Displaying items by tag: custodians

With 2024 coming to an end, financial advisors contemplating a switch to a new broker-dealer may wonder if there’s still time to make the move. While possible, the process can take several months depending on the complexity of the transition and level of support available. 

Advisors looking to act quickly may benefit from financial incentives and smoother tax records by completing the transition before the new year. However, rushing such an important decision isn’t advisable, so careful planning and blocking time for key discussions is essential.

Transition consultants can help expedite the process by securing offers and guiding advisors through the logistics. Ultimately, those who begin the process now may still be able to switch broker-dealers by the end of 2024, but many may find it more practical to plan for early 2025.

Finsum: While it’s certainly late in the year these services could help optimize time in order for a smooth transition.

Transitioning to a new custodian in the financial industry can seem challenging, especially with the complex regulatory environment. However, with thoughtful preparation and the right choice of custodian, the process can be seamless and beneficial. 

This involves understanding the differences between bank custodians and broker-dealers, with banks often providing greater transparency, asset safety, and flexibility. Key steps include reviewing existing contracts, gathering necessary documents, and clearly communicating your organization’s needs to the new custodian.

Engaging a dedicated conversion team ensures a smooth transition by managing timelines, addressing concerns promptly, and customizing the process to your specific requirements. With these measures in place, you can successfully navigate the transition, allowing your organization to thrive with the support of a custodian that aligns with your long-term goals.

Finsum: These tips provide a nice framework for transitioning and considering wither you are ready, but keep in mind the technology accommodations as well.

As custodians in the independent advisor market undergo mergers and consolidations, advisors are increasingly finding it challenging to secure a stable home for their clients' assets. Many advisors are opting to use multiple custodians to mitigate risk and increase efficiency, akin to diversification in investment portfolios.

However, frequent changes in custodial arrangements add layers of complexity and concern. This instability can lead to tedious processes like transferring accounts. The landscape is further complicated by the rise of niche custodians and specialized services targeting specific needs, such as real estate or gold investments.

The trend of using multiple custodians is driven by the need for diverse capabilities and the ever-evolving market dynamics, including mergers, competition, and new technologies.

Finsum: Getting a fuller picture of the technology and services offered by different custodians is a huge benefit. 

Independent financial advisors see business growth as their top challenge for 2024, but according to a survey by Interactive Brokers, robust technology and multiple custodial relationships will drive this growth. The survey revealed that 79% of advisors believe automation can free up time for client relationships, while 60% think it helps new team members get up to speed faster.

Additionally, 58% said automation reduces overhead costs. Advisors are increasingly seeking more automation in client account management and onboarding processes. The multi-custodial model is gaining traction, with 64% of advisors using at least two custodians. 

The survey also noted a growing focus on high-interest rate accounts for cash balances. To spur firm growth, advisors are prioritizing marketing, client referrals, and industry networking, with some planning to recruit and train young talent as part of their long-term succession strategies.

Finsum: We see advisors leaning on this combination of technology and personal relationships benefiting the most.

When transitioning between custodians, advisors need to be on the lookout for options that could improve their practice. One of the first things to look out for is discussions around a pricing strategy rather than resorting to fixed rates marking the inception of our the plan. RIAs should look for custodians that understand their unique business before proposing a suitable pricing structure. 

A good custodian will seek insights into operations before tailoring pricing. Personalized solutions will consider a variety of factors that lead to custom solutions such as growth stage and client dynamics. By embracing flexibility and collaboration, RIAs can feel empowered when navigating custodial transitions effectively, ensuring a prosperous future for their businesses.

Look for custodians that are open to this flexibility when it comes to this sort of pricing structure and make sure they understand your business when changing providers. 

Finsum: Clients are seeking flexibility and understanding with their advisors and RIAs should look for a similar approach when it comes to custodians.