The Custodian Of The Future: The Dawn Of The Boutique Age

Future Custodians Will Provide Tech Bundling, A Single Platform For All Investments And A Dedicated Human Point Of Contact

The changes of the past decade paved the way for a new kind of custodian. Innovation has democratized the level of service that custodians can provide, enabling smaller firms to compete directly with giants. 

Now the custodian of the future has arrived – and it turns out that it’s a boutique. Not just any boutique, either – this new model of custodian can leverage technology, client service and talent, and possesses the agility to meet market demands faster and better than bigger, slower players.

The Path Forward Passes Through A Niche

Not the right approach

The most important advantage of a boutique custodian is strong points of differentiation, rather than feeling compelled to be all things to all people. Today, the advisor marketplace is jammed full of commoditized products such as vanilla equities and fixed income instruments, ETFs and mutual funds. However, if a smaller advisor wants to work with alternative assets, they must go to a niche player. 

Fortunately, today a boutique firm can still offer best-in-class commodity features while differentiating itself with new product offerings. That’s the benefit of two decades of digitization. 

The key to moving forward is helping advisors combine all assets – from traditional to crypto to private equity to other kinds of alternatives – on a single custodial platform. That, combined with simple-to-use technology and passionate client service, defines the future niche of the boutique custodian.

Why Bundling Is The Future Of Advisor Tech

Technology made the custodian of the future possible, but it can be too much of a good thing, especially when tech products multiply like weeds and managing a stack becomes a full-time job. Integration has been the holy grail of advisor technology for 20 years. During this time, many tools like performance reporting and fee billing have become commodities. 

Integration has been the holy grail of advisor tech

The problem is their commoditization has not been reflected in lower prices. Super-RIAs can afford all the options they need. Smaller RIAs feel overwhelmed by the cost and the sheer complexity of navigation. For them, finding best-of-breed solutions at a fair value can be a real challenge.

That’s why the future belongs to integrated, bundled solutions, where trading models, performance reporting and fee billing are all included free on a single platform that also embraces alternative investments. 

In the past, all-in-one bundled solutions came with limitations on products’ features and benefits. This is no longer the case. Today, many bundled solutions have invested heavily in development and integrations with other products, such as Orion, financial planning tools, CRM, research and more. 

Of course, tech is only one part of the custodial offering of the future. When clients have a problem, they don’t want to hear that their advisor is waiting for a response to a chat sent to a custodian. They need to hear from a person immediately. 

A custodian needs to provide the right mix of online access with on-demand human interaction. This is also a component of simple self-service navigation that many advisors, both large and small, will embrace. This will always be a relationship-driven business – a series of partnerships between advisor and client, advisor and custodian, and human and machine.

Did The Future Sneak Up On An Entire Industry?

Legacy infrastructure?

In finance, people regularly try to predict the future. Occasionally, though, we can clearly see the shape of things to come – because, as it turns out, they’re already starting to arrive. The custodian of the future will offer full integration to new technology because nothing less than a seamless advisor experience will do. 

Joe Gerdes, CEO & President, Equity Advisor Solutions

It will also streamline an advisor’s operations, easing the pressure on margins. Most of all, its custody platform will position advisors to capitalize on new innovations as they appear, rather than leave them scrambling to drag their legacy infrastructure along. And it will underpin everything with an expert human empathetic touch. 

The future of custody may be much closer than people think. They simply have to know where to look.

Joe Gerdes is the CEO and President of RIA and custodian Equity Advisor Solutions

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