Skip navigation
Mark Tibergien

Pershing: Refining Its Model to Take Advantage of 'Market Disruption'

BNY Mellon Pershing execs are sharpening their sales pitch to RIAs in the wake of Schwab's acquisition of TD Ameritrade.

BNY Mellon Pershing executives said in a recent interview that the firm is set to take maximum advantage of what it sees as a watershed event in the history of the wealth management business: a combined Schwab and TD Ameritrade.

“There's a terrific opportunity in the marketplace,” said Ben Harrison, Pershing Advisor Solutions managing director of product development. “Over the last six to eight weeks, we've been really busy in terms of the opportunities that are emerging. We really do believe at our core that we are a very different model than the other three major custodians that we have competed against,” said Harrison.

"Unlike Schwab, TD and Fidelity, all the revenue we derive is via the intermediary model. It’s all that we do. And that’s really starting to matter. It matters more than ever with the shifting landscape and the environment we are seeing now,” he said.

Pershing's sole focus is its custodial business, said Harrison, unlike its peers, which he said continue to have an extensive focus on their retail brokerage businesses. His firm plans to stick to the custodial business and thinks that differentiation will become more important for independent-minded RIAs. 

“Our client is an important distinction in the market and it's one that we're holding true to,” said Mark Tibergien, CEO of Pershing’s Advisor business. “We continue to be seen as leading business consultants to firms that choose to work with us.”

"Schwab and Fidelity," Harrison said, “don’t desire to be discount brokerage firms or service providers to RIAs."

“They want to be direct-to-retail wealth management platforms—we think there’s a great opportunity to continue down the path of providing a business-to-business chassis to power firms that are building wealth management businesses rather than putting our brand forward,” he said.

Though not anticipating precisely this merger, executives of the Jersey City RIA custody unit of BNY Mellon said the firm has been readying for such a move for quite some time.

“The last 10 years have kind of primed us to be able to take advantage of market disruption in the marketplace right now,” said Harrison. “What we believed would happen was we would see a continued professionalization of the RIA wealth management marketplace. We really took the opportunity to differentiate from the major competitors in the landscape by focusing our business on the ‘optimal client profile.’”

Harrison said that this profile is made up of RIAs with a few billion dollars in assets under management, several degrees north of where he described midmarket players Schwab, TD and Fidelity are focusing.

In its favor, Harrison said, the average size of an RIA firm has grown dramatically over that period, as the businesses evolved “from sole practitioners to practices to major firms.”

This is not to say that Pershing will tackle the lowest end of the market, RIAs with a few million dollars in AUM, said Harrison. But it will aim low as well. To this end, over the past 12 to 18 months, Pershing has “made a very strong commitment to serving and orienting around the hybrid and corporate RIA model,” said Harrison. “For us, our broker/dealer and corporate RIA clients want to look more like a registered investment advisory firm. Their advisors are demanding tools, technology services to compete with the major custodians and the major wirehouses and private bank models.” In addition, he said, Pershing has “put a tremendous amount of focus on being able to have an integrated experience to serve advisers that have a traditional brokerage component of their business as well as an RIA component of their business to serve registered or corporate RIAs on our custody platform and really avail them with all of the services that traditionally were available in the marketplace.”

A key differentiator

Pershing has also integrated a bank and trust model into its platform. “The key differentiator for us is that nobody else [among the big four, now three] has a bank custodian like we do at BNY Mellon. We have a fully integrated bank trust in the brokerage environment,” said Harrison.

According to Harrison, that means a wealth management organization that also has a trust component to their business and needs to separate principal and income, and wants to utilize BNY Mellon as custodian can do so.

“That kind of aligns with our strategy to be able to serve multiple business lines for wealth-oriented firms,” he said.

Conversely, Harrison said, other custodians have been moving more in the direction of retail, financial wealth management. This makes Pershing’s business, as compared to Schwab’s, not as dependent upon a single revenue source like a single bank sweep and thus the firm has not been swayed by the zero-commission pricing war.

But those at Pershing have observed that clients will eschew proprietary products for choice.

“They want to know, what am I paying for? What value am I receiving? And do I have access to the lowest-fee, highest-value solutions in the marketplace?” Tibergien said.

Smaller advisors take note

However, Tibergien said Pershing would be looking down market as well.

“There are smaller advisors, even mid-size ones, who are not going to want to be served or are not going to be served as effectively in an organization that has 12,000-plus RIA firms. The competition has been very clear that they're moving to more of a self-service call center type of environment and only the highest-end firms are going to actually have a dedicated team or relationship coverage. And we think that that's a great opportunity for us to leverage our platform and our partners,” said Harrison.

"It's not complex banking. It's not bank custody. It's not settling in 60 different global jurisdictions. We've got that solved already,” he said. “So for us to go down market a little bit, we think is a lot easier for us to capitalize on the disruption that's going on in the marketplace,” Harrison added.

This does not mean, however, that Pershing will custody for the tiniest of advisors.

“If you're a $10 million or $15 million RIA,” said Tibergien, “it's just not going to work unless we can find a consolidated way to serve you. The good news is that the average advisory firm is getting bigger. And so there are literally thousands of advisory firms that we'd like to serve. We don't yet see a need to radically change our direction, but really refine the way in which we're approaching them.”

Technology and growth support

Christina Townsend, director of platform strategy for Pershing Advisor Solutions, said that providing technology is a great way for the firm to expand its addressable market to advisors with below $250 million in AUM.

“When you look at that subset of advisors, the annual revenue grows at 6% compared to the entire RIA population, which is an annual revenue growth of 12%.” That segment of the marketplace will be a boon to custodians like Pershing,” Harrison said.

 Pershing recently completed a study with a rival publication that found that wealth management productivity levels have remained relatively flat for a number of years, which Pershing has interpreted as meaning that advisors are “looking at how can they continue to grow up and not have to add people.”

Pershing, said Townsend, asked its advisors in the study: What keeps you up at night?

The answer was technology—they know technology in and of itself is not a growth driver—but it's keeping them up at night because they know that they have to embrace it in order to be successful and endure in their business,” she said.

“Growth is also a silent killer,” Tibergien said. “If people don't manage it, there's a consequence to how they have to solve for it.

He said that what the firm is finding from a business evolution standpoint in the RIA market is many have grown to substantial size, but their ability to manage that growth can represent a bit of a challenge. Because of this, he said, the firm has hired a business consulting team that spans the country to support all of its clients and prospects.  

In addition to that expansion, Pershing is 18 months into a three-year, $50 million tech spend program to integrate its technology with other top fintech interfaces.

“BNY Mellon, at the executive level, looked at all of the different businesses we’re in and said ‘this advisory business is an area of growth, so we’re going to double down on our investment in that area,” said Townsend, “giving Pershing additional capital to invest in the technology space, the client experience and kind of our overall branding in the marketplace.”

Evan LaHuta, managing director of client experience at Pershing Advisor Solutions, said that Pershing, unlike its competitors, is sticking to a dedicated client service model. To that end, he said, the company has hired 20 people over the past year purely in customer service and has added to its East Coast presence (in Jersey City and the Orlando, Fla., area) with a new processing center in Denver to cover the West Coast and Midwest.

TAGS: People
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.