custodians, and I also opted for Fidelity for their combination of services and value.
Maybe if you ask a more specific question you might get more useful feedback.
Morph and Captain, could you give some details on your RIA relationship w/ fidelity? Do they provide all platform/tech support? Or do you have to subscribe to your own planning software, etc. I’m looking to set up a fee only RIA using mainly funds, ETF’s and individual bonds if possible. Does fidelity, or someone else provide such a platform? And what is the cost? I’m in the early planning stages so any info is appreciated.
Your custodian provides access to their technology platform as part of the service, and you are free to subscribe to pretty much whatever other things such as planning software you wish, at your cost, but often times at a discount as a client of the custodian. Generally speaking, their basic technology platform is comparable to what I was accustomed to at a wirehouse - in some ways much better, and in others less comprehensive.
There is not a ‘one size fits all’ approach, though, so you need to figure out exactly what is important to you and whether that requires additional costs. The nice thing to me is you choose what you want and what seems worth the cost to you, given your specific way of doing business, rather than your firm supplying what they think you ought to have (and which they charge you for when they keep more than half your revenue).
The basic stuff you mentioned would be very straight-forward and cost effective at any good custodian. But if you’re serious you need to take some time and do some of your own research. That’s the thing about independence - no one is going to come along and spoon feed you information - you need to show some initiative, just as you would have to do once you are operating. Some people like that freedom to do things exactly as they wish; others don’t think it is worth the additional hassle. The former are good candidates for this business model, while the latter are not. Vive la difference!
Here are a couple links to the Fidelity and Schwab Institutional websites. Both have a fair amount of freely available webinars and related information which help answer many of your initial questions and more. You can also check out other custodians, but the web sites of these two are among the most helpful from a learning standpoint.
What does your current book look like very roughly, in terms of AUM and % existing fee based business?
Morph, have about 40mm now, 30% fee based, want to transistion to 70% then form the fee-only RIA leaving 30% behind. lots more variables in there, but those are the basics for now. I’m in the very early planning stages of this, and am a patient planner.