RIA with $3.1B leaving Schwab’s custodian for Axos

CG Advisor also has a relationship with LPL's custodian and is looking to partner with a third or fourth custodian.

As Charles Schwab nears the completion of its merger with TD Ameritrade, a large registered investment advisor is instead moving to another custodian.

CG Advisor Network, a firm that manages $3.1 billion across 70 advisors, announced that it would leave Schwab Advisor Services in favor of Axos Advisor Services, formerly known as Trust Co. of America.

CGAN has used TD Ameritrade since the late 1990s and came over to Schwab after the reported $22 billion acquisition closed in 2020. However, Schwab’s culture and strategy doesn’t align with what CGAN was looking for in a partner, said CEO Tony Mazzali.

Though he didn’t cite specific issues with Schwab’s custodian, Mazzali said Axos provided more clarity on how it could support CGAN’s growth as an independent firm.

“They were asking us questions for how they could become better partners for us,” he said. “How they could build our brand to the clients, not build their brand to the client.”

Schwab declined to comment.

It helps that Mazzali has a relationship with several former TD execs who are now at Axos. For example, Mike Watson, Axos’s head of RIA custody, spent more than 20 years at TD over his career while Eugene “Gino” DeRango, a senior vice president and national sales manager at Axos, spent nearly 17 years with TD.

There won’t be a “complete exodus” away from Schwab, but Mazzali does expect many advisors will utilize Axos technology to move accounts over.

In April, CGAN announced that LPL would be its broker-dealer and primary custodian. Axos will serve as CGAN’s custodian for high net worth clients to start, and the firm will expand the relationship over time, Mazzali said.

CGAN will eventually have three or four custodians that advisors can choose from. In particular, CGAN is looking for a custodian that can help the firm serve mass affluent clients at scale without forcing service to be entirely digital, Mazzali said.

“We need to find those partners that are willing to engage in how we do that without formally digitizing the whole experience,” he said. “Clients are still looking for that human contact, that human advice, that human relationship.”

Over Labor Day weekend, Schwab will migrate roughly 7,500 advisors and their clients accounts from TD as part of one of the largest data migrations in history. Many smaller custodians are hoping the event creates enough disruption to encourage advisors to consider alternatives.

More independent firms are going to start looking outside the traditional big three custodians — Schwab, Fidelity Institutional and BNY Mellon Pershing — in response to a rapidly evolving industry, Mazzali said.

“The next three to five years are going to be really interesting to see what develops,” Mazzali said. “There’s a lot of angst about what I would call this gap in this industry.”