Portfolio Management purple - icon

View Our Brand Assets

Access a suite of logos, fonts and media resources for the AdvisorEngine Brand. If you can’t find what you need, please contact us.

View Assets

10 questions to ask before choosing a custodial relationship

Choosing a custodian relationship is one of, if not THE single most important decision any newly registered investment advisor must make.

It should not be taken lightly. There are many custodians in the marketplace - not all will be the right fit for your business.

To explore the process of choosing the best custodial relationship, I had the opportunity to catch up with industry experts and thought leaders Joel Bruckenstein and Craig Iskowitz to have them weigh in on the top questions they believe breakaways or new RIAs should consider asking potential custodians.

10 questions to ask 

  1. How do the custodians investment capabilities match your firm's needs? Does the custodian support your investment frameworks such as models, investment managers and investments? What is the range of security types supported by the custodian and how does it compare?  Do they offer a choice of competitive cash vehicles?

  2. How well does the custodian support having clients invest in private equity, limited partnerships, and other types of alternative investments? And if they do not support some of these themselves and have partners, what do those arrangements look like, how seamless?

  3. What does the custodian offer on its own platform? What third-party investment providers or technologies do they integrate with and to what level of depth? Does the custodian support and integrate, where applicable, with your core investment, compliance, risk or technology providers?

  4. What are the trade commission fees? Any money movement fees? Does the custodian charge annual fees for IRA’s or other retirement accounts? How are lending fees calculated?

  5. How efficient is the custodian in terms of its processes, how do they do in terms of operational efficiency and how do they measure it? Are key processes (account transfers, money movement, account opening, AML order processing, etc) real-time, smart or automated?

  6. What are your support levels going to be like? What does day-to-day support look like?

  7. What other services do they offer (i.e. practice management consulting, technology consulting, thought leadership, peer-to-peer networking opportunities). Does the custodian have referral networks?

  8. How is the custodian’s user interface, both its navigation and look and feel as well as reporting? Both for advisors and end clients? Caring about a slick, modern look and feel is not just the territory of millennials - these days, all investors expect improved user experiences. Mobile accessibility matters.

  9. Does the custodian support all of the types of clients/accounts that you may need supported from basic accounts to trusts to retirement accounts to corporate accounts?

  10. What level of cybersecurity expertise and support or resources can your firm expect from the custodian?

If you are considering breaking away and venturing out on your own, all of these questions present a great starting point. To help further, I decided to dive a little deeper with Bruckenstein and Iskowitz and explore all the nuances of this important custodial decision. 

Your custodian options

This custodial decision was recently made more confusing by Schwab’s potential acquisition of  TD Ameritrade.  If approved this may result in there being “the big three” custodians versus the ‘big four’ of the decade past, the three being Schwab, Fidelity and Pershing.

The combined Schwab will be a powerhouse with a total of $5.1 trillion in assets across its retail and institutional sides and will serve the clients of 10,000 RIA’s. In total, the number of RIA firms served puts it far ahead of Fidelity (3,000 firms) and Pershing (750) respectively.

There are, of course, many smaller custodians, most fulfilling not only basic custody duties but offering different business models or ways of being compensated for their services and/or serving or rewarding advisors. These would include, in no particular order, Trust Company of America (now owned by eTrade), Shareholders Services Group, Trade PMR, Folio Institutional, Apex Clearing, RBC Advisor Services and Interactive Brokers, among others.

For advisors who utilize a hybrid model, allowing you to maintain both brokerage and advisory business, there are additional choices beyond the traditional custodians.

How many advisors choose a custodian

“Advisors pick custodians for a variety of reasons,” said Craig Iskowitz, founder and CEO of the Ezra Group LLC, a technology strategy consultancy that works mainly with independent broker-dealers, large RIA firms and family offices. “A lot of it depends on the size of the firm, whether it is going to be a lifestyle practice or a firm that wants to grow,” he added. 

Iskowitz said that he works with a lot of large teams leaving the big brokerages, which presents its own challenges when compared to those that grew up with RIA firms or even fully independent broker/dealers.

“They come out from their wirehouse and their cushy world where they have been pampered - in that the technology is provided for them - and are forced to ask ‘what now?’” Iskowitz said, adding that the world of custodian technology platforms and a universe of third-party providers to choose from can be overwhelming.

Technology and integrations

Every custodian has a technology platform these days but most advisors are multi-custodian, which represents a mix of factors. Some advisors simply want to accommodate a client with longstanding accounts at a particular custodian and not have to go through the process of ‘repapering’ them. For other firms, it is more of a business decision such as needs in an area the custodian might be perceived as providing better service, tools or processes in a particular area, for example, support of trusts or alternative investments.

“Advisors expect custodians to have integrations with all the best-of-breed third-party tools,” Iskowitz said. This is especially so when it comes to major core pieces of the advisors’ day-to-day existence, which would generally include customer relationship management (CRM) solutions, financial planning applications, portfolio management applications and performance reporting solutions.

Advisor industry technology expert and T3 conference creator and producer Joel Bruckenstein said that advisors should take thinking about integrations to a deeper level when considering a custodian.

Simply put he suggests that as advisors shop around they need to ask the custodian: “How open is your technology architecture and who [among third-party technology providers] do you have deep integrations with?” More than that though he suggests advisors begin to define the meaning of ‘integrations’ for themselves.

“You [as the advisor] have to define what a deep integration means—for some an integration might mean uploading or downloading data—for someone else it could equate simply to single-sign. What it means, what it does and what it doesn’t do,” Bruckenstein said.

To help illustrate this Bruckenstein points to the efforts of TD Ameritrade Institutional.

“They continue to invest in Veo Open Access which is an integration layer for third-party technologies,” he said. That platform has single sign-on to its Veo Open Access platform but also around 20 third-party technology providers most sought after by advisors, many of them able to share data bi-directionally with the account system.

“Schwab is doubling down on what I would call core custodial tasks,” said Bruckenstein. “They are investing money in making their APIs more robust and improving on things like moving money and onboarding clients,” he said.

Focus on what a custodian offers

Coming back to Ezra Group’s Iskowitz, firms seem to want fewer technology relationships, which is putting pressure on custodians to not only expand integrations with third-party vendors but also provide more support for them.

“There is a growing segment that says it is nice to have one throat to choke,” Iskowitz said, referring to all independent advisors, whether those coming from a wirehouse or those with long-standing RIAs who would like a single point of technology contact, a single responsible party to hold accountable.

“Advisors are not in the tech biz themselves, they need to run their own businesses,” Iskowitz said, noting that these days this encompasses not just the basic technology to power their firm but likely deciding on compliance technology. And that means compliance technology not just limited to trading and traditional advisor duties but things related to marketing like social media and texting. “It is endless,” he said.

When it comes to breakaways bringing some of their sophisticated, high net worth clients with them, this can present considerations beyond the purely technology-oriented.

“For HNW teams it can be important to consider how or whether a custodian can support other types of alternative investments, private equity, or limited partnerships, for example,” said Iskowitz. 

A lot of the choice can come down to support of security types too, or support for things like fractional shares, something Iskowitz noted was a strong suit of Folio Institutional in particular. He also noted that if a custodian themselves does not support this it is important to investigate whether they have third-party partners who can and, ultimately, how good the performance reporting and how deep and seamless the integrations are between them. 

Iskowitz said that in his consulting he also gets into just how efficient the custodian is when it comes to best execution and how they measure that.

Model portfolios, engagement and client expectations 

An increasingly important facet of the custodial question for wealth management firms has become whether those firms that want to have, use, and manage their own model portfolios can find support for this from the custodian.

“Can you use your own models, can you create your own strategies,” Iskowitz said. 

“One thing I’ve noticed is that RIAs don’t recognize how important engagement is,” Iskowitz said. “It used to be a meeting once a year.” Today, however, he said many clients are expecting more engagement in the form of possible touchpoints and when they do not get it, this can be a problem.

“Clients logging in to the client portal frequently used to be an indication of a problem, but now it is becoming more common as portals offer data beyond just portfolio performance,” Iskowitz said. “Advisors should look for more ways to engage clients that are active on their portal.” This notification should be provided frequently, preferably in real-time on a dashboard the advisors can monitor. But most custodians only provide a report generated periodically. The big four (soon to be three) custodians have gotten far more granular in their ability to provide these features to an advisor, though sometimes it requires setup on the advisory firm side to control it.

Then there is the changing attitude and expectations among end investor clients toward the user interfaces provided to them. The days of clunky decade-old look and feel are passing.

“In the past, the conventional wisdom that only millennials are concerned when it comes to a digital experience—it is spread across the age groups now,” Iskowitz said. “Certainly not a primary focus but HNW clients are more open to tech in their wealth experience than they used to be and more of them want multiple types of access,” he said, noting that this can mean being able to do additional things like tinkering with goals or experimenting with hypotheticals in their financial planning.

“Apple wasn’t the first company to create an MP3 player but they were the first big technology company that created an intuitive interface for playing digital music,” said Iskowitz.

Cybersecurity concerns

Bruckenstein said that another thing that is becoming an increasingly important concern and consideration for every RIA, and especially one that should be on the agenda of questions to ask for those just setting up shop is cybersecurity.

He shared that a recent T3 Inside Information Survey found less than six percent of advisory firms have ever engaged with a third-party cyber expert. Instead, he said that most RIAs depend on their ‘quote, unquote’ IT guy, who usually is a third-party IT person.

This is another area Bruckenstein said, where custodians are likely to begin to try and differentiate themselves, at least in terms of helping advisors begin to vet security expertise or come up with what they deem minimal security credentials that an expert should have. Over the last few years, an increasing number of security-related credentialing bodies and credentials have come out that many advisors are probably unfamiliar with.

“In addition to that person that may not be a cybersecurity expert there are a number of vendors in the industry that are holding themselves out as experts but you need to know whether they can come in and do things like penetration testing of your website and network,” Bruckenstein said.

Gone are the days where someone that is an adequate network admin and can update or replace PCs or servers can also necessarily call themselves a security expert. So an advisor setting up shop should ask the custodian what level of internal expertise or vetted experts they can refer a firm to.


Choosing the right custodian is an important decision for any advisor. It represents a relationship that can produce many long-term benefits. The custodian you choose ultimately functions as an extension of your business and can impact your clients and reflect on your practice in countless amounts of ways. Bruckenstein and Iskowitz both gave us some great food for thought. 

I encourage you to subscribe to receive future articles sent directly to your inbox. AdvisorEngine® wants to be a resource for all your wealth management needs. 

This blog is sponsored by AdvisorEngine Inc. The information, data and opinions in this commentary are as of the publication date, unless otherwise noted, and subject to change. This material is provided for informational purposes only and should not be considered a recommendation to use AdvisorEngine or deemed to be a specific offer to sell or provide, or a specific invitation to apply for, any financial product, instrument or service that may be mentioned. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor. Opinions and forecasts discussed are those of the author, do not necessarily reflect the views of AdvisorEngine and are subject to change without notice. AdvisorEngine makes no representations as to the accuracy, completeness and validity of any statements made and will not be liable for any errors, omissions or representations. As a technology company, AdvisorEngine provides access to award-winning tools and will be compensated for providing such access. AdvisorEngine does not provide broker-dealer, custodian, investment advice or related investment services.

Justin Wilkinson

Justin Wilkinson

Justin Wilkinson is a relationship builder and business development professional who is dedicated to establishing successful long-term partnerships with clients and industry partners alike. Applying his experience from both the institutional wealth management industry and his entrepreneurial ventures, he brings a unique perspective to client and partner relationships. Justin is responsible for accelerating new business growth at AdvisorEngine and helping our clients achieve strategic goals through technology-driven initiatives.


Read our latest thinking

We all know technology is pivotal in streamlining operations, enhancing client engagement, and driving overall efficienc...
The T3 conference is the longest-running event dedicated to advisor technology, and it marked its 20th anniversary in La...
As a financial advisor, managing client relationships is crucial – one missed action can cause a rift.