Last month, we discussed how over the last several years, custodians have come to play an important role in an advisor’s technology strategy. The big four—Schwab, TD Ameritrade, Fidelity and Pershing—have attracted substantial assets, but they are not for everyone. These firms have either official or unofficial minimums that range from approximately $10 million to $100 million in AUM, which excludes new advisors right off the bat. Some firms that pass the minimum test but are still considered small by their custodian complain about the service, or should we say lack of service, that they receive.

The good news for advisors of all sizes is that there are a wide variety of alternatives available to you. This month, we’ll look at four other custodians. Each of these firms offers some combination of technology and service that they believe sets them apart from the crowd.

TradePMR
How can a relatively unknown custodian in Gainesville, Fla., compete with the big firms? “With agility,” says Dennis Suppe, chief technology officer (CTO) at TradePMR Inc. “We are faster,” he says. “We are quicker to identify new technologies and apply them to our platform.” According to Suppe, TradePMR has a culture of innovation from the top down. Robb Baldwin, the firm’s president and CEO, is a great advocate of leveraging technology to improve efficiency.

TradePMR was the first custodian to embrace Windows 8 and realize its significance for advisors. While other custodians are waiting for their advisors to request Windows 8 features, TradePMR is already delivering them to clients. Fusion, TradePMR’s workstation for advisors, is the first touch-enabled custodial platform. Approximately 55 clients are currently using the new Fusion platform, and users of the previous platform are being converted. All new advisors to TradePMR automatically receive the new Fusion platform.

Advisors like what they are seeing. According to one recent report, TradePMR now ranks fourth, behind Schwab, TD Ameritrade and Fidelity, in the number of advisor clients they serve. According to Suppe, that’s because his firm views technology through a problem-solving prism. “Sure, our technology looks good,” he says, “but we want our technology to solve business problems.” And it does.

Workflows are built into Fusion’s DNA. Advisors have the ability to upload and track service requests. Digital signatures are fully integrated into the platform. With Fusion and DocuSign, advisors can process new account applications and other paperwork in a completely paperless environment. “A few others in the industry have paperless processes,” says Suppe, “but most are limited to a single signer. Our system can accommodate multiple signers.”

According to Suppe, TradePMR intends to get away from e-mail and faxes when communicating with advisors. “It is not secure,” he says. “The electronic way is the only way to go.” To date, he says, advisors are embracing these new methods. “We’ve had almost no pushback from advisors on this.”

TradePMR’s platform includes a fee calculation engine and a full billing module. It can accommodate virtually any fee schedule an advisor can create. It can calculate breakpoints at the household level, you can designate which account to deduct the fee from, you can split the fee across multiple accounts (e.g., deduct 60% of the fee from account A and 40% from account B). Once the advisor is ready to batch process the fees, Fusion will verify that there is cash available to debit the fees. If not, it will generate an alert showing which accounts need to raise cash. The system can generate a customized fee letter for each client, showing how the fee was calculated and where the fee was paid from.

Fusion’s sophisticated API supports deep integrations with leading providers. By the time you read this, the MoneyGuidePro integration should be complete. This integration will integrate the MoneyGuidePro SuperSolve meter on the household page of Fusion, so advisors can see if a household’s financial plan is still on track. The Fusion-MoneyGuidePro integration will be proactive. At regular intervals, TradePMR will communicate with MoneyGuidePro’s servers to update all plan data. If any of the plans are out of the Confidence Zone, Fusion will issue an alert to the advisor to look at those accounts.

TradePMR is also embracing big data and making it available to clients. They run an extensive set of calculations and analytics every night, and they make the results available to advisors through Fusion. “We’re happy with what we’ve accomplished,” says Suppe, but says they are not done. “We will continue to innovate.”

Shareholders Service Group (SSG)
According to Dan Skiles, president at SSG, his firm takes an approach to technology that is unique in the business. “We are both a builder of technology and a consumer of technology,” he says. “We are fortunate that we have a clearing relationship with Pershing, so we can leverage the technologies that they develop.” Skiles cites the upcoming versions of NetX360 and NetX360 mobile as examples of cutting-edge technologies that SSG advisors will have access to through the Pershing relationship.

Because of SSG’s strong ties to Pershing, SSG can release customized versions of NetX360 that are designed specifically for the needs of SSG advisors. “We may want to move around fields, display different screens or alter the workflows that our advisors have access to. We can do that with Pershing,” says Skiles.

In addition, SSG supplies all of the training and support relating to NetX360 and other Pershing technologies. “Advisors get the best of both worlds: world class, industrial-strength technology plus personalized support from a staff that knows the advisor by name and is familiar with the advisor’s business model.” Skiles goes on to point out that his staff uses the same Pershing technologies that his advisors use, so they are intimately familiar with the software. According to Skiles, that’s unique to SSG.

According to Skiles, another advantage of the Pershing relationship relates to cyber-security. “I am very happy that our firm is associated with the largest custodian in the world [BNY Mellon, the parent of Pershing, had $27.4 trillion in assets under custody and/or administration and $1.5 trillion in AUM as of September 30, 2013.] Their expertise in the area of cyber-security is world class.”

Despite SSG’s close relationship with Pershing, SSG conducts reviews on a regular basis. “We are an open-architecture shop,” he says. “We use Pershing because we believe that they offer the best platform for our clients. We then supplement that platform with additional tools to improve the user experience.” If at some point there were a better solution, Skiles indicated that SSG would adopt it. “We are incredibly flexible. There is a lot of innovation going on in the marketplace, and we want to be in a position to deliver a great experience for our clients.”

In addition to Pershing, SSG partners with a number of third-party technology partners to deliver technology solutions to their advisors. Partners include: Advent, Advisors Assistant, Albridge, Black Diamond, eMoney, Envestnet, fi360, Junxure, LaserApp, MoneyGuidePro, Morningstar, Orion, Redtail, TRX and many more.

Although SSG does not impose a minimum AUM requirement, Skiles indicated that his firm serves a wide range of advisory firms with a broad spectrum of needs. “We take pride in our ability to deliver outstanding service,” he says.

Folio Institutional
All custodians try to differentiate themselves from the competition, and they all have some unique aspects to their offering, but Folio Institutional really is different. “We continue to make technology the foundation of our offering,” says Greg Vigrass, president, Folio Institutional. The firm’s patented Folio platform functions in a manner similar to UMA accounts, but it is even more flexible because you can separate functions related to a Folio.

For example, you can have an investment model in a Folio, where you manage the individual securities within the Folio (much like a mutual fund) and you control tax decisions, like when to realize portfolio gains and losses. You can also have a scenario where a third-party manager makes all decisions related to stock selection and tax treatment. In addition, you can split the functions; you choose a tax strategy while the manager is in charge of investment selection.

Folios can contain fractional shares, so it is easy to allocate individual securities to an account, even if the account has a modest value. Since pricing is asset based, you can trade and rebalance as often as you wish for a fixed price.

While the platform is already quite impressive, new features are being added over the next several months. One is an upgrade to the rebalancing functionality. Today, you can rebalance at the Folio level, the account level and at the client level. Soon, you will be able to rebalance at the household level as well. This new version will allow for asset location and some degree of tax intelligence.

The platform currently includes basic performance reporting. Folio Institutional plans to offer, for a fee, a much more robust performance reporting option. This new offering will be multi-custodial, and it will be competitive with other third-party offerings on the market. Why develop their own portfolio management and reporting system? Vigrass says that some third-party systems handle each Folio as a separate account. This can be problematic when accounting for the cash flows among Folios.

Yet another innovation, already in production, is the Private Placement Platform. This new marketplace leverages Folio Institutional’s independent brokerage platform, providing the ease and convenience of an online brokerage account, along with a full complement of sophisticated features such as applicable IRS reporting, tax tracking, SPIC and FDIC protections, independent record-keeping, online access to statements, confirmations, tax documents and transaction history.

Perhaps the most interesting addition to Folio Institutional’s offering is the new Advisor Connexion. This is a new platform that allows the advisor to engage with prospective clients virtually. It essentially allows advisors to compete with online “Robo-advisors” by providing client onboarding and a totally automated investment management platform.

The platform gathers the necessary data from the prospect, provides a client questionnaire customized by the advisor, generates an investment policy statement based on the responses, scores the questionnaire based upon the advisor’s specifications and puts the client’s investments into a model based upon the scoring. The platform generates all documents, which the client can sign electronically, using Folio Institutional’s proprietary electronic authorization process. The advisor then monitors and manages the investments (or outsources the management to third-party Folio managers) and the client can monitor everything through the client portal.

In the first iteration, Advisor Connexion is missing a few things to compete directly with Mint, Personal Capital and the like. First, it needs account aggregation, which Vigrass says is coming. It also would benefit from some built-in communication tools like a video conferencing window. Most important, it requires integration with financial planning software, CRM software and other tools that advisors use in the normal course of business. If Advisor Connexion can deliver on its promise, it could be a game-changer. It will provide a new platform for advisors to manage their existing clients, but more importantly, it will allow them to cost-effectively manage smaller accounts they cannot profitably manage today.

Trust Company of America (TCA)
Trust Company of America is yet another custodian that is doing some innovative work. For example, like a few other custodians, they are creating mobile apps for Windows 8, but to our knowledge, they are the only custodian developing apps for the Surface RT (TCA’s apps should be available in the Windows Store by the time you read this). According to Trust Company of America’s CTO, the TCA platform architecture is flexible enough to accommodate any type of device.

Mobile is a big theme for TCA. Their mobile application, Liberty, is available on the Web and as a downloadable app. Currently, it provides up-to-date account information and reports, but it is being expanded to include trading and rebalancing at the account level. The plan, according to TCA, is to port all of the functionality of its advisor workstation onto Liberty. They will also be adding new functionality, such as the streamlining of workflows, automated mobile account openings with e-signatures powered by DocuSign, consolidated views of all accounts and more.

TCA makes a private labeled version of the Liberty app available to all TCA advisors so they can provide their clients with an app that has their own firm’s brand. TCA customized the app at no charge to the advisor and registers it with the appropriate app store. To date, 50% of TCA’s advisors have availed themselves of this valuable service.

In addition, TCA has its own mobile production studio. It will go out to an advisor’s office and produce a professional video for the advisor to use in marketing efforts. There is no additional charge for this service.

TCA offers technology consulting services to their clients. They can help advisors with Web site design and search engine optimization. They can also help with advisors’ other technology needs. In addition, they offer a practice management service that helps advisors maximize the efficiencies of their workflows. This service is provided by the same staff that has reconfigured TCA’s own processes. In the case of client onboarding, the process improvements TCA implemented resulted in a 66% increase in efficiency.

TCA says it has some additional major projects it is working on, but that it is premature to discuss them at this point. The firm expects to make some announcements before the end of the first quarter, with rollout before year’s end.

With all of the innovation going on at the custodian level, there’s never been a broader array of options for advisors to choose from. We’ll cover some additional custodial options in a future issue.