Custodians are charting fintech's future

From workflow efficiencies to robo-advice and artificial intelligence, the big four are developing technology to entice advisers

Aug 7, 2017 @ 10:49 am

By Liz Skinner

+ Zoom

The nation's largest custodians are racing to align with — and in some cases, buy — the strongest fintech available, as each of the major players seeks to win over advisers by providing the ultimate technology platform.

"One of the biggest challenges is to have the marketplace understand you're not just a custody and clearing provider," said Tom McCarthy, head of platform technology at Fidelity Institutional. "It's a mindset shift that our clients are getting used to, and they are happy that technology is increasingly coming as an integrated package, and that we are managing it for them."

Custodians are bringing advisers technology that makes their workflow more efficient, boosts their ability to collaborate digitally with clients, offers robo-advice and delivers insight into an adviser's operations and management.

(More: How technology will amplify the humanity in financial advice)

Looking into next year, large custodians promise to put artificial intelligence and proactive analytics to work to further enhance the planning and advice arena.

"In the fintech space, there are so many third-party firms that are offering unique capabilities that advisers are using, but a lot of those capabilities need to have some semblance of integration with custodians," said Ed Obuchowski, senior vice president for technology solutions at Schwab Advisor Services.

Buying integrated fintech through a custodian also gives advisers confidence that the vendor isn't going to go out of business.

Large custodians "have deep pockets" and advisers can be relatively sure they aren't going to run out of money halfway through development, said David Edwards, founder of Heron Financial Group.

Since late last year, TD Ameritrade Institutional, based in Omaha, Neb., and which custodies client assets of 5,000 firms, has been rolling out its Veo One platform that has been under development for five years. It's designed to give advisers access to all their integrated applications from one platform and login.

Practically speaking, it generates a snapshot of a client's financial life with a single request that mines results from financial planning, portfolio management, client relationship management and other software, and streamlines the adviser's business, said Jon Patullo, TD Ameritrade Institutional's managing director of technology products and solutions.

Nearly two-dozen tech firms have deep integrations on the system, and more will be added in the coming months, said Mr. Patullo. The Veo One system includes multiple robos advisers can choose from to make part of their own online advice offering for clients.

About one-third of advisory firms plan to implement a robo-advice tool as part of their businesses in the next six to 12 months, according to the 2017 InvestmentNews Adviser Technology study.

Mr. Patullo said many advisers say they plan to offer a robo client experience for some or all investors, but many are stymied as to how to make the tools part of their businesses — and they're taking their time to figure it out.

"Advisers have been slower to adopt online advice solutions than you'd think," he said. "Many are concluding some type of combined human and digital solution is best."


Next year, TDAI also plans to deliver an improved client portal for advisers that will include virtual agents, or chatbots.

In June, BNY Mellon's Pershing announced a plan to redesign the firm's adviser workstation to give advisers access to different technology components they can plug into their business processes.

The idea is that advisory firms pick adaptive components that create the experience for advisers and clients they're looking for, said Ram Nagappan, chief information officer at Pershing.

Jersey City, N.J.-based Pershing is also partnering with IBM Watson Client Insights for Wealth Management to develop predictive analytics tools, such as those that can highlight client behavior that suggests the investor may be preparing to find a new adviser.

Next year, the custodian, with whom about 1,400 firms entrust custody assets, expects to introduce a document-attached chatbot that will explain items in the document to the recipient.

Envision sending a client a financial progress report that incorporates video animation to explain the details. Future innovations will also include chatbots that interact more conversationally with clients, allowing them to ask follow-up questions, Mr. Nagappan said.

Schwab Advisor Services, based in San Francisco, is focused on making adviser processes more efficient, eliminating steps that leave a paper trail.

It recently rolled out an automated check-deposit tool for advisers to send client checks into the firm securely "and pretty much immediately," Mr. Obuchowski said.


It also introduced new electronic authorization software for client wire requests. The process still begins with a client call to the adviser to ask for a wire, but from there the adviser fills out an online form that he or she sends to Schwab. The custodian then sends a text or email to the client, who authenticates it through the mobile app or the client portal.

"In 15 minutes, that wire has been transferred securely," Mr. Obuchowski said. The old process of faxing usually took four-to-five hours, he said.

On the robo-adviser front, about 800 advisers have signed up to use Schwab's Institutional Intelligent Portfolios, which it rolled out two years ago. Future innovations to the digital platform will include adding mutual funds to its portfolio options and providing more adviser flexibility.

About 7,000 RIAs custody assets with Schwab.

(More: Charles Schwab to combine robo-advice and financial advisers in new hybrid model)

At Fidelity Clearing & Custody Solutions, which provides custody and/or clearing services to about 3,850 clients, the purchase of eMoney Advisor two years ago was a pivotal move.

eMoney, a popular financial planning tool which is still available to firms that don't custody assets with Fidelity, is being deeply integrated within Fidelity to create an effective way for advisers to collaborate digitally with clients.

More than 1,000 advisory firms that are clients of both eMoney and Fidelity are taking advantage of integrations for both the adviser and the investor, who can now view his or her entire financial picture and track progress toward goals via the eMoney client portal.

More integrations are being introduced this year and next to allow advisers to move easily from a client's eMoney plan to Fidelity to perform actions such as opening and funding accounts, rebalancing portfolios, moving money and more, Mr. McCarthy said.

Fidelity's also building a robo-adviser for RIAs known as Automated Managed Platform, or AMP. It's in the pilot stage and will be made available later this year.

Looking forward to 2018, the Boston-based firm will unroll advanced practice management tools for advisers to provide analytic data on growth opportunities and other key metrics.

It also expects to finish development on an additional workflow effort by January 2018: a series of widgets to guide advisers through different processes, such as onboarding a client and preparing for client meetings, Mr. McCarthy said.


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 30


Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video


3 themes shaping your business now

If there are three overriding themes for advisers right now its succession planning, acquisition and hiring millennials. Financial adviser James Loftin discusses how his firm is tackling all three.

Video Spotlight

The Search for Income

Sponsored by PGIM Investments

Recommended Video

Path to growth

Latest news & opinion

T. Rowe Price steps up its game to serve financial advisers

The Baltimore-based mutual fund giant is more aggressively targeting financial advisers with a beefed-up wholesale crew and placement on custodial platforms.

The most important tax changes for 2018

The Internal Revenue Service issued inflation adjustments to more than 50 tax provisions for 2018.

Shift to Roth 401(k)s 'highly likely' part of tax reform: former Treasury official Mark Iwry

Mandated contributions to Roth accounts would likely only be partial, as opposed to having a full repeal of pre-tax accounts.

E*Trade acquiring custodian Trust Company of America

Discount broker buying second-tier custodian for $275 million.

Another thousand Dow points higher, and investors yawn

Market milestones keep falling like dominoes, with 51 records broken so far this year.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print