At its core, the function of an RIA custodial platform is fairly straightforward. The custodian needs to hold client assets safely, act as a broker-dealer to facilitate trades, and execute inflows and outflows from client accounts such as money movement requests and advisory fee deductions. Every major custodian can reliably handle these baseline tasks, and there's very little differentiation between them on costs (at least based on the few fees that advisors can see and evaluate). Which means that custodians need other some way to differentiate themselves.
Fortunately, there are a number of different levers that custodians can pull to differentiate themselves from the rest. They could aim to offer the most responsive and hands-on customer service (as Shareholder Services Group [SSG] was long known for). They could build the best technology to overlay their custodial platform so advisors don't have to spend money for third party software to do the same thing (e.g., how Schwab includes the popular iRebal rebalancing technology as a "free" add-on for advisors on its platform, and how Altruist bundles much of the portfolio management software that advisors pay tens of thousands of dollars for elsewhere for "free" on its own platform). Or custodians could offer to solve advisors' business growth needs by referring prospective clients via their retail arms.
The needle has swung back and forth between these methods of differentiation over time. At one point, service took precedence: Which custodian could provide the best trade execution or be the most likely to have someone knowledgeable pick up the phone? However, as investment management became increasingly digital in the 1990s and 2000s (drastically reducing the need to call the custodial broker-dealer to execute trades in the first place), there became more of an emphasis on the technology that each custodian had to offer. Over the years, Fidelity launched its Wealthscape platform, TDAmeritrade introduced Veo One, and Schwab rolled out Schwab Advisor Center, with the intention of either providing an all-in-one technology suite in addition to baseline custodial capabilities (as with Wealthscape) or an open architecture platform that makes it easy for an advisor's own third party technology to plug into (as with Veo and now Schwab's Advisor Services).
But in more recent years, the emphasis has shifted away from technology and towards offering RIAs growth through client referrals to attract their custodial business. The success of the Schwab Advisor Network (which has generated so much demand that Schwab has repeatedly had to filter down the number of participants, and last year increased its program fees for RIAs on its network and raised the minimum asset requirement for clients referred through the program) and Fidelity's Wealth Advisor Solutions has spawned other custodians to roll out their own referral programs, from Robinhood announcing a new referral program shortly after its acquisition of TradePMR to Goldman Sachs launching a referral program in late 2025 to Betterment reportedly planning to debut its own referral program sometime in 2026.
And now this month's news that BNY's Pershing will be debuting its own client referral program for RIAs as yet another example of how the biggest RIA custodians are going all-in on offering business growth – rather than technology or services and support – to differentiate their offerings and attract new RIA business.
At a time where benchmarking studies show that RIAs only manage around 5% client growth per year, it makes sense that custodians would offer up referrals to entice RIAs to their platforms. And there are plenty of growth-hungry firms with the capital to pay the custodians' sizeable referral program fees, particularly in the form of PE-funded mega-RIAs like Mercer, Creative Planning, WEG, and numerous others – indeed, buying leads through custodial referrals is a core part of many of these firms' continued growth strategy.
For context, here are the program fees of some of the major custodial referral programs as of their most recent ADV filings:
In that sense, then, custodians are just following the demands of the market – particularly the PE-funded mega-RIAs that now reportedly serve nearly 25% of all RIA assets under management, who are scaled-up and capitalized enough to absorb the above fees and still serve clients profitably. Though at the same time, because there are only so many referrals to make – and referrers generally only want to refer to firms that have strong business development teams to ensure that the referrals actually close – in practice custodial referrals only help a narrow subset of typically-very-large RIAs; accordingly, the latest Kitces Research on Advisor Marketing found that custodial referrals were only a lead source for about 1% of advisors overall.
But it's also worth noting that even though client referrals are all the rage among custodians today, they still aren't the only differentiator. One case point is Altruist (now the only one of the top four custodial platforms without a referral program), which has leaned farther into its technological capabilities than its competitors by offering digital onboarding, automated rebalancing, performance reporting, and billing tools included for free for advisors who custody on the platform, and has perhaps not coincidentally become the fastest growing custodian in the market as measured by new firms joining. And in contrast to the custodians that target (only) the biggest mega-RIAs through their referral programs, much of Altruist's growth has come from small- and mid-size RIAs.
Which suggests that outside of the relative handful of giant PE-funded firms for whom custodial referrals are king, many RIA firms really do still see technology as a key differentiator between custodial platforms, and will pick the custodian investing the most aggressively into their technology, regardless of any referral programs it does or doesn't offer (because most RIAs aren't going to get a spot in those referral programs anyway, while all of Altruist's users benefit from their stellar ratings on performance reporting and portfolio management as shown in the latest Kitces Research on Advisor Technology).
To be fair, in addition to its new referral program, Pershing has also revamped its technology side with its Wove platform, which combines multi-custodial portfolio management tools with native versions of Salesforce's CRM and Conquest's financial planning software. However, Pershing's traditional association with BNY's banking and UHNW wealth management services don't make it as much of a natural fit for the types of small- and mid-sized RIAs that have flocked to Altruist – which could be part of the reason why it's now joining the rush to serve the mega-RIAs already lining up for Schwab's and Fidelity's referral programs.
The key point is that when all of the custodians have the basics of asset custody and trade execution covered, and when very few custodians charge an explicit fee or trade commissions for advisors to compare (since they typically make their revenue through back-end sources like cash sweeps and payment for order flow), there really isn't that much to differentiate them from one another. And so the choice then comes down to which platform can provide the most value beyond custody. As the last few years of trends in the custodial business have shown, for the majority of small- and mid-sized firms looking to start up or change custodians, technological capability can still serve as the main differentiator. But for the handful of big fish in the RIA pond who are willing to buy growth at all costs, it's apparently client referrals that matter most – and hence Schwab and Fidelity, and all the others now following in their wake, are now rushing in to fill the demand.
This article first appeared on the Nerd’s Eye View at Kitces.com at https://kitc.es/advisortech-feb2026, 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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