The world has seen rapid-fire changes in technology, and so has the financial services industry. Not only do advisors have to keep up, but so do the major custodial firms hoping to serve them, including Fidelity, Charles Schwab, LPL and other firms. Trillions of dollars of custody assets are at stake as these firms try to differentiate themselves and position their tech offerings as special, but also come up with competitive price points. These companies also have to reassure financial advisors that they are not trying to steal retail clients out from under them, and that they are letting the advisors control the relationships.

LPL Financial

Because technology advances at breakneck speed and advisors need a lot of the same products and services, competition among custodians is fierce.

“The custody space is incredibly competitive,” says Robert Pettman, executive president of products and platforms for LPL Financial in Boston. “There is a lot of pressure on custodians” to set themselves apart.

LPL got a boost to its technology at the end of 2018 when it acquired technology company AdvisoryWorld. The advanced technology will be introduced to advisors starting in January through LPL’s ClientWorks Connected, which integrates the digital services offered by LPL.

“Custodians need to deliver value; they can no longer compete only on price,” Pettman says. In LPL’s case, the firm entered the market as a strong contender in 2009, and has become one of the five primary competitors for this type of business, he adds. LPL has 10% of the market share. In 2018, LPL invested more than $100 million in technology, including improvements to performance, resilience and functionality in its ClientWorks program.

LPL has reduced pricing for its Strategic Wealth Management platform, which now offers access to mutual funds with no transaction fee. The firm also added enhancements to its Guided Wealth Portfolios, which enable team-based URLs and support split representative identifications so that more than one advisor can work on an account. Prices were also reduced across corporate and hybrid RIA platforms.

The Guided Wealth Portfolios platform now offers automated annual reviews and digital servicing features that keep the advisor at the center of the client relationship.

In 2019, LPL plans to continue to integrate with third-party vendors and build toward an offering of a core technology stack that will provide an end-to-end solution for advisors who want to simplify their technology experience within the system that powers their practice.

“Technology has become a key differentiator in being able to help advisors thrive in today’s environment,” Pettman says. “Being able to invest today and over the long run in the technology and capabilities that advisors need will be a key to attracting and retaining advisors.”

BNY Mellon’s Pershing

Pershing, based in Jersey City, N.J., is one of those custodians that prides itself on staying out of the advisor’s way and in the background, letting the RIAs brand its products as their own.

One of the company’s lead offerings is its NetX360 platform. “More advisors are breaking away from wirehouses, and NetX360 provides services to broker-dealers, RIAs and dually registered RIAs who break away,” says Christina Townsend, the recently appointed head of Pershing Advisor Solutions’ platform strategy. Townsend is charged with leading the firm’s technology for the RIA segment and expanding its tech consulting capabilities.

“We do not have a direct-to-consumer model,” she says. “We are allowing the advisor to initiate the action with the client and we provide the backbone of support.”

Michelle Feinstein, the director of product strategy and client engagement at Pershing, adds that Pershing partners with third party providers. “This is more than just having a single sign-on for the client; it means true integration with the providers.”

This year, the company announced it is making a multiyear investment of more than $50 million, in part to add eight new application programming interfaces (APIs) by the end of the year that connect with advisors’ workstations.

Pershing has launched a next-generation integration service that it calls “componentization” that adds capabilities to its NetXServices solution. Through the new program, Pershing provides digital components that are ready-to-use and come packaged with Pershing connectivity and work-flow information for a rapid setup. Many advisors still do not have efficient work-flow programs and continue to rely too much on paper, Feinstein says.

With the Pershing platform, advisors can integrate financial planning and market research. Users can also integrate block trading and rebalancing in conjunction with all of the client’s assets in a single portfolio.

“Looking into the near future, clients want a better user experience with more personalized features that will provide them with more control over how the data is presented to them,” Pershing says.

Pershing is also developing an AI engine that will allow clients to unlock the value of data and give RIAs the ability to get leading indicators on their clients and plan accordingly,” Pershing says. “For example … an advisor will be able to get alerts on a pending client’s life events and proactively engage the client with an updated goal-based financial plan.”

Charles Schwab

Technology is the surest way RIAs can improve services to retail clients without increasing staff, says Charles Schwab, and the firm is dedicating itself to providing that technology.

Schwab’s leaders recently assured advisors at the company’s IMPACT conference that it is not aiming its retail operations and robo platform at the same clients most RIAs are targeting. RIAs who are Schwab clients target more affluent clients than Schwab’s retail operation does, Schwab executives say.

Since September, Schwab, based in San Francisco, has aggressively set out to help those RIAs that custody with the company grow their own businesses, says Andrew Salesky, senior vice president and head of digital advisor solutions for Charles Schwab. Salesky took over his position in June and has been leading the Schwab technology efforts since then. Salesky says his and Schwab’s goal is to provide advisors with more choices.

Since Salesky’s takeover of the technology efforts, Schwab has unveiled Portfolio Connect, which eliminates the need for advisors to do daily data downloads. This is the next-generation of portfolio data management and performance reporting for advisors, he says. It is designed to provide advisors with transparency and reporting capabilities to strengthen their relationships with clients. It was built solely for Schwab custody clients and provides advisors with a range of reporting options, Salesky says.

Schwab Advisor Services recently launched the pilot version of its Digital Account Open tool, which is being rolled out along with Schwab OpenView Gateway to expand on the firm’s integration with Orion Advisor Services, a portfolio management and reporting provider.

Schwab OpenView Gateway is a flexible, open-architecture platform that integrates Charles Schwab custody and portfolio management systems with select technology providers that support independent advisors. The providers offer things like client relationship management systems, portfolio management and reporting, trading and rebalancing, financial planning and client portals, Schwab says.

Schwab research shows that 63% of advisors say integrated technology solutions are very important and that any custodial solution their firms choose must work with other core solutions.

TD Ameritrade

TD Ameritrade continues to build on its Veo One platform, which is its key technology for custody clients, and the firm plans even more advancements for 2019, according to Jon Patullo, managing director of technology solutions for TD Ameritrade Institutional.

More automated new account opening tools will be offered through the Veo One platform. TD Ameritrade Institutional, based in Jersey City, N.J., recently rolled out new application programming interfaces that connect Veo One with third-party vendors, such as customer relationship management systems, as well as with tools developed in-house by some advisory firms.

The integrations allow advisors to more easily push through new customer data to TD Ameritrade electronically without the need to manually re-enter data, yielding a better experience and reducing opportunity for errors, Patullo says. Next year, the firm expects to deliver a fully paperless account-opening service for even greater efficiencies.

Also built into Veo One is iRebal. A program that rebalances portfolios according to the RIA’s investment approach, iRebal is designed for tax-efficient rebalancing, cash management and tax-loss harvesting. This year it was beefed up with a feature that facilitates covered call options strategies.

Advisors particularly like TD Ameritrade’s Model Market Center, which includes a menu of third-party investment models in a central location, Patullo says. As providers update their models, changes are automatically communicated to advisors.

Model Market Center can save advisors time they would otherwise spend building models from scratch while retaining investment management fiduciary control and responsibility, flexibility and trading discretion, TD Ameritrade says.

“We are leveraging artificial intelligence to develop a digital service agent, one that can help advisors get the answers they need whenever they need them,” the company says. “Our virtual agent, developed by the people behind Apple’s ‘Siri,’ initially will interact with advisors through direct messaging.” Voice activated technology is still being developed, the company says.

Fidelity

A custodian is more than just a custodian today, according to David Canter, head of the RIA segment at Fidelity Clearing & Custody Solutions.

“The role of the custodian has evolved beyond safe custody of assets,” Canter says. “As advisors go up the value stack, so do their custodians. We’re doing more and more on a consultative basis,” rather than just providing technology.

Boston-based Fidelity, which acquired eMoney Advisor in 2015, is building on that partnership to offer new tools to advisors through the technology platform Wealthscape. New capabilities to be launched next year include consolidated data, the Insights+Analytics tool, and advanced modeling and rebalancing. These tools are designed to help RIAs, broker-dealers, banks and family offices digitize their businesses.

“One key thing advisors really value is our deep integrations with eMoney, which help them put planning into action with capabilities like Money Movement and Account Maintenance. The eMoney integrations help strengthen client engagement and facilitate collaboration,” Canter says.

“Advisors also value the flexibility Fidelity offers. Firms have the option to deploy Wealthscape products off the shelf, mix and match between our solutions and third-party tools, or integrate our solutions with their proprietary platforms. We recently launched Integration Xchange, our open architecture digital store that firms can use to explore integration options to build the right solutions for their needs,” he adds.

Fidelity Clearing & Custody Solutions has been particularly successful at acquiring multi-billion-dollar breakaway teams. “Providing practice management, access to products, and access to world-class technology have really become table stakes for us. We think of ourselves as business consultants that happen to be in the wealth management vertical,” Canter says.

Competition among clearing and custody solutions providers “increases as the RIA space continues to grow. The numbers of RIAs grew 3.3% in 2018 [as of December] versus 2017 and that’s on the heels of 3% growth in 2017. Competition is everywhere, so specialization for advisors and custodians alike matters now more than ever,” Canter says.

TCA By E-Trade

TCA by E-Trade considers itself a disruptor of the custody channel.

Formerly Trust Company of America, the Englewood, Colo.-based firm was acquired by E-Trade in April and has taken full advantage of the well-known name, says Joshua Pace, TCA by E-Trade president.

“We already are taking a disproportionate share of the RIAs that are in motion. Since the acquisition was announced in late 2017, we have grown by $2 billion in assets,” he says.

TCA by E-Trade provides its own platform, Money Manager X-Change, to allow advisors to use third-party money managers and to efficiently trade, rebalance and manage assets.

“The magic of Money Manager X-Change is the ease of use,” Pace says. “From the moment an RIA determines to outsource some or all of the investment management solution, Money Manager X-Change takes care of the rest. On-boarding a strategy is easy, billing is automated for all parties and most importantly, the advisor doesn’t even have to open an additional account to work the new strategy into the client’s portfolio.

“Our sleeve-level technology allows an advisor to run their strategies alongside the third-party strategies all in the same account,” he says.

In November, TCA by E-Trade launched a new account aggregation tool, CompleteView. The tool gathers data from across a client’s financial accounts, including custodial accounts, providing a comprehensive view of client assets.

CompleteView is accessible through the Liberty platform, TCA by E-Trade’s custody platform, which offers advisors and their clients access to on-demand financial information through a single online interface.

“CompleteView helps advisors analyze spending and investment patterns over time, providing insights into their clients’ saving and investing trends. This can help advisors spot opportunities to provide additional solutions to help support their clients’ financial needs,” Pace says.

Advisors particularly like having the ability to connect clients’ outside accounts, including checking accounts, credit cards, 401(k)s, and more,” in one space, he says.