Going Multi-Custodial: Every Firm’s Dream or a Nightmare of Complexity?

Multi-Custody versus Single Custody Isn’t Always a Clear Choice – Plus, Launching Our Inaugural WSR Growth & Innovation Awards!

Larry Roth, CEO, Wealth Solutions Report

In the early autumn, I met with a small group of longstanding industry colleagues.  They wanted to pitch me to provide both seed capital investment and planning guidance on their strategy for a potential new wealth management venture.

Their pitch had a mix of compelling ideas as well as the usual “work in progress” details that anybody would expect during the early planning stages.  

But one item that I found especially interesting was how their pitch opened with “Naturally, this new entity will be multi-custodial.”

“Naturally?”  How so?

Despite doing a great job in explaining multiple elements of the rest of their strategy, the members of this possible new venture never once circled back in the course of their presentation as to specifically why or how being multi-custodial would be beneficial to the business or its customers…either in the early stages, or over the long run.

Going Multi-Custody….”Just Because?”

Just because it’s popular,
it doesn’t necessarily mean it’s right!

And when I circled back on this point, asking exactly what the benefits of being multi-custodial would be, the reactions ranged from a shoulder-shrug set of “why not?” responses to an assertion about how “all the most credible wealth management businesses these days seem to be multi-custodial.”

But is that really the case?  Over the past five years in particular, we’ve seen more prominent wealth management firms and industry leaders publicly extoll the many virtues of being multi-custodial.  More choice, more flexibility, more solutions for advisors and clients, less of a need to repaper client accounts when hiring or recruiting additional advisors with a well-established book of business already.  Sure, these are all very good points.

Lost in the sea of multi-custody promotion, however, is the fact that having more than one custodial relationship has its downsides.  More operational, administrative and compliance costs and complexities.  More bells and whistles to either deal with on a manual basis, or to consolidate in one user experience.  

Indeed, there’s a strong case to be made that for every firm where going multi-custodial makes sense, there are other firms that are best off sticking with a single custodian relationship.

This Week’s Issue

And not surprisingly, when I floated the idea to our WSR community members of focusing this week’s issue on the future of multi-custody versus single custody, the outpouring of enthusiasm was very strong, to say the least.  So here’s what we have for you in this issue:

  • This week in our Digital Domain section, WSR Contributing Editor James Miller has written a story that brings together perspectives from RIA, IBD, data automation and compliance automation leaders from Sycamore Company, Adviser First Partners, Kingswood US and Docupace, each addressing technology, operations and strategy best practices for firms making the transition from single custody to multi-custody.
‘’HOW’’ could we do something
if the ‘’WHY’’ we’re doing it,
is not even clear, to begin with?
  • Of course, not everybody believes going multi-custody is always the right approach, and an excellent example of this perspective can be found in this week’s Words in Edgewise section, where Mark Contey, Chief Business Development Officer of LaSalle St., makes a very articulate case for why the single custody business model should continue to be an attractive option for both independent broker-dealers’ RIA platforms, as well as stand-alone RIA and hybrid RIA firms.

Inaugural WSR Growth & Innovation Awards

Finally, I’m very excited to announce that Wealth Solutions Report is launching its inaugural WSR Growth & Innovation Awards.


Each quarter, the WSR editorial team, with participation from select members of our Editorial Advisory Board, will recognize growth, innovation and impactful strategies among wealth management firms, third-party solutions providers and industry leaders.

We will be launching a dedicated WSR Growth & Innovation Awards page for more information starting next week.  In the meantime, please note that our first two awards are as follows:

  • Independent Financial Advisor Group of the Year:  Open to hybrid RIA firms, Super-OSJ groups and independent branches that recruit, retain and help grow the businesses of independent financial advisors.
  • Business Development Leader of the Year:  Open to senior in-house executives at independent wealth management firms of all business models whose responsibilities include oversight or leadership of financial advisor recruiting.

I encourage you to check out next week’s issue, when we will roll out more details on our new awards program, and to start thinking about candidates who you believe could be a strong fit.

We look forward to recognizing the winners – along with honorable mentions – early next year!

Quick Word on Thanksgiving

Given that Thanksgiving falls in the middle of next week, Wealth Solutions Report will be running a much more streamlined issue.

And the fun continues…
Happy learning!

But that doesn’t mean it won’t be a fun issue – For next week, one of our centerpiece articles will be a summary of the top ten most popular WSR stories from 2020 among our readers.

Please take a moment to email James Miller via ContributingEd@wealthsolutionsreport.com if there are any specific WSR stories from 2020 that you believe deserves inclusion on this list!

In the meantime, thanks so much for your continued support – The incredible month over month traffic and engagement that we have continued to generate, even during traditionally slower seasons – has been remarkable to all.

As always, we thrive on your feedback and suggestions, so don’t hesitate to let us know which content items resonated most with you, and be sure to share via social media, especially LinkedIn, with your industry friends, colleagues and other contacts.

Cheers!

Larry Roth, CEO
Wealth Solutions Report

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