What Are the Typical RIA Custodian Fees?

The Securities and Exchange Commission (SEC) requires registered investment advisors (RIAs) to have a qualified custodian hold client assets to ensure that they’re properly safeguarded. When comparing options, it’s helpful to consider RIA custodian fees and what you’ll pay for their services. Higher fees don’t always equate to more or better services and the best RIA custodians are fully transparent in explaining their pricing models.

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Typical RIA Custodian Fees

Pinning down an average RIA custodian fee is difficult as many firms don’t make their pricing models public. However, we were able to gain insight into fee structures for some of the top RIA custodians.

Schwab. The Schwab Pledge promises “no AUM minimums and no custody fees” for independent RIAs. Approximately 15,000 independent advisors rely on Schwab for custodial services.
Altruist. Like Schwab, Altruist charges no RIA custodian fees and has no minimum AUM required to use the platform. Altruist operates on the principle that fees are not and will never be the company’s primary source of revenue.
Interactive Brokers. Interactive Brokers charges no custody fees or ticket charges; there are no technology, software, platform, or reporting fees either. Advisors aren’t required to have a minimum AUM to use IB custody services.
Axos Advisor Services. Axos charges trading, special asset, and administrative fees. Broker-assisted trades are $45 per transaction while the custody fee for alternative assets is $62.50 per position, per quarter.
SEI Private Trust Company. SEI keeps things simple with a one-page custody fee schedule. There are no mutual fund surcharges, no payments for order flow, and no paper statement fees.

Some of the largest RIA custodians, including Fidelity, BNY Mellon Pershing, and Raymond James, have minimum fee and AUM requirements. Pershing, for instance, has a $100 AUM minimum, which is a step down from the previous threshold of $250 million.

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.

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.

A typical range for asset-based pricing is 10 to 15 basis points, which translates to a fee of 0.10% to 0.15%. However, some RIA custodians may set the fee higher or lower or use a tiered approach. With tiered pricing, the fee 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.

How to Minimize RIA Custodian Fees

An advisor reviewing financial documents for a client.

The simplest way to minimize what you pay for custody services is to choose the right RIA custodian to work with. That requires some research to understand what individual custodians charge and determine whether there are any “hidden” fees to watch out for.

Here 11 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 to transfer to another custodian will I pay a penalty fee?
Is there a preferred AUM 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 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)

What Is an RIA Custodian?

An RIA custodian is a financial entity that holds client assets on behalf of registered investment advisors. Compliance rules require RIAs to work with a qualified custodian, which may be a bank, broker-dealer, trust company, or other financial institution that’s approved by the SEC.

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

A financial advisor reading a letter from a client.

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

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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.