‘Disruptive’ Custodian

“How many times have you heard Apex’s name?” asked Apex Clearing CEO Bill Capuzzi during a recent interview. The question was directed not so much at me as to the wealth management industry at large to highlight his point that this up-and-coming Dallas-based custodian remains a relative unknown compared to the traditional legacy custodians familiar to the financial advisor community.

Apex’s bread and butter during the past five years has been providing clearing and custody services for Wealthfront, Betterment and other leading robo-advisor online platforms. But for the past year or more, Apex has pivoted its focus to play a bigger role in helping human-based advisory firms keep up with the times by bolstering their digital wealth management capabilities.

“We open more than 450,000 accounts a month, and add roughly $1.5 billion to $2 billion in assets a month, but most people don’t know who we are,” Capuzzi says. He adds that’s largely by design because Apex’s purpose is to create a fast and seamless online investment experience for its financial services customers and their clients while staying in the background as much as possible (aside from the Apex name appearing on client statements, as required, because it’s the custodian).

But as Apex aims to raise its profile and become the digital wealth management enabler of choice for traditional advisor firms, it’s throwing around the “D” word a lot—i.e., it sees itself as “disruptor” in the custodian space.

Capuzzi says the legacy clearing and custodial platform infrastructure is decades old, making it difficult for the incumbent players to provide quick turnaround on setting up accounts, transferring assets and other related chores.

“Why is it in our industry that it can take multiple days to open an account or transfer money from my bank to a custodial account?” he asks. “We’re disrupting by focusing on those pieces that are behind the scenes and automating them to whatever extent possible.”

Apex was formed in 2012 by PEAK6 Investments, the parent of online brokerage OptionsHouse (since bought by E*Trade Financial), in order to acquire some of Penson Worldwide’s client accounts after Penson exited the clearing business. Penson, a former securities clearing brokerage, got into hot water in 2011 after it disclosed it held a large chunk of illiquid bonds issued by a horse racing track operator that had ties to a Penson board member. Peak6 took over the business that became Apex as part of a restructuring at Penson, and subsequently refined its focus.

“Over the next few years the management team eliminated any clients that weren’t fintech-focused like robos” Capuzzi says. “That business really took hold in the 2013-2015 timeframe as the robos took off”.

Apex’s value-add is creating what it calls a sophisticated stack, or series of application program interfaces (APIs) that enable the integration of different software programs in a plug-and-play way involving such tasks as client on-boarding, account aggregation and portfolio rebalancing.