Apex Clearing to expand RIA custody, hires Morningstar exec as president

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Tricia Rothschild, the 26-year Morningstar veteran, started as president of Apex Clearing the first week of August.

Apex Clearing, known for servicing robo advisors and fintechs, is expanding its custody services for traditional RIAs, and it’s tapping talent from Morningstar and Fidelity to make it happen.

Tricia Rothschild, former chief product officer at Morningstar, now serves as president at Apex. Tom Valverde, former senior vice president of national sales at Fidelity, joined Apex as general manager of advisory.

Their additions and the firm’s expansion plans come as the industry experiences a new wave of consolidation among custodians and fintechs. For instance, Charles Schwab is acquiring rival TD Ameritrade and Morgan Stanley is buying E-Trade.

In this competitive marketplace, Apex sees an opportunity to expand its offering, Rothschild says. “You can't live without it,” she says with regard to custodial services. “It's not a nice-to-have, it's a must-have, and it's hard to do at scale.”

Apex, she says, stands out from competitors in that it doesn’t compete with RIAs for retail clients.

Rothschild was at Morningstar for 26 years until earlier this year.

Apex primarily clears assets for fintech companies, including Betterment and Wealthfront, according to Rothschild. About 50% of the firm’s client base is comprised of fintech-focused broker-dealers, while 30% is wealth management firms and 20% institutional firms, according to Apex.

Other custodians have expressed optimism about expansion opportunities amid the latest consolidation. “RIAs, of size at least, prefer to have multiple custodial relationships,” says Brett Thorne, head of RBC Correspondent Services and RBC Advisor Services. “A lot of those were using a combination of Schwab and TD [Ameritrade] and are now looking for an alternative,” he says.

RBC has signed on twice the RIAs than last fiscal year, according to Thorne.

Still, custodians’ revenue has been compressing, particularly with low interest rates. Late last year several custodians dropped commissions, thereby reducing their transaction-based revenue.

Rothschild says there’s opportunity in a bundled pricing model, and noted that Pershing had started offering new pricing options.

While it's a “little premature to say that there's one model that's going to work,” Apex has the flexibility to be “very nimble,” she says.

“This is a growth area for [Apex],” she says. “They’re less about protecting an existing book of business and more about growing into the future.”

Rothschild says she also anticipates growth where wealth management and banking intersect, noting Apex has relationships with Ally Bank and M1 Finance.

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