Here’s how a Custodian RFP can help you manage custodian changes for you and your clients.
Note: This blog post was updated on August 22, 2024.
Every RIA will likely consider a change in custodians at some point. While change can be stressful, it can also present an opportunity for growing your business.
Has your firm’s custodian been acquired? Do you need more comprehensive solutions than what you’ve been offered? Have you been given an ultimatum on moving your assets from one custodian to another?
Naturally, it’s often more comfortable changing custodians on your own timeline. But circumstances can also dictate if you’ll be switching custodians at your pace or not.
For RIAs approaching a custodian merger, time is of the essence. To help you evaluate your options and determine if a move can help you unlock new potential, we’ve put together an advisor-focused guide for a custodian review.
No two custodians are alike. Choosing the best one, the firm that suits your company and clients’ future, is important. That’s why we encourage advisors to Consider developing a Request for Proposal (RFP).
Benefits of Developing an RFP
An RIA custodian RFP can be an incredibly powerful tool. Developing and distributing an RFP can:
- Allow RIA firms to compare custodians — and their solutions — directly.
- Provide a competitive and transparent review process.
- Facilitate an agreement with all internal stakeholders.
- Limit prospective providers to only the custodians that want to do business with your firm.
- Allow for a customizable approach to match your firm’s priorities.
So how do you develop an effective RFP? And what separates a good RFP from a bad one? It comes down to focusing on a few key points.
What to include in Your RFP
Above all, a good Custodian RFP is clear, concise, and highly personalized to your firm. The more efficient the document is in identifying the points that are essential to your RIA, the more effective your final selection will be in meeting the needs of your organization.
A firm’s RFP development and distribution process should look to include 5 key elements:
Tell the prospective provider about your firm, why you are considering a change, and what your goals are for conducting the RFP.
If there is a specific topic (such as cybersecurity or RIA software integrations) that your firm prioritizes above others, don’t be afraid to put it front and center in your RFP. If you are looking to save costs, for example, consider including your current custodian’s rates.
Getting the RFP into the right hands is critical. If a potential vendor has a question, who do they contact at the firm? When do potential vendors need to respond by? Outlining a clear strategy can streamline the process and minimize the back and forth.
What does a successful RIA-custodian relationship look like for your firm? Be clear about what a deal-breaker is for your team, and don’t forget the basics.
What documentation do you expect to receive? An SOC report? What about a list of funds? Consider including a checklist in your RFP with important documents that your team would like to review from the provider.
Focusing on these 5 elements can help ensure your RFP is designed to garner the most relevant information from prospective providers.
Building an RFP Timeline
On top of finding a provider that checks the right boxes, properly timing a custodian change is critical to minimize business disruptions and client impact. If time is short, a demonstrated “sense of urgency” from potential vendors might also factor into your review.
While there is never a “slow time” for RIAs, advisory seasons do ebb and flow. Tax season and the end of the year can be particularly busy times – RIAs may find it challenging to look inward at their businesses when they’re spending more of their day addressing client needs.
By identifying and anticipating 8 key steps in the RFP process, advisors can better define their timelines and manage deadlines. With the right workflow, even the most unforeseen custodian transition can be transformed into a manageable event for your clients and their team.
Below are 8 steps for building and distributing your RFP:
- Outline Process and Timelines – determining what is ideal for your business and operations.
- Invite Vendors to Respond – identify prospective providers that could be the right fit for your business.
- Finalize Questions & Priorities – refine your questions to hit on all of the points you’re looking for in your next custodian relationship.
- Distribute RFP – share the RFP with the prospective providers, including information on your timeline and when you expect responses.
- Evaluate Submissions – review each provider’s responses and identify which custodians could hit the right marks for your RIA.
- Tech Demo – experience the RIA technology for those custodians that could be a good fit based on their RFP responses.
- Negotiate – dive into pricing with the firms that checked the right boxes in their RFP and tech demo; at this point, you should have a clear idea of which relationship will best facilitate your firm’s growth and success.
- Transition – sign on and make the move with support from your new provider.
Perhaps the most important component of your RFP timeline is that you control it. You’re making the move when it makes sense for you, to a provider that you have decided can help your team achieve your goals.
Every advisor deserves to work with a provider that understands their business and is there to help.
If you’re approaching a custodian merger and are planning to “wait-and-see” what happens, you may be relinquishing that control.
By taking a transition into your own hands, you may be mitigating the risk of being forced to move on a business-damaging timeline, to a provider that might lack certain capabilities, and that might not provide the pricing or service you need.
Develop Your RFP Today
If you’re approaching an RIA custodian merger or are otherwise considering a change in providers, TradePMR is here to help.
To that end, we have developed an RIA custodian RFP template to help advisors get started on their RFP process. The template includes suggested topics, questions, and format for your firm’s RFP to help ensure your next provider is the right fit for your business.
If you’d be interested in hearing how TradePMR would address your firm’s priorities, and if our top-rated tech1 and white-glove service could meet your needs, we should talk. We can dive into your business, your goals, and how your next custodial relationship could take your RIA to the next level.
Even if we aren’t the right fit for your firm, we’ll be happy to know that you’re taking the right steps in your custodian search.
About TradePMR
For more than two decades, TradePMR has worked with growth-minded independent registered investment advisors (RIAs), providing innovative technology tools and support designed to transform their businesses. The privately-held brokerage and custodian services provider (Member FINRA/SIPC), based in Gainesville, Fla., works to streamline investment advisors' operations through comprehensive custodial, operational, and trading support. For more information, visit www.TradePMR.com.
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1. 2024 T3/Inside Information Survey, Joel Bruckenstein and Bob Veres, January 2024, sponsored by SEI, Advyzon, FP Alpha, Addepar, XLR8, and FMG
