7 Emerging Challenges for Advisors, and How Custodians Want to Help

Goldman Sachs also positions itself as outsourcing support, targeting RIAs moving upmarket. Its custody arm sells bespoke solutions to advisors whose clients have "significant" net worth and want to invest in more diverse asset classes like alternatives, Lofgren said. 

Wenk said that his firm aimed to help RIAs in a cost-saving manner by offering integrated automation of services like cash management and minimizing taxes for every client at scale. 

Bringing on more assets through tuck-in acquisitions "has a point of diminishing returns," so at some point automation is a must, he said. 

5. Private equity-backed firms are making it harder for small RIAs to compete, as clients demand more services.

RIAs are being squeezed both by clients who demand more services and customization, and huge national competitors like Creative Planning, who are expanding into an advisor's local market, Losson said. 

"This is creating a very rapid canyon or schism in the industry," he said. "Much of that is fueled by a new party to the marketplace, which is private equity and sometimes venture capital … It's a very, very different marketplace than it was when just saying that 'I'm an RIA and a fiduciary' helped the day, back 10, 15 years ago." 

But Schwab is attempting to keep pace by investing in customization at scale for clients. "Obviously, one of the reasons we made our TD acquisition is we believe that scale creates a long-term competitive advantage in this marketplace," he said.

Schwab wants to support advisors to focus on growing locally if they so choose, Losson said, instead of feeling driven to scale with M&A due to the fear of missing out. "Our economic model also has, as you all know, a pledge in the marketplace that we will not charge a custody fee."

Schwab also plans to become a supported independence player and develop upmarket resources in areas such as asset management, banking and lending solutions and even private banking and trust services, Losson said. Clients coming into more wealth with an RIA would then feel happy staying, even as their needs get more complex. 

6. Lower fees won't cut it to win new clients.

Across the industry, advisors have been attempting to lower fees by offering discounts even as many feel the need to offer more services, Popek said. 

"Larger firms are offering discounts more frequently and deeper discounts," but that can easily become unsustainable, she said. 

Wenk agreed, adding that clients don't necessarily go for the provider with the lowest fees — they care most about user experience, he said. 

"We're lying to ourselves if we think we're delivering good user experience" compared to newer players like Robinhood, he said. "Their app is better than all of our apps by orders of magnitude." His own son, as a college student a few years ago, had never heard of any of the custodians in the room but was familiar with Coinbase and Robinhood. 

"What's really wild is, he thought Betterment was kind of like old school," Wenk said of his son, to laughter from the audience. (By RIA standards, Wenk said in an email later, he thinks Betterment has a great design.) 

"Just go challenge a young person" to share what truly cutting-edge UX looks like, he said. 

7. Advisors want more access to client data.

Holland referenced comments in a talk earlier that day by industry consultant Joel Bruckenstein, CEO of T3 Technology Tools for Today, reflecting on who truly owns client data: the advisor, or the custodian? 

"Sometimes I feel there's a tug of war," Holland said. 

The panelists acknowledged that while custodians at large have legal responsibilities to protect client data in their platforms, they could share data more with advisors and provide more access to information about client data that could inform the advisor's practice. 

"I think that's a next really big opportunity for all of us as custodians, is to take this shared data, and find a way to empower you with the data that we see," Losson said. 

Wenk added that advisors should ask for not only one or two years of their data, but all years, from their custodians. "I absolutely will never hold people's data hostage, because I hated that as a practitioner" and former RIA leader, he said. "If you're only getting one or two years of your data, it's not your data. And fundamentally I have a problem with that." 

(Image: Adobe Stock)