How Should Custodians Evolve In 2023?

Michael Madden, Contributing Editor & Research Analyst, Wealth Solutions Report

How Custodians Can Develop To Better Serve Advisors And Clients, And Why Change Happens So Slowly In The Custodian Space

A custodian service is just as fundamental to a financial advisor’s business as the refrigerator is to your kitchen – it works quietly in the background while attention usually flows elsewhere, but you can’t function without it, and upgrading it can change the game in every other area.  

While a few players hold dominant positions in custodian services, it’s not a field where economies of scale have shut out newer entrants – and some smaller competitors have ventured into the custodian space, sensing that they can compete with larger players by leveraging technology and innovation. 

We spoke to a panel of experts to hear their thoughts on how the custodian space needs to develop this year:

  • Doug Fritz, Co-Founder & CEO of wealthtech strategy consultant F2 Strategy 
  • Dasarte Yarnway, Co-Founder of ONYX Advisor Network, a resource provider to advisors from underrepresented communities

Each of them agrees that wealth management custodian offerings need to change, and that the custodian space maintains inefficiencies that can be removed. We asked each of them what the custodian of 2023 should look like, and why change has taken so long. Their responses are below. 

Doug Fritz, Co-Founder & CEO, F2 Strategy 

Doug Fritz, Co-Founder & CEO, F2 Strategy

The custodian of 2023 should be the Costco of tech partners for independent RIAs. It should package and provide services, products and experiences for wealth firms at a lower cost and more consistent quality than they can obtain themselves. It should constantly consider the future needs of advisory clients and predict trends before they become unmet demands.  

Like shopping at Costco, advisors should easily find the services and experts they need when they have questions, but custodians should mostly stay out of the way and simply make the experience easy, flawless and inexpensive. 

Digital experiences, automation and integrations should be world-class, but custodians should not act as if they’re the only vendor an advisor uses. To the contrary, advisory firms should be able to easily utilize the custody services along with other services from third parties.   

Regulation makes it slower

Unfortunately, a few custodians have been mired in the Sears model – trying to serve many different types of customers with varying experiences, disconnected tools and a legacy of underfunding. However, it’s also important to recognize that custodians have some valid reasons for the inefficiencies they continue to exhibit: Regulatory compliance hurdles are huge. 

In addition, advisory businesses are often highly fragmented and complex, requiring any change to work for vastly different cohorts. Lastly, innovation has been difficult to fund because these are not vastly profitable businesses and clients are unlikely to leave (if it’s bad) or come running toward them (if it’s great).  

Dasarte Yarnway, Co-Founder, ONYX Advisor Network

Dasarte Yarnway, Co-Founder, ONYX Advisor Network

Independent advisors tasked themselves with burdensome responsibilities the moment they decided to serve their clients away from the broker-dealers or wirehouses. Even advisors who aren’t fully independent can feel the impact – positive or negative – that choosing the right custodian might have on their book of client partners. 

The industry is changing, but advisors are still laden with minimal options for innovative and forward-thinking custodial partners. For so long, custodians have poured money into scalable systems that – in fact – are the systems of yesterday. While any technology and strategy can “work,” without placing the unique advisor profile at the center of a custodian’s offering, products will often have revenue and scale as a priority, with the end user as an afterthought.

The custodian of the future offers an experience for advisors to serve and impact their clients with minimal friction, allowing seamless onboarding, on-demand customer service, sleek user interfaces and robust investment capabilities on their trading platform. 

A custodian of this caliber is solving for tomorrow’s concerns, but working in the present to add deep value for each firm – large or small. Admittedly, this is a tall order. Yet, the opportunity to change the experience, service quality and impact within our industry hangs in the balance. 

Patrick Moeller, Founder & CEO, Entrustody Financial

Patrick Moeller, Founder & CEO, Entrustody Financial

The custodian of 2023 should be held to a higher standard than the antiquated practices of today. Custody – one of the most critical utilities of the food chain – is stuck, forcing every stakeholder to conform to legacy standards.  

The modern custodian must integrate innovation into its DNA to better serve the end investor.   

Custodians should provide a frictionless, advisor- and investor-centric experience. The goal of the custodian should be empowerment: eliminating all barriers, developing innovative and intuitive services and starting from a blank canvas with the express intention of enabling the overall wellness of the wealth management ecosystem. 

Why has it taken so long for a new paradigm to emerge in custody? For one, the scale and concentration of incumbents have stifled new entrants who could bring fresh ideas to the field. Systematic neglect has also allowed inefficiency and opacity to persist and even compound.  

The wealth management industry has shifted in an exciting new direction, one of fierce independence for both the advisor and the investor. Advisors must refuse to accept antiquated practices coupled with archaic platforms. The next generation of advisors and investors will demand better technology and consumer-inspired experiences, and the modern custodian must rise to the challenge.  

Michael Madden, Contributing Editor & Research Analyst at Wealth Solutions Report, can be reached at

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