This week, I am attending the Financial Services Institute’s OneVoice conference at the Gaylord Palms Resort & Convention Center in Kissimmee, Florida, bringing you news and insights from the event. On the first day, I sat down with Ben Harrison, Head of Wealth Solutions at BNY Mellon | Pershing, to hear his thoughts on trends in the industry and custody space.
M&A, Transitions And Growth
Harrison sees advisors focusing on how to grow, become more productive and scale up in the current market environment, with both a potential business contraction on the horizon and a cautionary optimism in the market that the current round of Fed tightening will end. “Advisory businesses are very focused on what the Fed will do, anticipating rate decreases. This would help advisors gain organic growth.”
Specifically for advisors contemplating transition, Harrison recalls the backdrop of 2023, with multiple challenges including a banking crisis, two active ground wars, high interest rates and a substantial amount of equity market gains attributable to a small, concentrated group of names. Times like these “put people on the sidelines to hunker down and see how things will shake out.”
Harrison sees this situation reversing, allowing more advisors to actively look to transition. “Now we’re back to a more stable environment and a renewed sense of optimism for advisors starting RIAs or joining firms with affiliation models.”
With the higher cost of capital and peaking RIA valuations in 2023, the M&A market pulled back slightly, Harrison observed. However, he notes, “The continued outlook of M&A is still very strong for a record-setting level of transactions. There’s a tremendous amount of capital and interest in the RIA space.”
The Custodial Space Barbell
“There’s a lot of activity and opportunity on the horizon,” in the custodial space, according to Harrison. “The marketplace is like a barbell, with consolidation on one side and new entrants coming in on the other. Custodial services are often referred to as a commodity, but there’s a high hurdle for entrants due to the scale needed. New entrants validate the attractiveness of the marketplace.”
Harrison believes Pershing is in a strong position due to its scale and its position as the second largest business in BNY Mellon. “BNY Mellon is the largest global custodian. Pershing’s size within the organization gives us a strong voice at the table in capital allocation to continue to invest for innovation.”
Harrison says that Pershing aims primarily to serve investment advisory firms with over $1 billion in assets. “There may only be around 1200 top-tier firms, but these control 71% of assets in the channel. These firms have a large wallet share and are growing faster than the under $1 billion firms. They align well with Pershing’s capabilities.”
Pershing has focused on investing over multiple years both to improve its core custody platform and develop Wove, its multi-custodial advisory platform, according to Harrison, who says Wove has been receiving one of the largest allocations across the BNY Mellon enterprise.
Harrison points to BNY Mellon’s scale as a source of stability for Pershing, stating that BNY Mellon’s size can give advisors on the Pershing platform confidence during times of sudden crisis.
Julius Buchanan, Editor in Chief at Wealth Solutions Report, can be reached at email@example.com.