For many years, the RIA custodial space has been dominated by three big firms: Charles Schwab, Fidelity, and BNY Pershing (plus a fourth, TDAmeritrade, until it was absorbed by Schwab in 2020). But there are many other custodians out there: For instance, large broker-dealers like LPL and Raymond James offer RIA custody to their dual-registered representatives and to independent RIAs; SEI and Interactive Brokers grew custodial branches out of their respective core businesses of private fund administration and market making in options and futures markets; and a few including TradePMR, SSG, and Altruist started out as RIA custody providers overlaying other existing custody/clearing platforms like First Clearing, Pershing, and Apex, respectively (although that list has shrunk down to solely Altruist after SSG was acquired by Altruist in 2023 and TradePMR was acquired by Robinhood in 2024).
There's been little movement in this custodial picture over the years, as the Big 3 have maintained their market position through their sheer scale and name-brand power. Even though LPL and Raymond James are themselves attached to sizeable, publicly traded companies, their RIA custody arms have limited brand recognition outside of the representatives affiliated with their broker-dealers or OSJs (or the relative handful who have dropped their broker-dealer affiliation but kept the RIA custody relationship to avoid the hassle of transitioning and repapering all of their clients). And the high cost of switching custodians has meant that Altruist has had to build its business mainly by targeting newer, smaller firms without an existing (and typically deeply entrenched) custody relationship.
Altruist's relative newcomer status makes for a long road to catch up with the more established players. But the advantage that Altruist does have over its competition is that it is built on newer infrastructure that has enabled it to rapidly innovate and compete on the strength of its technology. The splashiest feature early on was Altruist's portfolio management and performance reporting system which, for advisors who custodied at Altruist, eliminated the need to spend upwards of $10,000 per year per advisor on a third party solution. But Altruist's technology also just made for a better core custodial experience as well (scoring strongly across all its core categories in our Kitces AdvisorTech Research), e.g., allowing for rapid electronic processing of new account applications at a time when many other custodians required wet signatures, faxes, and multiple day time periods to open client accounts. And while Altruist didn't have the size and scale of Schwab or Fidelity, or even LPL or Raymond James, it has been able to raise massive amounts of venture capital from investors who saw the opportunity to disrupt the custodial space through technological superiority.
We seem to have reached a turning point in Altruist's journey when the news hit in mid-February that Altruist was launching a new tax planning add-on to its Hazel AI notetaking tool – and the markets reacted with a massive selloff in the shares of publicly traded RIA custodians. From the morning of February 10 (when the launch was announced) until the time of this writing, Raymond James's shares are down over 10%, Schwab's are down over 12%, and LPL's are down over 22%.
The news and its aftermath generated a fair bit of confusion about what connected the launch of an AI tax planning tool to the decline in RIA custody stocks. And the picture got even muddier after a media narrative emerged that the selloff was caused by investors' concerns that AI-powered tax planning software would somehow disrupt the financial advice model that those companies rely on for their custodial business – even though the Hazel AI tool is made for financial advisors, by a company whose revenue is almost entirely dependent on RIA custody. Clearly Altruist wasn't putting out a tool that threatened to disrupt its own source of revenue!?
But while there's perhaps some truth to the AI disruption narrative from a market behavior perspective (as there are no doubt legions of traders ready to push the sell button whenever the words "AI" and "disruption" appear together), the fundamental story – and the real threat to the established RIA custodians – is more simply about Altruist's emergence as a major player in the custody space. Altruist has been steadily gaining momentum and market share over the years as it has built out its tech capabilities and rolled out features such as automated tax-loss harvesting, cash management, and the Hazel AI notetaker, but it seemingly hasn't really been seen as a legitimate competitor among its own peers (as evidenced by the fact that the other custodians haven't felt pressured to innovate back and boost their own technology). And while it's still a bit of a mystery as to why this particular product launch served as the tipping point – Altruist itself didn't even seem to view its tax planning add-on as an industry-disrupting killer app until after the media narrative took hold – what's certain now is that the likes of Schwab, LPL, and Raymond James (whose executives' stock option compensation has surely taken a big hit in the last month) aren't likely to ignore Altruist as a competitor any more.
The question going forward, then, is how the established custodians will react now that it's clear that Altruist's pace of innovation and emerging technology advantage is costing them their market share (with markets implicitly projecting that Altruist will capture more market share in the years to come, thus triggering a sell-off in the stock price of the incumbents). Existing custodians could increase their own investments into technology to compete against the Altruist threat, although it's a risky proposition to pour time and money into technology when they're already behind in many areas due to legacy technology debt – by the time they've caught up to where Altruist is now, Altruist might have already taken another leap forward, leaving the competition playing perpetual catch-up.
Alternatively, an established custodian could opt to try and buy Altruist along with its technology and existing base of RIA users and clients. It's worth pointing out that LPL, with its relatively clean custody channel that isn't entangled with other parts of their business (as Schwab's and Fidelity's architecture are with their massive retail arms, Raymond James' custody and clearing serves multiple parts of their financial services businesses), could more or less plug in Altruist to replace its existing ClientWorks platform, with the resulting combination of Altruist's technology and LPL's scale and distribution capability through its network of broker-dealer affiliates increasingly pivoting to advisory, having the potential to compete with the likes of Schwab and Fidelity at the top of the custodial market.
The key point is that the connection between Altruist, Hazel, and the custodial stock selloff isn't about one new industry-disrupting AI breakthrough, and certainly not the threat of $50/month AI-driven SaaS software competing directly with RIA custodian economics. It's about the market catching up to what many advisors and observers who closely follow the industry have already known for a while, which is that Altruist's technological capability and rapid innovation (in their core custodial functions as well as the other features bundled in or added on to custody) are genuinely making them a true threat to join and compete with the "Big 3" custodians. And now that the market has realized it, we can expect to see a new round of innovation, consolidation, and overall disruption in the custodial space at large.
This article first appeared on the Nerd’s Eye View at Kitces.com at https://kitc.es/advisortech-march2026, and has been reprinted here with permission.
Ben Henry-Moreland
Ben Henry-Moreland is a Senior Financial Planning Nerd at Kitces.com, where he specializes in writing and speaking on financial planning topics including tax, practice management, and technology. He also co-authors the monthly Kitces #AdvisorTech column. Drawing from his experience as a financial planner and a solo advisory firm owner, Ben is passionate about fulfilling the site’s mission of making financial advicers better and more successful.
Michael Kitces
Michael Kitces is Head of Planning Strategy at Focus Partners Wealth, which provides an evidence-based approach to private wealth management for near- and current retirees, and Focus Partners Advisor Solutions, a turnkey wealth management services provider supporting thousands of independent financial advisors through the scaling phase of growth.
In addition, he is a co-founder of the XY Planning Network, AdvicePay, fpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.
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