Don’t settle for flashy marketing – secure the best custodial pricing for your clients.
Big-name custodians with a retail offering serve two masters – RIAs and retail investors. That split focus means these providers divide their time and resources. Developing technologies and services that entice advisors as well as retail customers is a tall order, and offerings that benefit to one group may not always make sense for the other.
The outcome of this split approach? Offerings like zero fee trading. Anything free at first glance seems amazing, right?
Zero Fee – Marketing to Retail Investors?
“Zero Fee” – for the past few years we’ve seen this plastered on newspaper advertisements, billboards, television commercials.
It’s a precedent that shifted the landscape for big-name custodians, but who does it really benefit?
For retail investors, zero-fee is an eye-catcher. A previously unheard of offering that can save investors with relatively uncomplicated financial situations who primarily trade individual stocks and ETFs.
For an individual investor looking to open a brokerage account, the prospect of paying no commission on those individual stock and ETF trades is enough to get their attention, and maybe their business.
The question is: does that zero-fee approach have the same benefit for RIAs looking to find the best custodial services pricing for their clients?
Zero Fee May Not Equate to Free
While retail investors may primarily trade single stocks and ETFs, investors that work with financial advisors often have more complicated financial situations.
Zero fee trading can still be a benefit for these clients when trading individual stocks and ETFs, but it’s valuable to look at how the rest of the custodial relationship is priced out.
- What are the RIA custodian’s fees when trading mutual funds? What about alternatives? Or fixed income?
- Does the custodian have a technology platform fee? Or fees to leverage specific capabilities?
- Are there other services offered by the custodian that would incur additional costs?
It’s important for RIAs to recognize that zero fee trading may not actually secure the best pricing relationship for their clients. Depending on what assets they hold and their trading preferences they could end up overpaying for custodial services.
When looking for their next RIA custodian, advisors should take the time to look beyond the exciting advertisements to establish a pricing relationship that fits the needs of their unique firm.
Pricing with TradePMR Starts with a Conversation
TradePMR has no retail channel. The firm exclusively serves RIAs with white-glove service and technology tailored to help them meet their needs, address their challenges, and seize their opportunities. Alongside this technology and service is a RIA-centric approach to pricing.
What’s a RIA-centric approach to pricing? Each RIA is unique, and TradePMR believes every RIA deserves a customized pricing structure to fit their individual needs.
The firm takes the time to fully understand each RIA, including their unique value proposition, approach to portfolio management, client mix, growth goals, and team structure. Only when the TradePMR team has a full grasp on these points and how the advisors approach their work with clients can the firm look to develop a pricing proposal.
This pricing proposal is personalized to each individual RIA and takes all these important factors into account.
At the end of the day, RIA custodians need to make money to continue to expand their offerings and appropriately staff their teams. RIAs shouldn’t expect to get custodial services and technology for free, but rather should find a provider that prices their services in a way that facilitates their firm’s and their clients’ success.
That’s exactly what TradePMR looks to do with its tailored approach to pricing: deliver custodial services and technology with a pricing structure designed to help RIAs and their clients grow.
Managing Client Expectations and Justifying Fees
If an advisor finds that a new custodial service provider would be a better fit for their business, there is still a hurdle to overcome: getting clients on board with the move.
As big-name custodians market to retail investors, a potential issue can arise for RIAs – their clients are being fed the same advertisements.
Clients are aware that some RIA custodians offer zero-fee trading.
If an advisor were to work with a custodial services provider that has ticket charges for individual stock and ETF trades, how can that advisor justify those fees to a client?
Fee conversations can be tricky – as technology has become increasingly streamlined and accessible, clients expect to get more from their advisors at a lower cost. Seeing a change from “zero” to anything can be jarring, but it’s important to take a step back and look at the complete picture.
To help streamline these conversations, advisors should focus on a few key points:
- Complexity can Help – advisor’s clients often have complex financial situations. A simple approach to pricing like “zero fee trading” may not be the right fit for their unique trading preferences.
- Changes in Fees Across the Board – dive into fees the clients have been paying for their different trades, and how those fees will evolve with the new provider. While some may go up, others may go down.
- Fiduciary Duty – reinforce to clients that your team has a fiduciary duty to work in their best interest, every day. Finding the best value for custodial services and technology to help meet their needs is a major part of that duty.
Does Your RIA Custodian’s Pricing Fit Your Business?
Flashy offerings like zero fee trading could distract from the full pricing relationship with a RIA custodian. Don’t get caught up in the thrill of exciting marketing, dive in beyond the surface and make sure your firm and your clients are getting pricing to facilitate success.
If you feel like your custodial service provider could offer pricing that better fits the needs of your business, we should talk. We can dive into your unique firm, and if TradePMR’s customized approach to pricing could be the right fit for your team and your clients.
