Fidelity sets $100M minimum for RIA custody

Fidelity sent notices this week to independent registered investment advisers that hold less than $100 million in client assets at the firm, informing them they must reach $100 million at Fidelity by June 30, 2027 to retain custodial services. Fidelity noted the $100 million minimum previously applied only to new custodial clients and is now being extended to existing relationships. The company wrote that it recognizes firms need time to plan and that it will assist advisers who move assets to another custodian during any transition.

The $100 million threshold also corresponds to a regulatory milestone: advisers at or above that level can register with the Securities and Exchange Commission instead of registering with individual states.

Fidelity’s custody business is the second-largest in the United States, behind Charles Schwab. Research firm Cerulli Associates estimates Fidelity, Schwab, Pershing and LPL Financial together hold nearly 85% of the U.S. custodial market.

Industry participants say custody revenue has been under pressure since many broker-dealers stopped charging trading commissions. Some firms have sought revenue through cash sweep programs and payments for order flow. In June, Fidelity introduced a transaction charge equal to 5% on purchases of certain ETFs whose sponsors do not pay Fidelity asset fees, with charges capped at $100.

Charles Schwab provides custody to thousands of smaller RIAs and works with more than 11,000 firms that have less than $100 million in assets. Jon Beatty, head of Schwab Advisor Services, described small RIAs as ‘the backbone of the independent advisory profession’ and said Schwab aims to help firms of all sizes grow and compete.

Tim Welsh, founder of Nexus Strategies, called the requirement ‘a dramatic move’ and noted some advisers have maintained long-term relationships with Fidelity without reaching $100 million. Alex Chalekian, founder and CEO of Lake Avenue Financial, wrote on LinkedIn that the notice affects his firm and asked what will happen to smaller firms if their custodial options shrink.

Smaller custodians and fintech platforms offer alternatives. Altruist accepts custodial clients without asset minimums and is set to be acquired by Vanguard. Industry participants noted that moving client assets to a new custodian can be operationally complex and can disrupt client service and billing.

Will Trout, director of securities and investments at Datos Insights, observed that the requirement reflects Fidelity’s interest in serving larger advisory firms and raised the question of whether other major custodians will adopt similar minimums. Michael Kitces, co-founder of the XY Planning Network, questioned whether advisers who cross the $100 million threshold would move custodians and whether firms are shifting away from smaller RIA clients.