Altruist launches a corporate RIA to ease breakaway advisors' path to independence (and to its custody platform)

There's a fundamental difference between the economics of technology or service providers that support RIAs, and those of an RIA custodian. For most tech and service businesses, the fee that the RIA pays is all of the revenue that the provider receives – there tend not to be additional ways to monetize the advisor (or their clients), and so the profitability and scale of the business is all about (1) how high of a fee they can charge, which mainly reflects the centrality of the tech or service to the advisor's own revenue center, and (2) how efficiently they can deliver their service or scale their technology product (so they can squeeze the most margin out of the fees they receive).

But custodians largely rose up under a different model, where they aren't paid directly by the advisors using them (i.e., it is not common for RIA custodians to charge an outright fee for custody), but instead find more indirect ways to monetize the advisors' (and ultimately, their clients') assets on their platforms: Most broadly through net interest on cash sweeps, but also through other channels like payment for order flow, mutual fund revenue sharing and distribution fees, fully paid securities lending, margin interest, and options trading fees.

All these layers of fees that can add up to 10-20bps or more (and frankly, the lack of transparency that makes it difficult for advisors and their clients to really know what they're paying or to compare one custodian to another) can make being a custodian much more lucrative than being 'just' a technology or service offering. Imagine an RIA with $100M of AUM and charging an average of 1% on those assets. With Kitces Research on Advisor Technology finding that most advisors spend 2%-5% of revenue on their technology, the $100M RIA's entire technology spend would equate to $20k-$50k per year. Whereas a custodian like Schwab that “just” generates 10bps of revenue from the advisory assets on their platform would earn $100k off of the client assets of a $100M RIA (and could earn $200k+ if the custodian's revenue yield gets as high as the 20bps they have earned historically).

This economic disparity between advisor custody and advisor technology/services is why it made sense for Altruist, when it launched as an RIA custodian in 2018, to create its own portfolio management technology and simply give it away to advisors on its platform. From the advisor perspective, being able to get rebalancing or performance reporting software for 'free' from their custodian represents meaningful cost savings compared to spending $10k-$20k per advisor to buy a third party 'all-in-one' portfolio management system like Orion or Black Diamond. While from Altruist's perspective, the revenue generated by client assets from advisors attracted to the platform by its 'free' technology makes up for the cost of offering it. The traditional economics of trying to get the most out of a single subscription payment for advisor technology are flipped on their head when the software can effectively operate as a loss leader to draw advisors into the more lucrative custodial relationship, such that the custodian can afford to offer most of the technology for free.

All of which is relevant when it comes to the news last month that Altruist plans to launch its own corporate RIA. As is the case in general for corporate RIAs, Altruist will provide the business structure of a centralized, SEC-registered RIA and some level of compliance and technology support (and presumably custody through Altruist's platform), while individual advisors who choose to affiliate with the corporate RIA entity as IARs will work as 1099 contractors. Each individual advisor's clients will engage with and be billed by Altruist as the corporate RIA, and Altruist will pay out a (as yet unannounced) percentage of that revenue back to the advisor.

The main difference between Altruist and most other corporate RIAs is that Altruist provides not just the technology and compliance support of a corporate RIA, but again operates first and foremost as the custodian for client assets. Which has two main implications: First, similar to its software offerings, Altruist doesn't necessarily need to generate a lot of (or any) profit from its corporate RIA business for it to make economic sense to the company. It only needs to bring enough client assets onto its platform to make up for the cost of the services it provides (namely the compliance support, since its technology is already built into its custodial offering) as a 'marketing expense' to drive revenue growth on custodial assets. Which means that Altruist will likely be able to offer higher payouts than similar corporate RIAs, whose sole source of revenue is the percentage of client fees that they keep after advisor payouts. Which means that, just like some advisors were likely attracted to Altruist because its 'free' software allowed them to avoid paying $10k-$20k for third party portfolio management technology, some other advisors could also be attracted if it allows them to earn a 5%-10% higher payout than a different corporate RIA offering the same level of service. (Notably, however, Altruist hasn't yet disclosed what its payout grid will look like, so it isn't certain yet that they actually will offer meaningfully higher payouts than other corporate RIAs, just that they could potentially do so while still profiting as a whole from the offering.)

The second takeaway is that Altruist could be uniquely appealing as a corporate RIA that doesn't push its advisors to stay with the corporate RIA… as ultimately, if the advisor converts to their own standalone RIA, then Altruist can continue to be financially successful in the relationship because the assets would ostensibly stay with Altruist Which will have made it worth the while for Altruist even if they don't see much or any profit from the corporate RIA relationship itself. This is distinct from a traditional corporate RIA, whose revenue is dependent on its affiliates and therefore has little incentive to make it easy for advisors to 'de-affiliate' (e.g., to move to a different corporate RIA or go fully independent). In other words, Altruist's ability to bundle its corporate RIA on top of custody, with a convenient pathway to de-affiliate, may make it a more attractive landing spot for breakaway broker-dealers who still want some centralized technology and compliance support as they make the switch to the RIA channel, but who aren't necessarily planning on staying affiliated to a corporate RIA forever… and Altruist gets the benefits of custodial asset growth either way.

Going forward, though, the question will be how well Altruist can make the shift from being a custodian and technology provider – which is primarily about sophisticated technology features and ease of use across its custodial and tech platforms – to the more service-oriented offering of a corporate RIA. Because even if Altruist's version of a corporate RIA is relatively “thin” to support a higher payout level – e.g., only offering the minimal required support and oversight on compliance, and allowing/requiring advisors to still self-service their own trades (using Altruist's portfolio management technology), while individual advisors come up with their own marketing, client service models, and operational processes – it will still need to be responsive enough to advisors' compliance and technology questions that the advisors actually feel supported. And if it turns out that the advisors who affiliate with Altruist also want support in other areas – from marketing to operations to other, non-portfolio-management areas of technology like financial planning or CRM software – Altruist may be faced with deciding how much it's worth expanding their corporate RIA service offerings (and the resource demands that entails) and potentially drifting away from their bread-and-butter focus on custody and technology.

With the complexity of compliance-related demands on RIAs continuing to grow (especially for RIAs who would otherwise be required to register at the state level), there's increasing appeal for the corporate RIA model, with a single, SEC-registered entity handling compliance while individual advisor affiliates are allowed to run their operations and client service models mostly autonomously. And while Altruist is the first major RIA custodian to launch a corporate RIA, it's ultimately an extension of the same approach Altruist took towards technology – namely, that in a world where the actual costs of custody are obscure enough that most RIAs aren't easily able to compare one custodian to another, but assets on platform are still lucrative and drive revenue growth, the custodian who offers the most tangible value outside of custody (e.g., with free or heavily discounted technology and/or services) will have an advantage in attracting new advisors' (and their clients') assets.

This article first appeared on the Nerd’s Eye View at Kitces.com at https://kitc.es/advisortech-june2026, and has been reprinted here with permission.