Custodians Target Fidelity Clients Amid $100M Minimum
Fidelity Investments’ announcement last week that its custody business would be dropping advisors with less than $100 million in client assets has competitors and even larger registered investment advisors circling with a combination of incentives, sales outreach and social media cajoling.
On Tuesday, Betterment made a direct offer to advisors to join its RIA custody platform, waiving its platform fee through the end of 2028. In addition, $48 billion custodian Axos Advisor Services has its sales team targeting “every advisor who custodies with Fidelity,” and RIA platforms are making the case that advisors should join them for the scale that will ensure loyalty.
Altruist CEO Jason Wenk, who recently agreed to sell his once-independent custodial platform to Vanguard, is making his case to advisors on LinkedIn, and even the custodial behemoth Schwab is directly pinging new potential clients.
“Small RIAs are the backbone of the independent advisory profession, and they always have been,” Jon Beatty, head of advisor services for Schwab, wrote after the news broke. “Whether an advisor is just launching a firm or managing billions, our role is the same: help them grow, compete and succeed.”
Beatty noted that Schwab, which has $5.7 trillion in custody assets for RIAs and no asset minimum, currently has more than 11,000 firms with AUM under $100 million.
For Fidelity, the lower end of the asset range has been a less important market. Over 10 years ago, the firm mandated a $2,500 quarterly fee for firms with under $15 million in client assets on the platform. More recently, it stopped allowing new firms with less than $100 million in assets to join the platform.
Several industry consultants, however, are warning financial advisors on LinkedIn and through commentary to treat the $100 million as an initial cutoff when evaluating their next option. Tim Welsh, president and founder of Nexus Strategy, wrote in a white paper on the topic that the threshold is just the beginning, and could continue to be raised by Fidelity and potentially others.
In response to competitors going after their clients, a Fidelity spokesperson wrote that: “Fidelity’s position as a leading firm in combined clearing and custody remains strong, as does our commitment to helping a wide range of third-party wealth managers best serve their end investors and grow their businesses. We continue to invest in our clients by focusing on the service, technology, products, insights, and consulting that we believe only Fidelity can deliver.”
Competitors, in the meantime, are making the case that they are the best choice for the small and upstart advisors.
“At Axos, we have all the capabilities to be able to support these advisors,” Mike Watson, executive vice president and head of Axos Securities, wrote in an email. “We are a non-competitive partner and don’t provide any proprietary asset management. …. We welcome the opportunity to work with advisors of all sizes and help them serve their clients.”
Axos, which is owned by publicly listed bank holding firm Axos Financial, has sales team members reaching out to advisors currently custodied with Fidelity, Watson wrote.
On Tuesday, Betterment put out an offer to advisors custodied with Fidelity, waiving its platform fee through the end of 2028 for those who add it as a custodian.
The New York City-based firm said it currently charges a platform fee from 12 to 20 basis points on a firm’s total assets on the platform. In 2027, however, it will shift to a 20-basis-point fee on assets under $10 million, 12-basis-point fee on assets over $10 million, and a negotiated rate on assets above $100 million.
“RIAs of every size deserve a custodial partner that supports where they are today and where they want to go,” CEO Sarah Levy wrote in an email. “Betterment is built to support firms at any size, and our job is to enable their efficient growth. For some firms, we are the sole custodian, and for others, we are the home for their next generation clients.”
Betterment said advisors must opt into the deal by June 30, 2027, which is Fidelity’s cutoff date.
Custodian Altruist, which was making waves before it agreed to be acquired by Vanguard earlier this year, declined to comment on its actions with Fidelity clients.
However, Wenk has been vocal on LinkedIn about the firm’s position for smaller RIAs, noting in one post regarding the new minimum that the “water is warm and all client-focused advisors are welcome.”
One RIA platform, Advisor Services Network, is also getting into the mix. Trey Prescott, a partner and director of business development for the $11 billion platform based in Atlanta, wrote in a post that firms that join its RIA network can custody with Fidelity even if they are under $100 million.
“ASN’s RIA infrastructure, platform and nationwide partnerships are here to support the entrepreneurial wealth advisors’ goals and the way they want to run their business,” Prescott wrote.
On a social media chain posted by Matt Regan, CEO of $10.6 billion RIA Wealthcare, he made the case that his platform provides a “ready solution that allows these firms to remain independent, keep their brand and approach, and avoid changing custodians. All while outsourcing the non-revenue generating tasks that bog advisors down.”
One advisor said his firm would shift from Fidelity to Altruist, but he added there will be a greater ripple effect.
“I have several accounts at Fidelity, so this isn’t an abstract decision for us,” Alex Chalekian, founder and CEO at Lake Avenue Financial, wrote in his post. “It’s a reminder that the relationship between an RIA and its custodian matters. I have a feeling this decision by Fidelity is going to backfire.”
Angela Thomson, founder of Coastal Financial Planning in Lincoln, R.I., said she was surprised to receive the letter from Fidelity warning her that her practice, with under $100 million in assets, would be kicked out, but that it conformed with other actions.
“They have been moving to limited client services, so I feel it’s in line with their trending service issues,” she said.
Thomson said she plans to be fully retired within the next year, so she will focus on selling her business rather than finding a new custodian.
“It may actually benefit me, as some firms are scrambling to make the new minimums, and my business would be sufficient to bring another organization up to Fidelity’s new requirements,” she said.
In the meantime, Schwab and others will continue to make the most of the moment.
In one LinkedIn post responding to Fidelity’s move, Financial Planner and Educator Cody Garrett asked if Schwab was “still in the picture for advisors building from the ground up.”
A response came from Schwab Advisor Services, noting: “Absolutely. We’re proud to support advisors at every stage in their journey. Big firms, small firms, and everything in between.”
