IBD Elite 2026: Hidden Costs of Clearing and Custody

Many financial advisors cannot determine the exact fees for clearing and custody when switching firms or launching RIA practices, the IBD Elite 2026 study found. The SEC’s Division of Examinations issued a June risk alert citing instances of omitted or misleading disclosures about revenue sharing and custodial arrangements.

The study compared firms that clear and custody in-house, known as self-clearing firms, with those that outsource to vendors such as BNY Pershing, Fidelity and Charles Schwab. Self-clearing firms including LPL Financial, Ameriprise, Raymond James and Wells Fargo Advisors Financial Network generate revenue from trades, product deals, cash sweeps and loans. Those revenue streams can support larger recruiting payments and different payout economics. Firms that outsource clearing point to lower infrastructure costs and the ability to focus resources on advisor payouts and service.

Veteran recruiter Jodie Papike warned many advisors “don’t know, and a lot of them will never know” the exact price of clearing and custody services. She advised advisors to choose affiliations based on client experience and pricing rather than paperwork convenience. Brad Wales, founder of Transition to RIA, described consultations about clearing and custody as common but complicated by private negotiations and firm-specific calculations.

The SEC alert said some firms failed to fully disclose economic benefits tied to custodial credits, margin loans and transaction markup fees. The agency noted omissions and misleading language in disclosures but did not indicate where advisors or clients can find clearer fee data.

Public regulatory filings show varied arrangements. LPL’s filings list administrative, custody and clearing fees. Kestra’s disclosures reference a program fee tied to negotiated client fees. Osaic’s filings warn of an economic incentive to use Fidelity and Pershing affiliates. Cambridge’s filings state outside custodians mark up ticket charges. Ameriprise’s disclosures say cost reimbursement payments from product sponsors “reduce the investor return on their investment.” Raymond James notes incentives when clients use affiliated products. Many public fee schedules show only starting rates and leave negotiated terms opaque.

Executives defended their chosen models. Osaic CEO Jamie Price described partnerships with Pershing, Fidelity and Schwab as giving advisors options while allowing the firm to invest in other priorities. LPL chief growth officer Marc Cohen framed self-clearing as offering choice and platform integration. Kestra executive Angela Xavier said outsourcing lets the firm direct resources to advisor payouts and service. Ameriprise executive Greg Carr argued an integrated platform provides a unified experience and operational efficiency.

Recruiters and consultants highlighted the distinction between custody and clearing and the effect on advisor economics. Jeff Nash of Bridgemark Strategies urged advisors to understand both custody and clearing and whether a provider is third-party or firm-owned. Shirl Penney of Dynasty Financial Partners linked custodial revenue to larger recruiting offers and the rise of modified recruiting deals. Penney also pointed to Pershing’s client losses after the JPMorgan takeover of First Republic in 2023 and said technology changes could alter how custodians compete.

The IBD Elite study reported that 37 participating firms posted combined revenue of $56.28 billion in 2025, a 12.5% increase from the prior year. The report noted a shift from commissionable brokerage accounts to fee-based advisory models has reduced traditional transaction income, and firms are filling revenue gaps with revenue-sharing agreements, interest from cash sweeps and program fees.

Given the variability and limited public detail on fees, recruiters recommend advisors analyze client experience, pricing transparency, platform technology and long-term business plans when choosing a custodian or affiliation. Strong customer service and reliable operations remain central factors for advisors during transitions.