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Pershing Rethinks Minimums To Attract 'Never Schwabers'

Eager to add assets, the advisor-focused custodian is modifying its onboarding requirements.

While executives at Charles Schwab sort out the firm’s pending acquisition of TD Ameritrade—including which advisor technology platform will provide the “best of both worlds” for advisors—one of Schwab’s competitors has revealed its strategy for attracting new business. Pershing, Bank of New York Mellon’s advisor-focused custodian, told that it was using the sale as an opportunity to attract new registered investment advisors to its firm, even forgoing some of the traditional demands it has made of advisors who work with the custodian.

Even while repapering concerns have largely been dismissed, Pershing is swooping in and “willing to get creative” to bring in new business. “[We] know that we are in an inflection point in the industry right now,” said Ben Harrison, managing director and head of new business development at Pershing Advisor Solutions. “We still have an optimal client profile that we’re very focused on. And, for the right opportunities, we are willing to get creative.”

For Pershing, "creative" means a more qualitative than quantitative approach to advisor partnerships, Harrison said. "In the past, advisors typically had to commit $250 million in assets to work with Advisor Solutions," he explained. "We have now moved away from the number of assets as a criteria; instead, we are focusing on the characteristics of the firm."

Advisor firms that are willing to make internal investments in learning Pershing's systems and committing their new business to the custodian will be welcome, according to Harrison. Pershing seeks to attract professionally managed, growth-oriented firms, with a "high potential" for future growth and a history of success.

Pershing is aware that RIA firms are doing some soul-searching. Schwab’s decision to buy TD Ameritrade is informed by the retail side of the business and “the RIA custody side is really kind of along for the ride,” Harrison said. "We are open for business and want to take advantage of this unique time in the marketplace to serve advisory firms that need a true partner."

But there are indications that the Schwab-TD Ameritrade deal may have caught advisor-focused competitors like Pershing off guard, even while the custodian moves to capitalize on the upheaval. Pershing is actively “looking at how we can digitize custody,” said Evan LaHuta, managing director at Pershing Advisor Solutions. He characterized the process as an “evolution” when asked if it was too late to leverage technology to take advantage of advisors dissatisfied with the “Schwabitrade” deal. Last year, for example, 38% of accounts were opened without using a piece of paper. But that still means the vast majority of advisor-custodian interactions, even in a singular transactional event like onboarding, have yet to enter the digital age.

Access to the latest technology is an important factor for advisors, particularly those associated with TD Ameritrade. The custodian's Veo One platform has unabashedly embraced open-architecture technology since launch, attracting wealth management tech providers large and small.

Pershing’s shift in the advisors it wants on its platform may be incremental, but it signals that competitors are seeing opportunities arise from the Schwab-TD Ameritrade acquisition. “Any corporate transaction of that size is hugely distracting,” explained LaHuta. “Those decisions will weave together a very different solution for everyone. Either half of those advisors are going to have a change, or all of them are going to have a small change, or somewhere in between.”

Indeed, Bernie Clark, head of Schwab Advisor Services, already told advisors the likelihood of them influencing the post-acquisition platform was slim. That declaration might not sit well with advisors, particularly those worried about the direction of the firm.

Advisor dissatisfaction at Pershing’s competitors is music to LaHuta’s ears. “There are a lot of firms out there who are, what I’ll call, ‘Never Schwabers,’” he said. “Anytime there’s a disruption, there’s an opportunity for assets to be in motion.”

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