RIA custodian comparison: which one is right for you?
Whether you’re an Investment Advisor Representative at an RIA firm or an Individual RIA, you should be familiar with the top RIA custodians. As of this writing, the “big four” RIA custodians (in no particular order) are Pershing, Fidelity, LPL Financial and Charles Schwab.
These custodians control an estimated 84% of custodied assets in the RIA market. However, you or your RIA firm do not have to be confined to those choices.
If you are at a loss as to which RIA custodian to engage for your custodial needs, InvestmentNews presents a side-by-side comparison of RIA custodians.We’ll also offer a few valuable tips to help you make this important decision.
As Registered Investment Advisors, it’s your job to offer sound advice when it comes to investments and securities. Your clients may also request that you manage their investment portfolios, but you are prohibited from directly carrying out the transactions. Due to provisions in the Investment Advisers Act of 1940, a separate entity, known as the RIA custodian, is required to serve your clients in that capacity.
RIA custodians take on the massive responsibility of maintaining and managing the assets and holdings of your RIA firm. As stated above, the four biggest RIA custodians, Pershing, Fidelity, Schwab, and LPL Financing dominate the RIA market. Your RIA firm may be expected to choose from one of the four, but that does not have to be the case, as you will see later.
The main reason why RIA firms are required to have an independent RIA custodian hold their clients’ assets is to prevent RIAs from misusing client funds. This is exactly what happened with FTX CEO Sam Bankman-Fried, whom the SEC found guilty of comingling client assets and investing them.
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