Can you have too many custodians?

investmentnews.com:

As custodians in the independent advisor market undergo mergers and consolidations, advisors can find 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.

This begs the question: is there such thing as ‘too many’ custodians? How many is too many? While most RIAs really only have one or two, Chuck Failla, CEO of Sovereign Financial says it ultimately depends on the size of the firm.

“Even more importantly than that, [figure out] what exactly is your firm is trying to do,” he added. “If you’re a lifestyle practice where it’s either a solo practitioner or a small group, there’s not much need to be multi-custodian. Just find the one that’s going to be best for you, and you’re good to go.”

Failla is quick to say that’s the best plan of action because it starts getting “more complex the more custodians you add into the mix.”

The reason why RIA firms tend to bring on more than two or three custodians, Failla explains, is exclusively for recruitment, as they’re actively looking to bring in advisors.

“The more custodians an RIA has on their platform, the easier it is for them to have other advisors plug into their platform,” he explains.

Nina O’Neal agrees.

“Another benefit is if you’re looking to attract certain clients that may have been with a competing RIA that used the same custodian,” says the partner & investment advisor at North Carolina-based AIM Advisors.

“If you’re able to say, ‘We already use that