Technology in the custodial space is a mixed bag of confusion these days. While wealth management firms express frustration with the lack of integration in their custodians’ platforms, confusion at the lack of automation and overall disappointment at the pace of innovation; custodians say functions are integrated. What we do know is that there is no publicly available toolkit at this moment for FinTech firms to collaborate with custodians.
The industry expects that custodians will do a better job developing technology that suits their needs, but at the same time, they aren’t waiting and are building workarounds with third-party providers to get what they need. This is a golden moment for custodians to lean into technology that offers experiences that work for both advisors and their end clients.
Trend 1
Operational Enhancements and Integration Top Advisors’ Custody Platform Wishlists
Insights and Actionable Intel
- Given the collective frustration with the lack of integration and disappointment in the pace of innovation, it’s not hard to understand why most RIAs go to other vendors for more efficient technology.
- RIAs want efficient processes for getting data into their custodians’ platforms and pulling data from the platform for processing and reporting—flexible data models are critical for custodian tech platforms.
- Take Action: Custodians should listen to their RIA clients to plan project roadmaps and update functionality that meets expectations.
Trend 2
Most Wealth Management Firms Take a Multi-Custody Approach
Insights and Actionable Intel
- The top three reasons wealth management firms say they use multiple custodians are operational support, asset safekeeping and integration.
- Firms generally take a least-friction approach to getting advisors on board; adding a new custodian is easier than repapering accounts in terms of client experience.
- Take Action: Supporting multiple custodial relationships is less painful than switching custodians, but brings its own set of challenges, especially in data management. Prepare to align your operations and reporting processes before opening new custody relationships to avoid impacting advisor and client engagements.
Trend 3
Third-Party Data Delivery Tools Bring More Satisfaction than Native Tools
Insights and Actionable Intel
- Less than half of firms are satisfied with their custodian’s native data download tool.
- Flexibility in delivery methods is critical for custodians given the high percentage of RIAs working with multiple custodians—each RIA may take a different approach to aggregating data and will expect their custodian to help them.
- Currently, firms are not relying on their custodians for innovation and they want more out of what they have and will get it in whatever way they can to solve their challenges.
- Take Action: Challenge your custodians to deliver your data (and take data from you) in modern and efficient forms rather than relying on legacy file delivery methods.
Survey Information: The data in this report is pulled from a survey conducted by F2 Strategy in May 2023. The survey includes responses from 29 leading RIA, Wealth Management and Broker/Dealer firms representing approximately $6 trillion in assets.
