What does a custodian do for an RIA?
A registered investment adviser manages money, but it usually does not hold it. The assets sit at a custodian, a bank or broker-dealer that keeps the securities and cash, settles trades, sweeps idle cash and produces the official account record. Winthrop & Co. describes the custodian as the vault and the plumbing, with assets held in an account titled to the client rather than to the adviser.
The adviser's role is narrower. Winthrop & Co. notes that an independent adviser typically holds a limited authorization to trade the account and deduct its fee, and nothing more. The custodian sends statements to the client, and the adviser provides its own performance reports; the two can be compared.
Why does the SEC Custody Rule matter?
Rule 206(4)-2 under the Investment Advisers Act, known as the Custody Rule, requires an adviser with custody of client assets to keep them with a qualified custodian, such as a bank, broker-dealer, savings association or futures commission merchant. The adviser must have a reasonable basis to believe the custodian sends account statements directly to clients at least quarterly, and in many cases must undergo an annual surprise examination by an independent public accountant.
SEC staff guidance explains that an adviser does not have custody merely because it deducts fees, as long as an unaffiliated qualified custodian processes the deduction. When the custodian is a related person, different conditions apply. In 2023 the SEC proposed replacing the rule with a broader Safeguarding rule, then withdrew that proposal on June 12, 2025, so the existing Custody Rule remains in force.
When a brokerage custodian fails, SIPC protection covers missing customer cash and securities up to $500,000 per customer, including up to $250,000 in cash. SIPC does not protect against a decline in market value.
What is the difference between an RIA custody platform and a clearing firm?
Several large firms operate two related businesses. One serves RIAs directly as a custodian, with service teams, trading tools and technology built for advisers. The other is a clearing firm that settles trades and holds assets for other broker-dealers, which in turn serve advisers and their clients.
At Fidelity, the RIA custody business runs through Fidelity Brokerage Services, while National Financial Services is the clearing arm. At BNY, Pershing Advisor Solutions is the RIA custody business and Pershing LLC is the clearing firm. Form ADV filings reflect the split: in Financial ADVSR's tally, 1,326 RIAs name Fidelity Brokerage Services and 692 name National Financial Services, while 160 name Pershing Advisor Solutions and 336 name Pershing LLC. Some RIAs also use custodians that rely on another firm for clearing; TradePMR, for example, clears through Wells Fargo Clearing Services.
How do custodians get paid?
Custody often appears free to the adviser and client. Winthrop & Co. notes that custodians generally do not charge an explicit custody fee and instead earn from client cash and lending. Schwab's 2025 annual report, for example, describes bank deposit account fees it earns when uninvested cash in eligible brokerage accounts is swept to deposit accounts at TD Bank, alongside net interest revenue when client cash is used for margin loans or held at its own banks.
Other revenue comes from trading and order handling, payments from fund companies and negotiated pricing arrangements. American Banker reported in April 2026 that Schwab's pricing for RIAs varies by firm, based on assets custodied, the securities held, trading activity and use of Schwab services.
Minimums are another lever. Fidelity told existing RIAs on Oct. 1, 2026 that firms with less than $100 million in custody assets must meet that level or end the relationship by June 30, 2027. The $100 million floor previously applied only to new relationships, and Fidelity's earlier minimum for new advisers was $15 million, set in 2008. Schwab has no publicly reported minimum for RIAs to custody with it.
Which custodians do RIAs use most?
Financial ADVSR reviewed Form ADV filings submitted from October 2025 through September 2026 by 8,572 wealth-focused SEC-registered RIAs that report custodians. Schwab is named by 5,774 firms, about 67%. Fidelity is named by 1,999, about 23%. BNY Pershing follows with 493 firms across its two entities, then LPL Financial with 354, Raymond James with 287, Interactive Brokers with 242, Altruist with 177 and SEI with 167. Further down the list are Axos with 84, Apex Fintech with 41 and TradePMR with 30.
Many firms do not rely on a single custodian. In the same filings, 1,890 RIAs, about 22%, list custodians from more than one firm. Winthrop & Co. puts Schwab Advisor Services at $5.5 trillion in client assets across more than 16,000 RIA firms, and cites Fidelity at more than 3,300 wealth management firms.
What has changed among custodians recently?
Ownership has shifted at two adviser-focused platforms. Vanguard agreed on Aug. 26, 2026 to acquire Altruist, a custody and technology platform for RIAs in which Vanguard first invested in 2020. Altruist is expected to operate as a standalone business, and the deal is expected to close later in 2026, subject to regulatory approvals. Robinhood completed its roughly $300 million purchase of TradePMR on Feb. 26, 2025, when TradePMR served about 350 RIA firms with more than $40 billion in assets under administration.
Custodians have also narrowed support for some strategies. InvestmentNews reported that Fidelity stopped new long-short separately managed accounts in December 2025 and raised fees for some advisers using them in May 2026, while Schwab raised its long-short SMA minimum to $10 million. The same report said Axos Securities holds about $50 billion in RIA custody assets.