Schwab, which owns the majority of the custodian market, is often entangled in an advisor's decision-making in some way. Craig Limoge, owner of Limoge Investment Management in Vancouver, Wash., says he has a love/hate relationship with Schwab that has resulted in him moving to other custodians, but not completely separating from Schwab.
His client accounts are currently split between Schwab and Ameritrade. The latter company became his custodian after it bought Bidwell & Co. of Portland, which Limoge had been using as his custodian. Limoge's gripe with Schwab is a common one. He's troubled by the fact that they are, in fact, a competitor-pursuing customers who fit his client profile as well. Schwab's costs are also not the lowest around.
Other drawbacks, he says, include a limited bond inventory and a fee structure that can add up for frequent stock traders. But Limoge acknowledges that Schwab does have volume, experience and a broad range of services. "They do have other benefits to working with them," he says.
A recent client, for example, had a Swiss account that held securities that were held with a mix of Swiss francs and euros. The client wanted to change custodians, but did not want to convert the assets into ADRs, Limoge says. While this type of account would have been a problem with a smaller custodian, and could not be handled by Ameritrade, Limoge says Schwab had the staff to tackle the problem. "I called Schwab and they said, 'Let us transfer you to our international trading department,'" he says.
Limoge had a similar result when he was trying to devise a strategy for a client who had 80% of his net worth tied up in one company. The client refused to sell off the holdings, so Limoge was forced to devise a strategy for protecting the investment position. He contacted Schwab and found out they had a department for concentrated positions.
"The strength of a larger company is they have the staff to track down the problems and details that come up when transferring accounts and money," he says.
Broker-dealers are picking up on advisors' inclination to have more than one custodian relationship. Securities America, for instance, recently launched a program that gives advisors access to Pershing, National Financial and Schwab for their custodial needs.