Pershing Steps Up Business Plan for ‘Small’ Advisors: Interview – AdvisorHub


Pershing Steps Up Business Plan for ‘Small’ Advisors: Interview – AdvisorHub

February 25, 2021

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February 25, 2021

Small Advisors

BNY Mellon’s Pershing Advisor Solutions has got a blast of new energy by marketing itself to small registered investment advisers who are open to changing their custodial relationships after TD Ameritrade was sold to Charles Schwab Corp. last year, Pershing’s new RIA custody head said in an interview.

Pershing prepared for the event in late 2019 by lowering its minimum asset requirement for RIA customers to $100 million from $250 million. The small RIA market was a key part of TD Ameritrade’s business, and many of those advisors were concerned about losing service priorities within the larger Schwab business.

Schwab took pains to reassure TD’s RIA clients, and hired the deposed architect of TD’s small-firm strategy to demonstrate its commitment to the sector, but Pershing said integration friction and its own marketing skills have been bearing fruit.

“There is a tremendous amount of volume and volatility in the marketplace and that’s creating stress on service and other areas, so we believe that we’re really well positioned to take advantage of that,” said Ben Harrison, who became head of Pershing Advisor Solutions last March. “We have absolutely seen a significant uptick in terms of firms evaluating options, and we’ve got a very healthy and robust pipeline for the core RIA marketplace.”

RIA customer assets at Pershing crossed the $900 billion barrier by the end of 2020, up from about $800 billion at the end of 2019. “In the midst of a pandemic, we feel really, really good about that,” Harrison said.

A spokeswoman for Pershing said about 25% of the custodian’s new advisor clients in 2020 came from RIA practices below the $250 million asset level, including existing RIAs and former brokers shifting to the RIA business model.

Pershing serviced 726 RIAs with north of $800 million in assets when Harrison took the reins of the business from Mark Tibergien, its longtime head of custody, last year. That is well behind industry leaders Schwab, Fidelity Investments and legacy TD Ameritrade, and Pershing’s spokeswoman declined to give an updated number of its RIA clients.

Tim Welsh, a former Schwab RIA official who runs consulting firm Nexus Strategy, said he had no doubts that Pershing and other custodians are making hay because of service issues that Schwab has acknowledged in the early days of the TD Ameritrade integration.

“Advisors will forgive a lot of mistakes, but if they have to wait to get a hold of you, then that is a deal breaker,” he said.

Schwab officials, for their part, are underscoring their commitment to small RIAs. The discount brokerage pioneer is now servicing 4,500 RIA clients with under $100 million in assets, and most are custodying assets solely with Schwab rather than with multiple custodians, Schwab Advisory Services head Bernie Clark said at the firm’s “winter update” conference for analysts earlier this month.

Harrison said Pershing is benefiting from the desire of even small advisors to work with multiple custodians as well as from industry consolidation. He said increasing Pershing’s addressable market, by stretching its asset minimums, is giving them more “at-bats” with small RIAs.

Mike McNitt, a former BMO Harris Bank broker who launched Highview Capital Management in March 2020 as a Pershing-backed RIA in Northbrook, IL, agrees. He and his two partners did their initial due diligence with Schwab, legacy TD Ameritrade and Fidelity, and were favoring TD Ameritrade before considering Pershing “late in the game.” They felt their clients would be more comfortable with the Bank of New York name, and were also concerned about having to repaper accounts once the Schwab takeover occurred.

“They’re really hands off, and I mean that in a positive way,” McNitt said, noting that Pershing has abstained from promoting proprietary bank products. “If we need them, they’re ready to go, but they let us run our business the way we want.”