Opportunities Remain In RIA Custodian Market – Study

Editorial Staff

15 February 2023

A cluster of four firms, including such names as Charles Schwab, Pershing Advisor Solutions and Fidelity, control 84 per cent of assets custodied in the registered investment advisor channel, highlighting barriers to entry in the space, a report says.

RIAs are more likely to add a new custodial partner than unwind an existing relationship, Cerulli Associates said in a report.

Emerging custodians can fill perceived gaps for existing RIAs or help breakout advisors to establish new independent RIAs, according to The Cerulli Report - US RIA Marketplace 2022.

Most firms have a single custodian. Among all RIAs, 73 per cent of them manage less than $250 million and, therefore, the plurality only works with one custodian.

However, RIAs may begin to evaluate the number of custodial relationships they maintain as their firm grows or their needs evolve, the report said, noting that they often add custodial partners if they engage in M&A and are onboarding a new advisor or team that custodies elsewhere.

According to Cerulli, one in four RIAs are exploring adding a custodian in the next year. Yet only 4 per cent of RIAs have switched custodians in the past 12 months.