Small RIAs below Fidelity's $100 million minimum have until June 30 to find a new custodian

Fidelity's rule removes firms below $100 million from its platform ^[4], and the threshold counts assets entrusted to Fidelity, not a firm's total book ^[5]. A firm that already splits accounts between Fidelity and a second custodian therefore has to decide where to consolidate. The cost of moving is about the same in either direction. Such firms often run third-party systems like Advyzon, Orion or Black Diamond that are built to work with many custodians ^[12]. "So if they're using, just to pick one, Advyzon and underneath that they already have Fidelity or Schwab, they're not having to change anything with Advyzon," said Brad Wales, founder of the consulting firm Transition to RIA ^[16][13]. "They're just having to change what the account is actually held." ^[13]

Split firms can top up, and Fidelity keeps the relationship plus the assets moved in to qualify ^[14]. Or they can consolidate at the other custodian, and Fidelity loses its slice with nothing coming in to replace it. A third group, firms with Fidelity as their only custodian, has no top-up option, and Wales called them the real difficulty ^[14]. I think consolidating away will happen more often than Fidelity would like. A firm on custodian-neutral software is choosing on preference, because the effort is roughly equal on both sides ^[12]. The counter-case is that a firm keeps assets at Fidelity because it prefers Fidelity's service, in which case topping up is the default. If most split firms move assets in by June 30, that view is wrong.

For the sole-custodian firms, the binding limit is how few custodians will take them. About a dozen firms offer custody to RIAs ^[7], but Wales said most departing firms will end up choosing between two, one of them Charles Schwab, because many rivals have their own minimums ^[1]. Two realistic choices out of about 12 is one in six of the market ^[17]. Wales said a list that short means most firms can make a final choice within a few weeks ^[2]. "Realistically, if they were to reach out to me, I would narrow the list down quite quickly for them," he said ^[3]. He was describing work his own consulting firm would do ^[16].

Most of the months go to integration and repapering ^[6]. Account-management systems built for one custodian may need significant changes before they work with another ^[10]. All of it runs alongside normal client service. "But the problem is you still have your proverbial day job, right?" Wales said. "So you have to still carry the torch of everything you need to be on a day-to-day basis, and now you have this very large project on your hands, as well." ^[9]

On Wales's ideal schedule, a firm spends weeks on each of the first two phases and still has most of the roughly eight months left to chase straggler clients ^[8]. American Banker reported that the experts it spoke to are urging advisors who must switch not to wait, because transitions between custodians tend to produce unexpected hiccups ^[15].