How 5 of the industry’s biggest firms do RIA custody

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• Key insight: When it comes to custody, the big firms all do it differently, leveraging different aspects and advantages to attract the business of RIA firms.
• What’s at stake: For advisors looking to choose a custodian, factors including name recognition, technology integrations and track records come into play. 
• Expert quote: “Any custodian you have, I don’t care what anyone says, it’s going to come with challenges.” — Brett Bernstein, CEO of XML Financial Group

Over nearly 30 years in the industry, financial advisor Brett Bernstein has worked for and with some of the biggest names in wealth management. The CEO and co-founder of Bethesda, Maryland-based registered investment advisory firm XML Financial Group first broke into the industry at Merrill and spent a dozen years with LPL Financial before his RIA joined Focus Financial Partners in 2016. Three years later, XML acquired another Focus affiliate that brought its own broker-dealer into the fold, which led to a new relationship with Wells Fargo’s First Clearing as the clearing and custody provider to the rebranded brokerage, XML Securities.

Operating a multibillion-dollar RIA that is a wholly owned indirect subsidiary of Focus and uses Fidelity Investments as its custodian, while also running a brokerage that works with the clearing and custody arm of Wells Fargo, can certainly get cumbersome for Bernstein and the team supporting 25 advisors in five offices, he said. But, from his perspective after decades in the industry, those components add up to just the right setup for the team to serve customers at many different stages of investing and levels of complexity across $4.3 billion in client assets. The in-house brokerage and its agreement with First Clearing have also helped smooth the transition of two teams that XML acquired without needing to change the clients’ custodian.

“Any custodian you have, I don’t care what anyone says, it’s going to come with challenges,” Bernstein said. “I think Wells Fargo was smart. … They realized it’s cheaper to keep the advisors than it is to keep losing them back and forth.”

Wells Fargo, LPL, RBC, Raymond James and Goldman Sachs share custodian businesses in common that display a willingness to work with external RIAs in a way that their brethren among the giant brokerages haven’t embraced. While their largely undisclosed amounts of assets under custody among RIAs with no registered representatives affiliated with those firms’ brokerage or RIA arms likely fall far short of the scale of Fidelity and Charles Schwab, the five companies have built substantial custody businesses among external advisory practices.

Those firms “recognized that they could leverage what they already have in place for outside RIAs to use, without having to reinvent their models completely,” according to Jodie Papike, CEO of independent advisor recruiting and executive placement firm Cross-Search.

To be sure, some varying, firm-specific factors led each into serving as custodians to independent RIAs at different times, and name recognition among consumers favors some of the big firms more than the others. At the same time, as the independent RIA channel draws more advisors and clients from wirehouses and other brokerages, the companies that would presumably be in a position to lose that business altogether have developed a method to retain some portion of it through their custodians.

“There are all these different creative ways that firms can put themselves out there to advisors so that, no matter how they want to affiliate with them, they’re still a good option to them,” Papike said. “The bigger firms tend to be more nimble in how they allow advisors to affiliate with them, and they have the resources to do that.”

A varying landscape for custody across the RIA and brokerage world

For this 12th installment of Financial Planning’s ongoing series on the fees and business models of the industry’s custodians, FP sent questions and interview requests to all five firms, offering the opportunity for any of them to push back against the idea that they belonged in the group. Though they straddle several industry classifications, the firms frequently flex their ability to work with independent RIAs that use their custodians in some capacity without being registered brokerage or investment advisory reps of the firms. That latter regulatory distinction separates the business line from so-called hybrid RIAs that are independent while using a brokerage.

For firms like Merrill, Morgan Stanley and UBS, the custody for external RIAs “means supporting the independent channel their own advisors leave for,” according to William Trout, the director of the securities and investments practice with consulting firm Datos Insights, and Gregory O’Gara, a strategic advisor with the firm’s wealth management practice. As an example, they pointed to Morgan Stanley’s 2021 move to spin off the custodian once known as Trust Company of America, then called E-Trade Advisor Services and now named Axos Advisor Services. Goldman went in the opposite direction when it acquired Folio Financial in 2020. Goldman has been ramping up its RIA recruiting to the point that it even acts as a custodian to the company that acquired onetime aggregator firm United Capital from it in 2023, Creative Planning.

But Wells Fargo has been the exception to its wirehouse peers in its structure, given that the Wells Fargo Advisors Financial Network is one of the largest independent brokerages. Wells Fargo’s First Clearing also provides services to TradePMR by Robinhood, and it will be rolling out a specific unit catering to external RIAs later this year, Trout and O’Gara noted. It, LPL, RBC, Raymond James and Goldman each approach RIA custody in slightly dissimilar manners from one another — and distinctively from the three largest custodians in the industry, as well.

“Schwab, Fidelity, and Pershing compete for independent firms on scale, technology, and advisor support,” Trout and O’Gara said in an email. “Each of your listed five firms run RIA custody as an extension of a franchise built around its own advisors, clients or products. Goldman treats custody as a distribution channel for capital markets, lending and asset management. Raymond James uses it as a retention tool for advisors who want to go independent. LPL extends a channel it already operates. Vanguard’s pending purchase of Altruist points to a different purpose again: vertical integration. Owning a custodian allows an asset manager to reduce its reliance on third-party platforms and the revenue-sharing arrangements that come with them.”

How the firms describe it

In keeping with that divergent theme, the five firms differed widely in their responses to FP’s questions. Representatives for Raymond James and Goldman did not respond to inquiries.

LPL supplied a link to its standard account and service fee schedule and disclosed that it had $358 billion in independent RIA assets under custody at the end of the second quarter. The company didn’t respond, however, to a further request for the specific amount with independent RIAs that do not have any LPL registered reps. Regardless, LPL has been “providing custody, clearing, technology, service and business support to both fee-only RIAs and hybrid RIAs” since 2008, according to Marc Cohen, a group managing director and LPL’s chief growth officer.

While Cohen acknowledged in an email that LPL’s custodial revenue stems “from multiple sources, including transaction activity, cash sweep, lending interest, product-related economics, and custody or platform fees,” he noted that the company doesn’t sell proprietary investment products or payment for order flow. And that distinguishes LPL from many wealth management companies that do have those latter two common industry conflicts of interests.

“LPL is an advisor-centric business, and we do not compete for end clients. Financial advisors are our clients, and our focus is on supporting them and helping them grow their businesses,” Cohen said. “No matter how advisors choose to structure their business, from independent RIAs to corporate RIA affiliation, hybrid or fee-only models or outsourced operations, LPL provides the flexibility and support to help them achieve their vision. LPL provides the scale of a leading custodian with integrated technology, business support and service capabilities in one ecosystem.”

RBC brings an even longer track record of working with external wealth management firms, dating to the launch of RBC Clearing & Custody in 1979. Representatives with the firm noted in an email statement that it is the custodian to more than 300 firms “in the U.S. and in select global markets, including breakaway advisors, start-ups, wealth management firms, money managers, dually registered firms and institutional-based firms.” The representatives cited the “depth and consistency of our service,” as well as “the financial strength of our parent company” and the firm’s technology resources.

“Our Minneapolis-based technology team supports every aspect of the technology experience: strategic consulting for well-informed technology decisions, tactical implementation for customizing a firm’s tech stack, training and support for faster adoption and greater productivity, and data analytics support for regulatory compliance and business insights,” RBC’s statement to FP said. “Many factors play into our overall pricing. Each firm we partner with has a unique business model and business plan, giving us the opportunity to tailor pricing. We see the relationship as a commitment to our clients’ success and our focus stays on delivering value aimed at helping them meet their goals.”

Wells Fargo’s First Clearing has maintained such relationships with external independent brokerages and RIAs for roughly 40 years, according to an interview with Erik Karanik, head of independent solutions with Wells Fargo’s Wealth and Investment Management division and Leann Markovitz, who is head of First Clearing. Those services will enter a new phase in early December, with the launch of Wells Fargo’s new RIA Solutions unit.

While the firm also opened an RIA channel in 2019 under its collaboration with TradePMR, the new program will deliver the services entirely through Wells Fargo as a third leg of its independent advisor businesses, alongside FiNet and First Clearing. The latest outreach reflects the “market trends” that continue to see advisors moving to RIAs, Karanik said.

“We think we have the capacity to serve the advisors along the spectrum, where they can garner more control of their businesses, more control of their client experience and we want to provide the scale and support to provide those client solutions,” he said. “To have the RIA Solutions was a logical next step.”

He and Markovitz declined to share any metrics for the size of First Clearing’s custody business, but Karanik said that it is comparable to that of Apex Fintech Solutions in “the next tier” below Schwab, Fidelity and BNY Pershing. In terms of fees, First Clearing doesn’t share any schedule publicly, but the rates are based on criteria such as an advisory practice’s business model, requirements and use of the custodian’s services, Markovitz said.

“Through due diligence and the capabilities that they need, we work with those firms to price that business,” she said. “We look at the needs of the firm to price that business.”

An RIA-by-RIA fight for custody

Those kinds of negotiations play out regularly for custodian sales teams at RIAs across the country such as Synergy Financial Group, a San Ramon, California-based firm with nearly $1 billion in client assets. The firm has always worked with multiple custodians, according to Synergy Chief of Staff Shannon Irwin. However, after months of due diligence and meetings, she and the rest of Synergy’s team switched one of its custodial relationships at the beginning of the year to Goldman from Pershing while keeping its agreement with Schwab, Irwin noted.

While she said she wouldn’t describe them as “unhappy” with Pershing over anything in particular, Goldman’s private wealth and banking capabilities brought “additional benefits we wanted to award our ultrahigh net worth clients,” Irwin said. Goldman won out by identifying more areas of value it could deliver to the firm’s customers, and the fees represented only one aspect of the decision.

“We are very transparent with our clients, so fees obviously are something that we take into consideration,” Irwin said. “They took the time to understand our business, because that’s something that is really important to us.”

Simpler transitions often play a role in advisors’ decisions as well, although the significance of that factor can shift over time. When Franklin, Tennessee-based SageSpring Wealth Partners and its president, Jeffrey Dobyns, dropped Raymond James Financial Services in late 2024, he left “a lot of good friends at Raymond James,” where they “were super kind to me,” Dobyns said. But the technology, favorable fee rates and flexibility of working with multiple custodians in Schwab and Fidelity won out over the idea of retaining Raymond James as a custody provider.

“The nice thing was it was easy,” Dobyns said. “The bad news was, the economics were still not really competitive.”

Brand name, technology and track record could all enter the mix of advisors’ decisions, according to Bernstein of XML. RIAs will be comparing, say, the draw and product access of a name like Goldman to rivals like Schwab, Fidelity, Pershing, First Clearing and LPL.

“The answer is, can you compete enough and bring me something that others can’t?” Bernstein said. “Nine times out of 10 the lawn turns brown, so you really have to believe that grass is going to be green for your clients and your team.”