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multi-custodian integration

Multi-custodian Integration in the Midst of Custodian Mergers

The recent announcement that two of the ‘Big Four’ brokerages will merge to form a mega-firm with $5 trillion in brokerage and RIA client assets has some advisors anxious about what’s to come in the custodial marketplace. The Charles Schwab and TD Ameritrade merger brings to light the pros and cons of consolidation in the marketplace, the challenges of repapering, and the benefits of managing client assets with multiple custodians. As the future of the “#Schwabitrade” merger/acquisition shapes up and advisors revisit their custodial options, trade management tools with a focus on multi-custodian integration will continue to prove valuable. 

Reasons for Maintaining Assets With Multiple Custodians

Not all custodians are made equally – they have varying strengths and weaknesses, price structures, and services. Choosing a best-in-breed for required features remains paramount for advisors. By maintaining assets with multiple custodians, advisors can recommend a custodian that is most appropriate for each specific client. Custodians also frequently change service options, merge, consolidate, or fail to deliver promised services. The need for specialized services and a continually changing custodial marketplace are just a few of the reasons that advisors choose to diversify custodial responsibility. 

The choice to manage assets with multiple custodians has become more and more common in the world of independent advisors. In reality, using one, dependable custodian to handle all clients’ assets has become more of a fanciful notion. There are advisory firms that have used the same custodian and platform software for years due to the cost and inconvenience of migrating, but total migration is no longer the only option. Managing order flow across multiple custodians is increasingly easier with secure trading platforms that feature multi-custodian integrations

The Custodial Disruption by Schwab-TD Ameritrade Merger

Charles Schwab’s acquisition of TD Ameritrade, an ‘inflection point’ for the industry, poses challenges and opportunities for firms of all sizes. Competition in the industry will likely increase among custodians, leading to service enhancements and price benefits, but not without cost and the potential for smaller RIAs to get lost in the noise. Other competitors that could gain from the integration (which is expected to take between 18 and 36 months after the deal closes) include Pershing, Fidelity Investments, and smaller custodians such as E*Trade and Apex. Meanwhile, current TD advisors who will be tasked with repapering to move clients may also experience a decline in the quality of service

The merger has smaller RIAs nervous about being overlooked and considering the option of additional custodians to dodge service and pricing changes. Although Schwab CEO, Walt Bettinger, claims that having multiple custodians could add risk, most advisors disagree. Custodians other than Schwab or Ameritrade may see the strategy as more favorable as advisors look for options, and over the course of the next year could even push for a focus on multi-custodian integration.  

Utilizing Technology with Multi-Custodian Integration

Advisors who do choose to benefit from utilizing multiple custodians immediately face another challenge – finding a centralized dashboard to access data from multiple sources. While this should sound like an easy task, the battle for control of the technology hub used by RIAs has been raging for years. Open architecture plays a powerful role in driving technology integration, but, as evidenced by Schwab’s own abandoned plans for a multi-custodial management tool, it is not always seamlessly delivered. 

Managing multiple custodians and running trades without a single, streamlined system can cost advisors time and money. Offering clients custodial options will not serve well if there is no management system to maximize effectiveness. As an “agnostic” platform, Blaze Portfolio not only integrates with many portfolio accounting and reporting systems but also delivers robust multi-custodian integration

For advisors looking to add custodians in the midst of the Schwab-Ameritrade custodial disruption, Blaze can help to reduce operational risks. The Blaze Portfolio system allows continued operation of client accounts while historical data quickly converts, a transition and migration that could otherwise take months. 

Learn how Blaze uses electronic execution, real-time trading, seamless integrations, and full-service support to streamline accurate order flow across multiple custodians, asset and security classes with a personalized tour of our software.