How To Choose A Custodian For Your RIA

Executive Summary

The standard advice on picking a custodian is to go with the biggest one and stop thinking about it. Schwab custodies around $3.37 trillion in RIA assets, and by Cerulli’s count roughly 16,000 of the country’s 18,000 or so independent RIAs keep at least some business there. Fidelity, Pershing and LPL hold most of what’s left. Cerulli puts four firms at about 84% of all assets custodied in the RIA channel. When one platform is that dominant the choice feels less like a decision and more like joining everybody else, and plenty of advisors treat it that way.

The problem is that the big platforms were not all built for a firm doing $40 million, and the mismatch doesn’t show up in the sales meeting. It shows up a year and a half later, when the referral program you were counting on turns out to have a minimum you can’t hit, or the service team that used to answer on the second ring has been reshuffled, or you work out that the free custody is getting paid for out of your clients’ idle cash at a rate nobody quoted them. Fixing it then means moving custodians, and almost nobody does. Cerulli found only 4% of RIAs switched in a given year, even with one in four saying they wanted to add one. So the first pick carries weight it doesn’t look like it carries. This post is about how to choose a custodian for your RIA, the criteria that decide whether one actually fits and the order to weigh them in, before the first account gets opened.

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Wes spent eleven years at a wirehouse before he left last year to start his own RIA. He did the homework everybody tells you to do. He talked to two custodians, compared the ticket charges and the platform fees, picked the one with the name his clients would recognize, and moved about $55 million over the course of a quarter.

The custody worked fine. What didn’t work was the part he hadn’t asked about. The custodian’s referral program, the one he’d half been counting on for growth, needed far more in assets than he had to participate. His service pod turned over twice in the first year and the third one didn’t know his book. And when a client asked why she was earning almost nothing on the cash in her account, he didn’t have a clean answer, because he’d never looked at what the custodian was keeping.

None of that is a disaster. It’s just a worse fit than he’d have picked if he’d known what to look at. He wanted to know how to choose a custodian the second time around, if it ever came to that.

One Platform Custodies Most Of This Industry And That Is The Problem

Start with the shape of the market, because it changes how you should read every pitch you hear.

The Investment Adviser Association’s 2026 industry snapshot counts 16,544 SEC-registered advisers, a record, and 92.8% of them have 100 or fewer non-clerical employees. Median assets under management for an SEC-registered firm is about $447 million. Most registered advisers are small businesses, and the custody platforms know exactly how small.

On the other side, the custodians are not small and there aren’t many that matter. InvestmentNews, working from Cerulli data, reports Schwab at $3.37 trillion in RIA assets, Fidelity second around $1.5 trillion, Pershing third near $350 billion. Cerulli’s RIA marketplace work, covered by NAPA Net, had four firms controlling an estimated $5.8 trillion of RIA assets as of 2021, about 84% of everything custodied in the channel. The Schwab and TD Ameritrade combination, which closed in 2020, put more than 7,000 RIAs onto one platform.

We see the concentration in our own data too. We work from the SEC’s adviser registration filings. Of the 160 Texas RIA firms in that set that name a custodian on their Form ADV, 98 name a Charles Schwab entity, which is 61%. Altruist is the next most common at 13%, ahead of Fidelity at 6%. In one state, in filings advisors made themselves, six in ten point at the same firm.

That dominance is why the default is the default. It also means the biggest platform has the least reason to bend for a $40 million firm, because it has thousands of them and its economics run on the ones ten times that size. Being the obvious choice and being the best custodian for your firm are two separate questions, and the first one gets answered for you.

Minimums And Referral Thresholds Are The First Thing To Check

The gate nobody puts on the pricing sheet is how much you need to get in the door and stay useful.

Custodian minimums move around and firms are cagey about them. A few years ago Financial Planning reported Fidelity setting a platform minimum around $30 million and routing firms under $50 million to larger partners, while Schwab said it had no official number and looked at other signals. Those figures are dated now and worth confirming directly, but the pattern holds. The big three want scale, and a brand-new firm with $10 million is either turned away or accepted and then ignored.

The newer custodians were built for that firm. InvestmentNews reports Altruist lets an RIA open 100 accounts for free and charges a dollar a month per account beyond that, regardless of size. That’s a different proposition for someone starting at zero.

Then there’s the referral program, which is where advisors get the math wrong most often. InvestmentNews reported in early 2026 that Schwab raised the bar on both ends of its program. A retail client now has to reach $2 million in assets before Schwab will refer them to an RIA, up from $500,000, and the RIA has to run $500 million in assets to participate at all, double the old $250 million threshold. Only about 100 to 150 firms take part. If part of your custodian choice is built on the idea that referrals will come back to you, check whether you actually qualify, because the answer for a small firm is usually no.

Free Custody Gets Paid For Out Of Client Cash

Nobody sends you a bill for custody, and that’s the tell.

When the custodians dropped trading commissions in late 2019, the money didn’t stop, it moved. The main replacement is cash. Your clients hold idle cash in their accounts, the custodian sweeps it to its own bank, pays the client a low rate, earns a higher one, and keeps the spread. Schwab’s most recent quarterly results show net interest revenue of $3.36 billion in a single quarter, a net interest margin of 3.00%, and $485.7 billion sitting in transactional sweep cash. That’s the model working as designed. WealthManagement.com put it plainly, a custodian earns the spread between what it makes on client cash and what it pays out, and payment for order flow adds more on top.

That isn’t a reason to avoid a big custodian. It’s a reason to know the number. If a custodian pays 0.3% on swept cash while short-term Treasuries yield 4%, and your clients carry meaningful cash, that gap is a real cost to them and it’s invisible on every report they get. You can manage around it with a purchased money market fund or a cash management setup, but only if you know it’s there. Ask each custodian what the default sweep rate is and what your options are to move client cash somewhere better. A platform that makes that easy is treating your clients differently than one that buries it.

This is the same kind of hidden overhead that shows up all over a small firm’s expense base. We walked through the rest of it in our line-by-line look at what RIAs overpay for.

The Service Model Matters More Than The Pricing Sheet

Ticket charges and platform fees are easy to compare, which is why advisors spend most of their evaluation time there. The service model is harder to compare and it’s what you’ll actually feel every week.

Ask each custodian who picks up when you call. Is it a dedicated team that knows your firm, a rotating pod, or a general queue. How many other firms does that team cover. What are the hours, and what happens when your one contact is out. Get the names. A custodian that assigns you a service team of people you can email directly is a different daily experience than one that routes you through a 1-800 line, and the difference gets bigger the smaller your operations staff is, because at a two-person firm the custodian’s service desk is your operations department.

Then ask about the things that only happen once or twice a year and go wrong loudly. A death in a client family and the transfer that follows. A trust that needs to be retitled. An account that gets frozen for a bad reason. These are the moments a client remembers, and the custodian’s back office is doing most of the work. A firm that has been through a few of these with a given custodian can tell you more in ten minutes than a sales deck will in an hour.

One Custodian Or Two Is A Question Of Firm Size

Most small firms should run one custodian and most owners still ask about running two, so it’s worth being clear about when the second one earns its keep.

The Cerulli data NAPA Net covered lines up with what you’d guess. About 73% of RIAs manage less than $250 million, and among that group the plurality, 44%, work with a single custodian. On the other end, 71% of RIAs with three or more custodians manage $500 million or more. Multi-custody is something firms grow into, usually because a team joins from a different platform or a subset of clients needs something the primary custodian doesn’t do well.

The trend is real though. WealthManagement.com, reporting an AdvizorPro analysis of Form ADV filings, found the number of RIAs using more than one custodian rose to 6,253, more than a quarter of all RIAs, framed as a defensive move against outages and service problems. And the challenger platforms are pulling real volume. InvestmentNews reports Altruist now has close to 5,700 advisors on it, third by advisor headcount, after more than doubling its RIA relationships in a year.

For a firm under $250 million the honest answer is usually one custodian, chosen well. A second platform doubles your reconciliation, your paperwork, your training, and your points of failure, and it makes your firm harder to value and harder to sell because a buyer has to integrate two of everything. Add the second one when a specific problem forces it, not as insurance you don’t need yet. If you want the full brand-by-brand comparison of who fits a small firm, we did that in Schwab vs. Fidelity vs. the upstarts.

The Order To Weigh A Custodian Decision

Here’s the sequence we walk owners through. The order matters, because most advisors run it backwards and start with the pricing sheet.

1. Check the gates first. Minimum to open, minimum to stay in good standing, and the real thresholds on any referral program you’re counting on. If you don’t qualify for something that’s part of your plan, you’ve learned that before you wasted three meetings.
2. Price the whole relationship. Not the ticket charges, the cash. What the default sweep rate is, what your clients are giving up on idle balances, and how hard the custodian makes it to do something better for them.
3. Pressure-test the service model. Who answers, how many firms they carry, what happens on the hard once-a-year events. Talk to two firms already on the platform that look like yours.
4. Look at the transition support, because you get it exactly once. How they handle repapering, what the conversion team looks like, and whether they’ve moved a book your size recently.
5. Decide single or multi last. Default to one. Add a second custodian only when a concrete need shows up, not because it feels safer.

Wes would have picked the same custodian for custody. He’d have gone in knowing the referral program wasn’t coming, he’d have set up a better cash option for his clients on day one, and he’d have asked the service questions before he signed instead of finding out the answers the slow way.

Choosing a custodian is one of the more reversible decisions on this list, since roughly 4% of firms do reverse it every year. It’s just expensive and slow enough that it’s worth getting closer to right the first time. More on running the firm rather than working in it is on our practice management page.

Our goal is to make sure advisors know what options are available and make it easier to find those options.