Pershing adds 2 pricing models to custody platform — with caveats

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Advisors who use Pershing will soon have more options when it comes to how their clients pay for custody — as long as they agree to some restrictions.

In May, Pershing will offer two new pricing alternatives on its RIA custody platform, according to Ben Harrison, the incoming head of Pershing’s RIA division: A zero-commission option paired with a low-yield cash sweep and a monthly subscription model starting at $25, which includes free mutual fund share trading.

Advisors have demanded a new pricing alternative after the firms’ largest competitors, Schwab, Fidelity and TD Ameritrade, dropped commissions on ETF and equity trading in October, Harrison tells Financial Planning in an interview.

“About one-third of the advisors we talk to like that [commission-free] model,” Harrison says. Another motivator, however, was transparency. “We believe the industry was moving in more of an opaque fashion,” he says, noting it was important to Pershing that advisors be able to compare models and evaluate the best options for clients.

Pershing is keeping its traditional pricing structure, which offers advisors either a tiered asset-based custodial fee or transaction-fee-based charges (The firm doesn’t publicly break down its tier structure).

The two new pricing options aren’t all-inclusive, according to Harrison.

The zero-commission pricing model requires advisors invest their clients in a low-yield cash option, as opposed to the approximately 80 cash sweep selections the firm says it normally has available. (Harrison declined to specify what the yield will be on the cash sweep, but says it will offer FDIC insurance and is comparable to competitors’ low-yield rates).

The monthly-fee model will offer all Pershing’s core portfolio capabilities, including ETF, equity, mutual fund and fixed income products and trading at a tiered cost of at least $25 a month per client. However, additional services typically available to advisors, such as lending, will have to be added on separately as a “premium service,” Harrison says, again declining to give specific details on pricing and the tiered structure.

Pershing is not the only custodian to have changed its pricing structure this year. Betterment started charging a monthly subscription fee to advisors in January, in addition to a basis point charge.

Pershing’s zero-commission pricing model does not extend to mutual funds. Schwab, TD Ameritrade and Fidelity still charge transaction fees on mutual fund trading as well.

Harrison says he hopes the pricing model changes will give the 720 RIAs on its platform the alternatives they have been seeking — while showing clients how much they pay for custody.

“We thought it was important to bring light to that and put our money where our mouth was and provide options to the marketplace,” Harrison says.

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Clearinghouses/custodians Pershing Advisor Solutions RIAs Independent advisors Fee-based compensation Client retention