RBC's custodian adds 27 firms. What's driving growth?
RBC’s custodial business is experiencing a big uptick in business, having signed clearing contracts with 27 new RIAs and broker-dealers since last October, the beginning of the firm’s fiscal year.
“That pace compared to the prior year — it’s almost double,” says Brett Thorne, head of RBC Correspondent Services and RBC Advisor Services.
RBC’s success has been driven in part by its technology offerings, which the firm plans to add to in the coming year, executives say. One of the firm’s tech tools, a three-year-old turnkey platform for planning-oriented advisors, dubbed RBC Black, has played a key role in attracting new customers to the company.
“It drives our prospecting significantly,” says Noel Stave, COO of RBC Correspondent Services and RBC Advisor Services, who oversaw the platform’s construction. “I end up having a lot of conversations with prospects just to talk about this platform.”
RBC is a relatively small player within the custodial marketplace. The firm has only about 95 fee-only RIAs and 190 broker-dealers — a far cry from the over 7,500 RIAs on Schwab’s platform (plus, Schwab is in the process of acquiring one of its largest rivals, TD Ameritrade).
But the custodial business is rapidly changing because of a new wave of consolidation among the biggest players as well as evolving technology offerings that can sway RIAs to try a new custodian. RBC sees a chance to scale by attracting tech-forward and multi-custodial firms.
“I think that will continue to provide opportunities for other players in the market,” Thorne says. “And I think we're one of them.”
On the digital side, RBC is developing a new advisor dashboard based on functionality rather than integrated applications, according to Stave, who says it should be available for beta testing with certain firms at the beginning of next year.
“You won't have to consider what applications you need to launch or where you need to go. The idea is that this would be a one-stop shop,” Stave says. RBC is working with Salesforce and Deloitte to implement the new design, which will include a functionality-based search bar. “If we have to train advisors [what acronyms mean], then we probably haven't done a good job around the experience,” Stave says.
RBC’s Black platform is optional for firms using the custodian and costs $175 a month per advisor. It is built around account aggregator CircleBlack, which pulls in data from banks, retirement plan providers, and other custodians. Black has end-to-end integrations with Riskalyze, Envestnet’s MoneyGuide and Redtail. It operates in one tab on an advisor’s browser, although advisors can open MoneyGuide in a separate tab to work simultaneously.
“I think it’s a fantastic platform,” says Greg O’Gara, who researches custodians and their technology at Aite Group. “Because they’re focused on a subset of vendors, and those vendors are tightly integrated into the platform, they can cast some pretty good pricing to RIAs that adopt the solution.”
O’Gara says advisors in general pay anywhere between $6,000 to $12,000 a year for their tech, depending on the custodian, broker-dealer and vendors they use to manage their practice.
RIAs that use RBC typically have at least $500 million in assets, according to Thorne, although the custodian takes on smaller firms that show a growth trajectory. About 70 firms and over 1,000 advisors use RBC Black, according to Thorne and Stave.
RBC Black was the main draw for Centennial Securities, a $1.5 billion hybrid firm that moved its custody to RBC from First Clearing at the end of July, according to senior vice president Ryan Diepstra. Centennial Securities looked at six different custodians and chose RBC largely because of the cost and sophistication of its tech offering, Diepstra says.
“What put us over the hump with RBC was RBC Black,” he says. “We certainly believe that this will help us grow, scale, retain clients and continue to gain trust with new clients.”
Diepstra called all the tech vendors individually to guarantee it would be more affordable to use RBC Black then purchase the technology individually. “It was almost an 80% [discount],” he says, noting that was what RBC had forecasted.