Treating your clients with Fidelity?
A common practice for registered investment advisors is to use a large asset management custodian platform to manage their clients’ money. The 2 most popular are Charles Schwab, a multitrillion dollar firm based in Dallas, and Fidelity, another multitrillion dollar firm based in Boston. Fidelity is known for their extremely consumer friendly investment vehicles, such as their credit cards that can deposit rewards directly into an investment account, along with their brokerage services and retirement plans/accounts.
Because of this, Fidelity has become a very familiar name among retail investors and retirees alike; after all, the name does mean loyalty and faithfulness. They have also become extremely popular in the custodian and asset management space by taking custody of assets for registered investment advisor (RIA) firms so that the firms can make client trades via Fidelity’s platform. Fidelity currently custodies about $5.8 trillion across 3,300 RIAs, family offices, and independent broker dealers.
However, to juxtapose what their name would suggest, Fidelity recently announced that firms would have until June 30th of 2027 to either add or grow to $100 million in assets on its platform or exit. Seems a little cutthroat, especially considering that Charles Schwab, which is larger, has no asset minimum to use its platform. But Fidelity says that firms under this new minimum only account for less than 1% of those using its platform; and they also have an agreement in place with firms with less than $15 million on its platform, allowing them to use it in exchange for a $2500 quarterly fee.
This isn’t just a one and done headline though; the main selling point of being a registered investment advisor instead of working for a broker-dealer has always been independence. Now that the custodians are starting to raise the bar, the dependence on something that nobody thought would change could put a lot of smaller firms in jeopardy. It will be interesting to see if Charles Schwab follows suit and implements an asset minimum, or if clearing firms like LPL Financial will make any changes to the way they process trades for independent broker-dealers and mega-RIA firms.
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