RIAs Face Three Choices After Fidelity’s $100 Million Minimum

Fidelity told registered investment advisers that they must hold at least $100 million in assets on its custodial platform by June 30, 2027. Firms below the threshold can join an aggregator, transfer accounts to another custodian or increase their assets.

Fidelity has not given a detailed explanation for the policy. Will Trout, director of securities and investments at Datos Insights, said the cost of serving an RIA with $50 million in assets can be similar to the cost of serving one with $500 million. Larger relationships can therefore generate more revenue for custodians without equal increases in service costs.

An RIA could join an aggregator that already meets Fidelity’s requirement. The firm would report its assets with those of other affiliated advisers, which could allow it to remain on Fidelity’s platform and avoid transferring client accounts. Moving accounts between custodians, a process known as repapering, can require new agreements and client communications.

Advisory Services Network, an Atlanta-based network with more than 150 firms and $10.6 billion in combined assets, has told its members that they can continue using Fidelity. The network does not buy the firms that join it. It also offers custody through Charles Schwab, Pershing and Goldman Sachs.

Tom Prescott, ASN’s co-founder and managing member, said the network already exceeds Fidelity’s minimum and that its member firms can continue using the platform. He said some advisers have contacted ASN since Fidelity announced the policy.

Joining an aggregator can affect an RIA’s compliance processes, technology, trading procedures and pricing. Some aggregators buy minority stakes in affiliated firms or charge fees for their services. Those arrangements can reduce a firm’s earnings and give its owners less control.

Trout advised RIAs to check how an aggregator reports affiliated assets. “If the aggregator files separately for each acquired firm, the RIA doesn’t benefit from scale,” he said. Aggregators can report firms together on one Form ADV or file separately for each business.

RIAs can instead move their accounts to another custodian. Charles Schwab provides custody to more than 11,000 firms with less than $100 million, according to Jon Beatty, head of Schwab Advisor Services. Other custodians that do not set an asset minimum include Pershing, Interactive Brokers and Altruist.

Betterment said it will waive platform fees for custodial clients through the end of 2028. Those fees generally range from 12 basis points to 20 basis points annually on assets held in custody. Interactive Brokers charges no custody or ticket fees, which are fees tied to individual trades.

AdvizorPro data shows that nearly 70% of RIAs use Schwab for custody, compared with slightly more than 17% for Fidelity. The median RIA using Schwab has $107 million in assets under management, compared with $328 million for the median Fidelity RIA. Fidelity serves about one-quarter as many RIAs as Schwab but holds about 80% as much in managed-account assets.

An RIA that wants to stay with Fidelity can seek new clients, collect more assets from existing clients or acquire another advisory firm. A firm with $70 million in assets would need more than 40% growth in nine months to reach the threshold, according to Tim Welsh, founder of consulting firm Nexus Strategies.

“For most firms, that’s a hope, not a strategy,” Welsh said. Acquisitions can add the required assets but require capital and carry execution risks. Fidelity could also raise the minimum again in the future.

“Ultimately, your custodian is a vendor, not a partner any more,” Welsh said. “Know how they get paid, get commitments in writing, and always know how you’d leave. Basically, everyone should now have at least one foot out the door.”