Look Beyond The Obvious To Get The Right Custodian

By Pete McAteer

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In our previous blogs we have discussed what you should consider when deciding whether to change clearing platforms; but what about adding or changing your custodians?  While this may appear to be an easier transition or addition to your overall firm offering, there are several key considerations:

  • Product availability
  • Advisor and Home Office functionality, ease of doing business
  • Cultural and business fit
  • Platform costs
  • Business processing, operational service and support
  • Current platform technology, integration, innovation and digital capabilities
  • Ongoing relationship management

Find the Right Firm

Once you have assessed your product and services needs and determined your firm’s direction around growth, recruiting and technology enhancements, it’s time to begin the process of finding the right custodian firms to help achieve your firm’s goals. 

While custody agreements are short and easy to execute, finding the optimal custodians can be daunting.  It is important to identify the custodians that provide the best offerings, technology, and investor/client support. Your team must also be able to make informed decisions your firm can live with for the foreseeable future, and not exacerbate operational inefficiencies.

Part of finding the right custodian requires a disciplined process for due diligence that includes, but is certainly not limited to vendor risk assessment, regulatory compliance, reputational risk, service & support record, and operational professionalism.   

Many firms simply add custodians as recruiting needs dictate.  However, the operational complexity of having many custodians can ‘snowball’ and quickly create an untenable situation. These firms can get mired in the challenges of managing, monitoring and supervising so many disparate custodian firms and platforms. 

Get the Entire Team Involved

A solid, unified business plan will help align and unite your leadership team.  It is vital for all leaders to share in the decision-making process.  Once a decision is made, the leadership team should be 100% onboard and kept fully involved to make the selection process, implementation and transition go as smoothly as possible.  All key stakeholders should be present for the appropriate demonstrations and relevant follow-up meetings. Even though it’s easier to add the relationship, having a robust process will ensure the decision has lasting positive impacts to the firm’s growth.

Outsource the Selection Processes

The custodial contract is one of the most important contracts your firm has. It affects the systems your firm uses to interact with customers, how statements look and how the core aspects of the company run. If your organization is like most, everyone is busily focused on the day-to-day job of running the firm.  Engaging a knowledgeable partner to guide you through the process will take some of the disruption pains away. For example, the Request for Proposal (RFP) process from potential providers can run three to six months and, if done well, takes a lot of focus and attention.  Many firms don’t have the time and staff to embark on such a journey alone.  Find a partner that can help guide you in making the best decision for your firm. 

Oyster Consulting is the partner you need. Our consultants stay current with major custodial firms, their service offerings and representative clients. We use our industry experience to help you review your current contract, ensure business alignment, negotiate better terms and transition to a different custodian provider. 

About The Author
Photo of Pete McAteer

Pete McAteer

Pete McAteer has senior level management experience in coaching, consulting and leading large programs and operations teams, which drive significant, impactful change management, process improvement and implementation efforts. He possesses a deep background with over 30 years of experience with Fortune 500 companies working in International Quality Manufacturing and Financial Services industries.