Call to Ac­tion for Cus­to­di­ans

Al­though these firms pro­vide the RIA in­dus­try a lot of sup­port, they could be do­ing more.

Financial Planning - - Contents - BY AL­LAN BOOMER

Al­though these firms of­fer the RIA in­dus­try a lot of sup­port, they could be do­ing more.

I started my RIA firm in 2012 in my par­ents’ base­ment. I am proud to an­nounce that we crossed the $100 mil­lion mile­stone in reg­u­la­tory as­sets un­der man­age­ment ear­lier this year. This is a num­ber I could not fathom when I started and had to beg a cer­tain RIA cus­to­dian to give my firm a shot on their plat­form.

I was leav­ing an RIA to start my own ven­ture and my hope was to con­tinue work­ing with the same cus­to­dian, mak­ing the tran­si­tion process as seam­less as pos­si­ble for my clients. But the cus­to­dian had a strict min­i­mum for new RIAS, and I wasn’t there yet. I was shown the door.

De­jected but un­de­terred, I in­ter­viewed each of the other ma­jor cus­to­di­ans and lob­bied them for an op­por­tu­nity. Time was of the essence. I al­ready had quit my prior RIA and the more time I spent with­out a cus­to­dian, the more I risked los­ing clients.

Thank­fully, I found a cus­to­dian who be­lieved in my story and vi­sion for the fu­ture. They pro­vided the plat­form I needed to cre­ate my firm — trad­ing, cus­tody of ac­counts, web in­ter­face for clients, state­ments and a solid brand name to stand be­hind me. How­ever, in hind­sight, they pro­vided very lit­tle else.

If you are like me, you like your cus­to­dian a lot, you just don’t love them. You know they could be do­ing more for you and your clients. You also know that your prac­tice has grown de­spite your cus­to­dian, not be­cause of them.

Al­though these firms pro­vide the RIA in­dus­try a lot of sup­port, they can do more to help our firms grow and also serve our clients bet­ter. Here are a few.

Re­fer­rals: Give us some leads. I have placed as­sets with three dif­fer­ent cus­to­di­ans over the past eight years. I have never re­ceived one lead from any of them. With all of the money these firms spend on mar­ket­ing, wouldn’t it be great if they spread the love around? I re­call ask­ing one bank about the re­fer­ral pro­gram they ad­ver­tise on their web­site and they quickly low­ered my ex­pec­ta­tions on re­fer­rals — “Don’t count on it.”

Ad­min­is­tra­tion: Help us with the pa­per­work. Many of the ma­jor cus­to­di­ans also have large bro­ker­age busi­nesses where they deal with the pub­lic through call cen­ters. Wouldn’t it be sweet if these same call cen­ters could process our ac­count open­ing pa­per­work (per­haps ev­ery­thing but our client agree­ments) for RIA clients?

When a client opens an ac­count with us, it would be great to have an op­tion to get the cus­to­dian on the line and have them han­dle the rest of the ad­min­is­tra­tive process.

Not ev­ery firm would take ad­van­tage of this ser­vice, but this would be a great add-on for young firms who do not have the re­sources to hire their own ad­min­is­tra­tive staffs.

Part­ner­ship “dat­ing” op­por­tu­ni­ties: Help us net­work. Back when I was beg­ging cus­to­di­ans for a

If you’re like me, you like your cus­to­dian a lot, you just don’t love them. And you know your prac­tice has grown de­spite your cus­to­dian, not be­cause of them.

seat at the table, I bet there was an­other ad­vi­sor in the same shoes some­where. Wouldn’t it be great if cus­to­di­ans would take steps to in­tro­duce up­start ad­vi­sors to each other for part­ner­ship op­por­tu­ni­ties?

My cur­rent busi­ness part­ners have been hugely in­stru­men­tal in the growth of my firm; I just wish I had met them sooner.

Ser­vice teams: Make us look good. There is noth­ing more frus­trat­ing than deal­ing with a ser­vice team rep who pro­vides mis­in­for­ma­tion. As the cus­to­di­ans grow, their ser­vice em­ploy­ees are be­com­ing greener and greener. I’m a firm be­liever that clients don’t fire ad­vi­sors over ac­count per­for­mance, how­ever ser­vice is­sues can be deal-break­ers. We spend so much time and ef­fort court­ing clients and get­ting them to say yes to us that we can­not af­ford to be mis­in­formed by a cus­to­dian’s in­ex­pe­ri­enced ser­vice team. Many cus­to­di­ans think they are solv­ing this prob­lem by hav­ing ded­i­cated ser­vice teams that cover spe­cific firms, but this alone is not the so­lu­tion.

Don’t com­pete with us: OK, who am I kid­ding? Most RIA cus­to­di­ans also deal with the pub­lic di­rectly. We can live with that fact be­cause we have a com­pet­i­tive ad­van­tage in­side of our RIA firms that the cus­to­di­ans can’t match — in­de­pen­dence. How­ever, there ore times when cur cus­to­di­ans fifer the some prod­ucts cheaper to the pub­lic than they do to RIA clients. This cre­ates o chan­nel-con­flict for the smart client who is In-the-know. More free con­fer­ences: RIM ore in­vited to free con­fer­ences and events cn a reg­u­lar ba­sis, how­ever, many of the big cus­to­dian con­fer­ences come with a some­times fear-fig­ure price tog. This cost con be pro­hib­i­tive for small but grow­ing Finns. Tech­nol­ogy: Ev­ery RIA cus­to­dian has In­vested heav­ily in their tech in­frostm­c­ture, but this is still a huge area in need of im­prove­ment. At my RIA, tech­nol­ogy is my big­gest cost af­ter hu­man cap­i­tal. Be­cause of the gaps in the cus­to­dian's of­fer­ings, hu­man a patch­work of dis­con­nected sys­tems that I have bought on a ono.olr bolls from o litany of ven­dors.

Wouldn’t it be great if cus­to­di­ans in­tro­duced up­start ad­vi­sors to each other for part­ner­ship op­por­tu­ni­ties? My cur­rent busi­ness part­ners have been in­stru­men­tal in the growth of my firm; I just wish I had met them sooner.

I have to log into these sys­tems sep­a­rately and most don't talk to one an­other. This could be low-hang­ing fruit for cus­to­di­ans: CRM as well as soft­ware for fi­nan­cial plan­ning, port­fo­lio con­struc­tion and per­for-mance. Min­i­mums: In many ways the cus­to­dian holds the keys to the front door of firm own­er­ship for as­pir­ing RIA en­trepreneurs. Min­i­mums, which at some cus­to­di­ans can reach nine-fig-ures, pro­vide a struc­tural im­ped­i­ment — es­pe­cially for young ad­vi­sors, women and mi­nori­ties. To be sure, these re­la­tion­ships can be a two-way street. That is, there are steps RIAs can take to help fa­cil­i­tate a bet­ter re­la­tion­ship. For starters, if you’ve been as­signed a re­la­tion­ship man­ager, don’t just bring them all of your com­plaints, try to be their friend. Be­yond that, take ad­van­tage of their tech­nol­ogy. Some cus­to­di­ans of­fer a score­card that shows how well each RIA has adapted to tech­nol­ogy. There may be some cost sav­ings or ef­fi­ciency to be gained.

Here are just a few more ideas for RIAS to help this re­la­tion­ship:

• At­tend the free stuff. Cus­to­di­ans of­ten pro­vide no-cost ed­u­ca­tional op­por­tu­ni­ties. Sign up and go! Stop ask­ing for ex­cep­tions. Cus­to­di­ans have strict rules that gov­ern how they con­duct busi­ness. Ac­cept their rules and abide by them. Don’t wear out your wel­come. • • Learn their plat­form. There could be things that you’re not tak­ing ad­van­tage of like dis­counts, or tech­nol­ogy, or prod­ucts sim­ply be­cause you didn’t know about them.

There are over 12,000 RIAS in the U.S. col­lec­tively manag­ing over $70 tril­lion in client as­sets, a 300% in­crease since 2001. And the busi­ness of cus­tody for those as­sets is very lu­cra­tive.

The two sides — RIAS and cus­to­di­ans — ex­ist in a sym­bi­otic re­la­tion­ship.

Nei­ther can fully ex­ist with­out the other. As RIAS grow, so do the cus­to­di­ans. So RIAS want to view our cus­to­di­ans as a true, al­beit arms-length, part­ner who is a pos­i­tive fac­tor in our suc­cess and not a de­ter­rent.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.