Assessing Custodians: My Way Along the Road
It seems as though there’s a lot of interest in custodians, so I thought I’d write a little more about my decision to join Trade PMR. First, I’d like to say that my former custodian, Fidelity, is a fine company. I have nothing bad to say about Fidelity. Even though I was leaving, its service never faltered. Whenever I’ve spoken to them on the phone, they are extremely courteous and helpful. Again, my decision to change was solely due to their corporate decision to raise their minimum AUM requirement. In general, they did this because they determined that advisors under this level of assets were unprofitable. To further explain, it was many of these advisors who called in by phone instead of utilizing Fidelity’s technology to get service. The result was that it took more man hours which increased expenses. In any event, that’s water under the bridge now. Let’s move on to TradePMR, my new custodian.
What made the difference in my decision? I like a great deal about what TradePMR offers. Its technology is excellent on a number of fronts. Seems the firm has an ex-Microsoft whiz at the helm of its development, and I have been very impressed with his ability.
TradePMR just launched a new platform called E-Custody. It is an integrated Web-based system for advisors. Like any new system, though, there were a few small issues, such as pop-up windows that were too small. However, whenever I found a bug of some sort, TradePMR corrected it immediately.
The firm’s service people are very responsive. I could go on and on, but suffice it to say that TradePMR is clearly interested in what its advisors have to say. Unlike many large firms, this company listens to its advisors and that’s one trait that makes a good company. It’s very refreshing.
I also looked at TD Ameritrade, Scottrade, and Shareholders Service Group. TD was a bit more impersonal and had an AUM minimum. Scottrade had a much smaller number of mutual funds available, though its transaction fees were the lowest. Shareholders Service Group ran a close second to TradePMR (at least in my view). I have the utmost respect for the people I spoke with at Shareholders. They were very accommodating, but in the end, TradePMR was my choice. Neither Scottrade, Shareholders Service Group, nor TradePMR had an AUM minimum.
If you are looking for a new custodian, I suggest you speak to several to find the one best suited to your business. If you need additional information, just ask. I would be glad to help.
Did you inquire as to whether or not the custodian maintained cost basis statement information? Going through the current tax season, as well as past ones, I found having an annual gain/loss statement invaluable to my clients. How is the quality of the statements from TradePMR?
Hi Douglas,
Yes on the cost basis question. Their statements are good. Gain/loss is included and I have access to this at anytime.
Mike
Mike,
In the current market environment with Madoff and Stanford, how do you go about making your clients comfortable with TradePMR as your custodian. I know that the clients are doing business with you…but for your prospects that have never heard of TradePMR what do you do to explain the TradePMR/Sterne Agee relationship for them to feel comfortable? Do you provide any custodial literature to them?
Regards,
Lance
Lance,
This is new for me and I have given it some thought. I remember when I worked for Merrill, I thought, “How could anyone make it unless they worked for a name-brand firm?” Now I think just the opposite!
TradePMR clears through Sterne Agee and Leach. They are one of the oldest and largest privately held firms in the U.S. TradePMR is simply the man-in-the-middle. Their assets are held, and covered by SIPC (according to SIPC guidelines), like every other firm. They also have additional insurance of 24.5 million, for a total coverage of 25 million. All TradePMR does (not that it is insignificant) is provide the platform for its advisors to manage their business (including all aspects). That’s what I say when it comes up.
Hope this helps,
Mike
Hi Mike,
Thanks for posting this information – it is very helpful! How do you deal with explaining the transaction fees for Trade PMR to clients? Unless I’m mistaken, they are almost 3x Scottrade and some others? I was just curious how you handle this.
Thanks,
Mike
Hi Mike,
When I looked at changing custodians, the fees for mutual funds were as follows:
Scott Trade: $17
Fidelity: $35
Schwab (as much as Fidelity or possibly more)
TD Ameritrade: $24
Shareholders Service Group: $27
TradePMR: $19.95
Unless the fees have changed drastically, you are mistaken. Also, I have NEVER had to explain this to clients. When I left the wirehouse world years ago to join a regional firm, I never even knew these fees existed. I thought it was a big issue, but in reality these fees are like a fly on the back of an elephant. No big deal!
Hello Mike,
I used to work with ProEquities and have just registered my RIA with Colorado.
I like to use options with other securities. How is TradePMR for option
strategies? Did you consider BrokersXpress / OptionsXpress when you were looking? Are you currently using options and how friendly is your platform?
Thanks,
Chuck
Just found this due to the recent article. Saves me time/effort so I wanted to thank you.