Ram Nagappan, the chief information officer at BNY Mellon Pershing, says advisors are more likely to leave their custodians over trust and stability issues than they are to flee over a merger or changes in tech platforms.
Over the relatively volatile past 18 months, many brokerages, custodians and fintech platforms suffered repeated outages on high-volume trading days, leaving advisors and investors unable to access their accounts or make trades. Major brokerages and custodians like Fidelity, Schwab, TD Ameritrade and Apex have all experienced outages and technical issues during days of rampant trading.
Episodes like these have become a serious concern for advisors, says Nagappan. “RIAs expect the trust and stability of the firm, and many times we don’t talk about it, but especially for the first quarter of this year and last year, when the market is really frenzied and the volume is so high, our investment in stability is a big reason that RIAs selected [Pershing],” Nagappan says. “We were stable and up and running all the time. That’s the one attribute that they will always pick, above anything else.”
Lisa Burns, head of platform technology at Fidelity Institutional, echoed that sentiment. “Within technology, we focus on a couple of areas. The first is foundational work to make sure the platform is one that advisors can trust to run their business on, and ensuring to them that they can scale on the platform,” Burns says. “We’ve seen a dramatic year around the volume of trade activity and account activity, and customers wanting to log in and check the status of their money. So scale and security have to be our first focus area.”
Advisors may not feel that they can build scale on a custodial platform that has suffered repeated outages, she says. But ease of use and cost are also major drivers, says Steve Sanders, executive vice president of marketing and product development at Interactive Brokers. Sanders touts his company’s low costs of doing business and its all-in-one, customizable technology platform as attractions for advisors looking around.
Interactive Brokers has also seen more business as a result of the Schwab merger, he says, but he doesn’t expect it to result in a wave of advisors switching. “Remember that if an advisor wants to move from one custodian to another, they’ll have to repaper,” he says. “That means they’ll have to go out to clients, sign new agreements and then take all the data they have in the Schwab or TD Ameritrade system and load that into a new custodian’s or broker’s system. We try to make that as easy as possible via electronic transfer, but still going out to every client and having them repaper is a lot of work and a slow process. I think that Schwab and TD Ameritrade would have to go through a lot to anger or frustrate an advisor for them to say that they’ll go through all that work to bring their firm to a new custodian.
“What we’ve found is that people stick with what they have, even if there’s a solution at lower cost,” Sanders adds.