Many financial advisors must make one of their biggest business decisions around inherently murky costs.
The way the industry operates, advisors often "don't know, and a lot of them will never know" the exact price of clearing and custody services, according to veteran recruiter Jodie Papike.
When changing firms or launching a new registered investment advisory firm, advisors should choose based on where they'll have a better experience and beneficial pricing, rather than "based on the ease of paperwork," the CEO of recruiting firm Cross-Search said.
But the struggle to calculate those prices — regardless of whether advisors use a firm that safeguards assets and clears transactions in-house or outsources to a vendor — is understandable, she and other experts said. A full list of charges across transaction costs, cash yields, markup surcharges, asset-based fees and other administrative or platform expenses usually doesn't even appear in the formula for an advisor's payout rate — the portion of take-home compensation remaining after paying a brokerage firm.
"We have to look at it and actually reverse-engineer a fee to an individual client and see who's paying it," Papike said. Many advisors trying to "drill down" into the prices aren't able to see the impact of those asset-based advisory program costs. "It's so confusing, and every firm is very different in how they calculate it."
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Self-clearing, outside clearing or both
Financial Planning's 2026 IBD Elite study (the 41st annual edition) of wealth management's independent brokerage channel explores the important distinctions between the "self-clearing" firms that do clearing and custody in-house and those that use outside vendors such as BNY Pershing or Fidelity Investments. (See also FP's ongoing series on the fees and business models of industry custodians.)
Cost is just one of many factors influencing decisions about clearing and custody, said Papike and others. The size of an advisor's potential landing spot looms large: Self-clearing firms LPL Financial, Ameriprise, Raymond James Financial Services and the Wells Fargo Advisors Financial Network are among the biggest firms in the independent broker-dealer channel. However, as vanishing commissions and falling transaction fees shrink margins for clearing and custody, these and other firms are changing how they recruit advisors and negotiate M&A deals as well.
Even though advisors probably don't bring up whether a brokerage is self-clearing or not when talking with clients, they all want to ensure customers are comfortable with a firm's safeguarding of their assets, said Brad Wales, a former Raymond James executive who is the founder of consulting firm Transition to RIA.
Beyond that, advisors' decision paths frequently diverge. Common considerations include:
- Brand recognition: A company with a household name that clients are familiar with
- Flexibility: Having as many custodial options as possible
- Structure: Whether the firm is publicly traded or private
- Pricing: Fees and exact basis points
- Platform: Technology and operations systems
The majority likely take several of these factors into account, of course. IBDs trying to recruit advisors while evolving alongside them may lose out to RIA channel competitors, which typically offer more custodian options. But with any service provider, prices vary based on the size of an advisor's business, and private negotiations make any attempt at generalizing the costs near-impossible.
"I have this conversation almost daily," Wales said. "I wish there was a black-and-white matrix of why certain advisors choose certain custodians."
The connection between self-clearing and big bonuses
Even the industry's top regulator, the Securities and Exchange Commission, is trying to nail down explanations of custodial costs and how they affect clients.
In June, the SEC's Division of Examinations warned in a "risk alert" that some firms have "omitted material information or provided misleading disclosures regarding revenue sharing arrangements they had with clearing broker-dealers or clients' custodians." In some instances, the regulator said, firms "did not provide full and fair disclosure of the economic benefits to the advisers with respect to the advisers' recommendations regarding custodial credits, margin loans and credits, and transaction markup fees."
The alert may not lead to regulatory cases or changes to industry governance. But it demonstrates how tough it is to find exact information on custodian costs. Firms closely guard the terms of their relationships with current or prospective advisors, and most public fee schedules share only the starting rates for clearing and custody services.
The SEC declined to comment when asked where consumers or advisors can find more information to help them understand the fees and revenue collected by clearing and custody firms through their relationships with wealth management companies.
Luckily, some firms and industry experts helped supply key insights. For one thing, firms offering the biggest recruiting bonuses typically can afford them because of profits from the custodial business model: They collect revenue from trades, deals with asset managers and other product providers, cash sweeps and loans.
To Shirl Penney, CEO of RIA service provider firm Dynasty Financial Partners, the breakdown of that revenue and the recruiting offers it allows for explains "the fundamental difference" between self-clearing firms and those using third parties. It also explains the rise of "modified wirehouse recruiting deals that have now started to pop up in the independent broker-dealer space," he said.
"An independent broker-dealer that clears through someone else typically is sharing the economics with the clearing firm," Penney said. "If you're self-clearing, you don't have to share those economics with anyone."
On the other hand, clearing transactions is just one service provided by asset custodians, according to Jeff Nash, CEO and co-founder of recruiting firm Bridgemark Strategies. While self-clearing firms can offer bigger recruiting checks, Nash recommends advisors considering a move first think about which model — self-clearing or third-party — will have a greater impact on their daily business and future goals.
"There's custody, there's clearing, and then there is third-party and firm-owned," Nash said. "It's kind of two different categories. It's really important for people to understand custody versus clearing."
Unique arrangements abound: What the disclosures say
Independent brokerages, regardless of whether they used a self-clearing or third-party setup, enjoyed a solid year in 2025. Among the 37 firms participating in FP's IBD Elite study, combined revenue jumped 12.5% to $56.28 billion last year.
Companies across independent and employee channels of wealth management argue that their specific clearing and custody model is the best landing spot for advisors.
"We and our affiliated broker-dealers have negotiated competitive pricing and services with the custodians for the benefit of our clients," according to the SEC Form ADV brochure filing for a Cetera-owned RIA. "They offer clients substantial financial strength and stability, economies of scale and reliable, state-of-the-art technology."
Websites for large IBDs generally share fee schedules for advisory and commissionable accounts — a basic document that most of the industry's largest custodians do not make publicly available.
With so much secrecy around recruiting and retaining top advisory teams while preserving other revenue, it could be too difficult for any large brokerage or custodian to compile a full, accurate list of the fees advisors or their clients might pay. These firms are vying to keep that business as traditional revenue streams from transaction fees and surcharges dwindle, thanks to the industry shift away from commissionable brokerage accounts and into fee-based advisory holdings.
To fill that profit vacuum, firms are turning to alternate sources, including revenue-sharing arrangements with third-party fund firms or custodians, interest from cash sweeps, and program or advisory platform fees. For advisors, the resulting web of discounts, benefits and conflicts of interest make adding a new clearing and custody partner a complicated endeavor.
The Form ADV disclosures about those relationships, rules and fees read slightly differently at every firm. Some notable examples of that language include:
LPL charges representatives of its main corporate RIA "various fees under its independent contractor agreement, for example, for administrative, custody and clearing services to accounts, technology and licensing," while hybrid RIAs disclose that LPL collects a supervision fee for its oversight of accounts managed through an outside brokerage or custodian.
A Kestra Financial-owned RIA charges "a program fee" that the firm receives "from the client fee you negotiate with your advisor" based on the size of accounts and client assets, its Form ADV said. "Some advisors will have higher program fees than other advisors."
An Osaic-owned RIA "has an economic incentive" to use Fidelity and Pershing units for clearing and custody "over other firms that do not or would not provide such economic benefits to Osaic Wealth, even if such other firms might be more beneficial to clients," its disclosure said.
For accounts managed by a Cambridge Investment Research-owned RIA under the custody of those Fidelity and Pershing affiliates, the RIA gets a ticket charge for transactions, the Form ADV said. And Cambridge "has directed" the outside custodians "to mark-up ticket charges" on those transactions and certain other nontransaction fees.
Any "cost reimbursement payments received" from investment product sponsors by an Ameriprise broker-dealer affiliate that acts as the firm's clearing and custody provider to its managed accounts "reduce the investor return on their investment," according to a Form ADV brochure for an Ameriprise-owned RIA.
When clients of a Raymond James-owned RIA "use or purchase products or services delivered by other affiliates of the firm, the related entities receive fees and compensation (the amount of which may vary)," the firm's Form ADV said. So the firm has "an incentive" to recommend those products and services "over other non-affiliated products and services available."
Executives at Osaic, LPL Financial, Cetera, Kestra and Ameriprise weigh in
Firms aim to mitigate any conflicts of interest and argue that their specific internal (self-clearing) or external (third-party) structures for clearing and custody provide benefits that outweigh the costs.
The various dynamics have changed independent brokerages' strategies (and the extent to which they publicly discuss operations) around owning or outsourcing clearing and custody. To better understand such strategies, Financial Planning sent a series of questions about clearing and custody to seven firms that rank among the 10 largest by revenue on the 2026 IBD Elite list. Executives at five of those firms provided email answers, while Cambridge declined to respond and Raymond James did not return inquiries.
"A decade ago, moving to a self-clearing model may have appeared to be a compelling strategy, and candidly, I wasn't convinced Osaic would remain non-self-clearing forever," said Jamie Price, CEO of Osaic. "However, the clearing and custody conversation has changed meaningfully over the past decade."
So Price's firm has opted to work with units of Pershing, Fidelity and Charles Schwab as its custodians, on the grounds that it gives advisors more options, lets Osaic invest in other areas and results in benefits due to the size of its business with those third parties.
"Osaic's approach gives advisors the benefit of both worlds: access to leading clearing and custody platforms, combined with the scale, advocacy and support of one of the largest wealth management firms in the country," Price said. "Because we are a significant partner to our approved providers, we can advocate for advisor needs, collaborate on strategic priorities and help bring forward solutions that support independent advisors and their clients."
LPL sees its role as a self-clearing firm "as extending well beyond traditional custody and clearing services," according to Marc Cohen, a group managing director and the chief growth officer with the firm. Even though LPL (and any other firm in wealth management) derives the largest profits from handling as many components of the business as possible, advisors can select which to use.
"LPL is an exclusively advisor-centric business and does not compete in the retail market for end clients," Cohen said. "What differentiates LPL is the combination of choice and integration. Advisors can select the affiliation model, business structure and support services that best fit their goals, while benefitting from a connected platform designed to help them serve their clients, grow efficiently and build long-term enterprise value."
Rival firm Cetera has its own self-clearing affiliate, Cetera Investment Services, which primarily works with banks and credit unions, noted Christian Mitchell, the president of Cetera Solutions. But the firm also uses units of Pershing for clearing and custody and, since its acquisition of Avantax in 2023, Fidelity's National Financial Services.
"Working with a large, well-established broker-dealer like Cetera that has long-standing strategic relationships with external custody/clearing providers enables independent advisors upon affiliation to enjoy the benefits of a proven, solid foundation with multiple external custody/clearing providers, which creates more flexibility and choice for advisors and their practice," Mitchell said. "Cetera's position is that advisors shouldn't have to choose between scale and optionality. Our multi-custodial model combines the advantages of access to leading external custody and clearing providers, with an affiliated self-clearing capability when applicable."
Other firms avoid self-clearing status entirely. Kestra can "direct more of its own resources toward advisor payouts, service and practice management rather than clearing infrastructure" by using Fidelity's NFS, said Angela Xavier, an executive vice president and client experience officer.
"Self-clearing is primarily a strategic decision that benefits the firm more than the advisor," Xavier said. "It gives a firm more control over its own balance sheet, risk policies and product shelf, but it also requires a significant, ongoing investment in capital, technology and operational infrastructure just to keep pace. By contrast, working with a firm like Kestra, which partners with an industry-leading custodian like NFS, means advisors get the independence and entrepreneurial freedom of running their own practice, while leveraging the scale, stability and technology of one of the largest clearing organizations in the industry."
But from the perspective of self-clearing firm Ameriprise, the opposite setup brings "an efficient, streamlined and fully integrated experience for advisors" that translates not only to more economical operations but also to business growth, according to Greg Carr, an executive vice president for service and operations with the firm.
"With clearing, custody, technology and service capabilities on a unified platform, advisors have one place to access client information, complete transactions, leverage integrated AI tools and manage their practices," Carr said. "That means less time navigating multiple providers, systems and logins, and more time serving clients and growing their practices. Because client and practice data reside within a connected ecosystem, advisors can access holistic reporting, identify client planning opportunities more efficiently and deliver a more seamless client experience. Clients benefit from having information across their financial solutions in one place, while advisors benefit from greater efficiency and ability to deliver more value to clients at scale — contributing to roughly 12% average annual productivity growth, well above the industry average."
For advisors, it can be a choose-your-own-adventure
With various custody and clearing models offered by independent brokerages, advisors can choose among more suitors than ever for their business. Amid aggressive recruitment and fee confusion, even seemingly small factors — like the convenience of keeping the same custodian through a move to a new firm, or cutting out middle parties for service requests by going to a self-clearing firm — could prove decisive, Papike said.
"With every type of firm there are pros and cons," she said. "Some advisors feel like the workflow is easier and the technology is easier to navigate in that environment."
The difference between internal and external custodians also comes up in M&A deals, which Wales said are "a one-way street": The firms using outside providers never acquire ones that already do clearing in-house.
"It is inevitable that, if a self-clearing firm buys a non-self-clearing firm — it's not going to happen overnight, but it's only a matter of time before those assets are going to be moving to another firm," he said. "If you are a self-clearing firm buying a non-self-clearing firm, there's a bit of an arbitrage."
Choice, consolidation and the future of clearing and custody
In that sense, ongoing industry consolidation could threaten large custodians, according to Penney, who cited the example of Pershing's client losses in the wake of JPMorgan Chase's takeover of First Republic in 2023.
The rise of technology firms that could give advisors and their clients stronger cash returns or more favorable loan terms, or the potential for faster, cheaper processes through blockchains or stablecoins, may remake the industry. Plus, lower trading fees and cheaper investment management could prompt more custodians to collect a specific custody fee for advisory assets.
"The scale number just got higher in terms of the point at which it might make sense for you to be self-clearing," Penney said. "It's going to be fascinating to see where disruption may come about."
With so much in the mix when it comes to clearing and custody decisions, avoiding the headaches of service interruption through strong customer service for advisors may be the best way for firms to stand out, according to Nash.
Self-clearing firms can argue that advisors avoid the headache of dealing with two firms to solve one service problem. Meanwhile, firms using outside clearing and custody can argue that outsourcing service and technology leads to savings. So Nash's team aims to lay out the many possible trade-offs with advisors.
"The self-clearing firms have this extra layer of profitability, and what they do with that is firm by firm and literally deal by deal," Nash said. "We talk about, where do you see the business going in five years, and which business model is going to be better for you in where you see the business going?"
