What Are the Typical RIA Custodian Fees?

RIA custodian fees range from $0 to 200 basis points (2%) a year, depending on the provider and how it prices its services. Schwab, Altruist and Interactive Brokers advertise $0 baseline custody fees, while others charge asset-based, ticket-based or flat fees. Betterment, for example, charges 0.20% for firms with under $10 million in assets. Because “free” custody can come with other charges, compare total cost, minimum AUM requirements and services before you pick a custodian.

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Typical RIA Custodian Fees

There is no single industry average fee, as RIA custodians approach costs differently. Here’s a brief comparison guide to illustrate what you might pay with popular providers, along with information about minimum AUM requirements:

Custodian	Fee Structure	Minimum AUM
Schwab	$0 baseline direct custody fee	$0
Altruist	$0 baseline direct custody fee	$0
Interactive Brokers	$0 custody or ticket fees; $0 technology, software, platform, or reporting fees	$0
Betterment	0.20% for firms with less than $10 million in assets; 0.12% for firms with $10–$100 million in assets; Negotiated rate for firms with more than $100 million AUM	$0
Fidelity	$0 baseline direct custody fee	$100 million
BNY Mellon Pershing	Up to 200 bps	$100 million
Raymond James	Request current RIA custody and platform pricing directly from Raymond James	$100 million for new RIAs; $30 million for existing RIAs

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How Are RIA Custodian Fees Calculated?

RIA custodians can choose from multiple pricing models; some use a single model while others use a combination of fee structures. Here are some common ways custodian fees may be calculated:

Asset-based pricing: The asset-based model calculates fees using the RIA’s assets under management (AUM). Fees are calculated as basis points; the amount you pay to the custodian can fluctuate in tandem with increases or decreases in your AUM.
Ticket-based pricing: With a ticket-based system, the custodian charges a fee per trade. The price is fixed but the cost to the RIA increases as trading volume increases.

Asset-based pricing is typically expressed in basis points. So, a fee of 200 bps annually translates to 2%. Some RIA custodians may use a tiered approach to set asset-based fees. With tiered pricing, the fee generally decreases as your assets under management climb.

Aside from these two models, RIA custodians may charge a flat fee for access to their services and platform. You might also pay 12b-1 fees and fees associated with proprietary funds. While not technically a fee, custodians can charge interest on margin loans or lines of credit extended to RIAs.

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How to Minimize RIA Custodian Fees

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The simplest way to minimize what you pay for custody services is to choose an RIA custodian that offers clear, transparent pricing. A custodian that advertises $0 baseline custody fees, for instance, may tack on other charges. Reviewing fee structures carefully and asking questions can help you avoid hidden or surprise fees, and better understand what you’re getting in exchange for any fees you pay.

Here are some common questions to ask that can help you find a cost-friendly custodian:

Do you use asset-based or ticket-based pricing or a combination of the two?
If you offer both models, do you work with RIAs to help them determine which approach is most suitable for their firm?
How do you calculate asset-based pricing? For instance, do you use the average daily AUM monthly or over another period to determine what RIAs pay?
Are the fees you charge the same for all RIAs you provide custody services for, or do you offer tiered pricing?
Is any aspect of your pricing structure open to negotiation, or do you offer any type of discount?
How do trading fees compare for different types of assets?
Do you charge a fee to access your platform or other technology tools? If so, is the fee one-time only or a recurring charge?
Is there a required minimum AUM?
How often do you update your pricing model? And when will I be notified of pricing changes?
If I decide to end our contract early and transfer to another custodian, will I pay a penalty fee?
Is there a minimum AUM that RIAs need to have to work with you?

Careful vetting can help you find an RIA custodian that aligns with your needs and what you’re willing to invest in these services. If you meet with a custodian to discuss a service contract, don’t hesitate to ask for clarification on how the fees work if there’s something you don’t understand.

You may also want to talk to other advisors in your network to get their opinion on which RIA custodians are the best when it comes to the fees and the overall level of services provided. What you learn could help you make a more informed decision about which custodian you want to work with.

Frequently Asked Questions (FAQs)

When Is an RIA Custodian Required?

An RIA custodian is required when an advisory firm is registered with the SEC and/or state regulators. Compliance rules specify that RIAs must hold client assets with a qualified custodian, which may be a bank, broker-dealer, trust company, or other financial institution that’s approved by the SEC. This requirement is intended to protect client assets from mismanagement or fraud.

Who Pays RIA Custodian Fees?

While the custodian may bill fees to the RIA, it’s the RIA’s clients who typically pay them. Custodial fees, along with other charges, are built into the fees the advisor charges their clients. As an advisor, you’re required to disclose the fees your clients will pay in your Form ADV.

How Do RIA Custodians Make Money?

RIA custodians make money by charging fees, which can be based on assets under management or transaction activity. They may also charge 12b-1 mutual fund fees or assess interest on margin loans or lines of credit. While some RIA custodians charge $0 fees for custody services, they may charge other fees on the back end so they’re not truly free.

Bottom Line

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Transparency matters when comparing RIA custodian fees, as does being aware of what you pay. If you feel your custodian is charging more than you’re comfortable with, it may be time to look around for a new place to hold client assets.

Tips for Growing Your Advisory Business

If you’re thinking of going independent or you want to grow an existing firm, marketing is an important part of the plan. The right marketing strategy can help you connect with your ideal clients and grab their interest so they’re compelled to learn more about you. If you’re having trouble gaining a foothold or want to spend less time promoting your business, you might consider partnering with an advisor marketing platform. SmartAsset AMP uses a holistic approach to help growth-focused RIAs generate leads. Schedule a demo to learn how you can leverage it to build your book of business.
One of the most important considerations when choosing an RIA custodian is compliance. Any institution you work with should closely adhere to regulatory guidelines set by the SEC and/or state regulators. If you’re establishing a new RIA, you’ll need to designate yourself or someone else to act as chief compliance officer (CCO). If you don’t want to take on this role yourself or have no employees to turn to, you may consider outsourcing CCO duties.