Why RIA custody is ready for another shakeup


On this week's episode of the Financial Planning Podcast, Anthony Stich says the best part of shaking things up is what follows once things settle. 

Stich, chief revenue officer at the custodial platform Entrustody, swings by the Financial Planning podcast this week to explain why the disruption happening in the RIA custodian landscape is boon to advisors and investors alike.

Tony Stich, chief revenue officer at Entrustody

From mergers and new entrants to the establishment of a new big three, 2023 has seen plenty of change in the space, and Stich's firm has played a role in plenty of the remixing.

But more than growing the business, Stich says he wants to make it better for everyone who touches it. It's a mission-based mindset that goes back to his childhood, a time when he saw the power of money first hand.

"I went through a significant money moment with my family. My parents, they had a lot of kids. In fact, I'm from a family of 10 children. And so there's a lot of financial challenges with that," Stich said. "Now I'm not going to say I was poor. I don't think that's fair to say, but we were challenged with money to the point where we actually went through a bankruptcy and we lost our home.

"So I think that money moment coupled with my desires around psychology and sociology really was the perfect formula for being attracted to and staying in this industry."

READ MORE: Why wealthtech running out of 'free money' isn't as bad as it sounds

During his conversation with FP Podcast host and lead editorial producer Justin L. Mack, Stich, aka "Mr. Purple," talks about wanting to drive the industry forward, working closely with advisors to get the Entrustody formula just right and why nobility plays such an important role in his work.

Listen to the new episode — as well as to all future and past episodes — by subscribing to the FP Podcast on Apple, Spotify or wherever you get podcasts.

Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.

Justin Mack (00:02):
Good morning, good afternoon and good evening. Welcome to the Financial Planning Podcast. I'm your host Justin L. Mack, and it is my pleasure to introduce this week's guest, Tony Stich, chief revenue officer at Entrustody. Tony, thank you so much for joining us on the show this week, my man.

Anthony Stich (00:19):
Wow, Justin, thank you so much for having me. Super excited to be here.

Justin Mack (00:23):
Absolutely. Now Tony brings decades of wealthtech experience to this week's pod. Before joining the Entrustody team as CRO in fall 2022, he was most recently at InvestCloud, which acquired Advicent, the financial planning software developer of NaviPlan, a name that many of you probably know, as their chief operating officer. He led North American sales, marketing, professional services, customer success and support for NaviPlan. And before that, Tony predominantly had roles in the financial services space, leading the marketing group at Bank Mutual as well as performing national marketing and go-to-market functions. A busy guy, but now he's all about shaking up an RIA custody landscape that has seen plenty of shaking in 2023. We're going to talk about what has gone down, what still needs fixing, what's on deck and much more this week. But first, Tony, are you ready to pay what I call the first-timer's toll?

Anthony Stich (01:19):
I suppose so.

Justin Mack (01:20):
Alright. You didn't have a choice anyway, so even though we've had a chance to connect before — we talked at Future Proof — but as a new visitor to the podcast, the first-timer's toll is your origin story. I always like to find out how people got into this business because it's not an easy one to find. There's a lot of people I talk to who have been in this business for 30, 40 years, titans of the industry who were like, before I got into this I didn't even know what this industry was or that I was perfect for it. So I always love sharing those origin stories. So tell us, how did you get into the world of financial services in the first place? Was it something you always planned on, or did you kind of segue here from a different, I guess, background or skill set? How'd you get here?

Anthony Stich (02:00):
That's a fantastic question. I'm happy to pay this toll. I actually want to take a further step back to when I was in college. Forgive me for dating myself, but I remember going to college and I had no idea what I wanted to do with my life. No idea. For the first two years of college, I was just kind of like a general, whatever it was, general education requirements, whatever those were. And I was talking to my counselor and she had said to me, she's like, well, what classes did you enjoy these first two years? And I told her it was sociology and psychology. That's the two I enjoyed the most, honestly. And she's like, well go into marketing. And she explained the rationale behind that and I trusted her. And boy was she right. But I want to apply that same kind of thought process to the financial services world.

The sociology and the psychology around helping people is what drew me to this industry and what's kept me here. And now at this point in my career going on so long, it's a bit of nobility as well. I'm not saying that I'm some noble man. I wish I was. But what an industry. To be able to help people make their ways through their lives, financially, empowering advisors to do that, but also helping people. In fact, I'll end with this real quick on this topic, but everyone talks about money moments. I'm sure you've talked about these before in the past with your guests. And I went through a significant money moment with my family. My parents, they had a lot of kids. In fact, I'm from a family of 10 children. And so there's a lot of financial challenges with that. Now I'm not going to say I was poor. I don't think that's fair to say, but we were challenged with money to the point where we actually went through a bankruptcy and we lost our home. So I think that money moment coupled with my desires around psychology and sociology really was the perfect formula for being attracted to and staying in this industry.

Justin Mack (04:09):
So you have a very real-life, tangible tether to this business. It's not, hey, I thought this would be a good thing to do because I'm pretty good at it. I got the skill set, I've got the background. And to know this was kind of a seed planted from just the way you came up and saying, hey, I can affect change through this business. So cool to see a very mission focused motivation behind your career. So with that, I want to talk about where you are right now. We talked about your background, right now rocking with Entustody, it's been over a year now since you've been part of the squad. Talk about the mission and the motivation there. What is the work you're doing and what are you guys looking to impact and what kind of impact are you looking to have on the RIA custody space?

Anthony Stich (04:47):
Sure. And I think that ties back to the nobility, the idea of nobility. When we exited the business, NaviPlan, to InvestCloud, I stayed on for a while. I stayed on for about a year or so, and it was not related to a contract or clause or anything. I gave it a go. And then I took some time off six months over the summer and it was a good time for me to kind of recenter myself and kind of look at the industry as a whole. And at the time I was presented with a lot of opportunities and what I decided was back to the nobility and kind of the idea of what moves me. And I was going to interrupt you when you were asking the question, because this isn't just about financial services, kind of the motivations. It's not a job at that point, right?

It's not a job when you're moved by a noble cause or a mission or something to help other people. And that's the same holds true within Entrustody. So when I joined Entrustody, the idea was there's a noble venture of improving what could be argued as the least disrupted space, the custody space. Until of course 2023. And so yeah, for the last year, that's what we've been doing. We've been building and kind of laying that foundation for true disruption and kind of looking at everything and turning every stone. This isn't about a new coat of paint, Justin, this isn't about kind of a delightful experience. This is much more than that. This is looking up and down the entire kind of value chain of how custodians work to be disruptive at all points. And that might drive down costs, which help the investor. That might improve the customer service, which helps the advisor and the investor. But the idea is that we can ideally go up and down that chain to make sure we're as disruptive as possible for that next generation investor and advisor.

Justin Mack (06:49):
Definitely, definitely. And then something else I want to talk about. You talk about taking that time to kind of chill for a bit after that exit with NaviPlan to figure out what the next move is, what the right move is. The one that spoke to you and you talked very passionately about the mission and why you were like, yeah, this is the time. This is what I want to do. So with that, before we kind of go into the break here, I would love to get your thoughts overall on the current landscape in the RIA custody space. If you've been following Financial Planning, which hopefully listeners you have, but even if you followed any aspect that's covering this business, you've seen there's been a lot of change in the custody space, especially this calendar year. We've got mergers, we've got a new big three, we've got reshuffling of the deck as it were. So I would love to get your thoughts specifically. You were motivated to get back and work in this space as a way to help the folks who are impacted most by the current custodial system, the way it's set up. So for you, what are your thoughts? Where are we right now with this crazy year? I don't know if that's too simple of a question to ask, but good or bad, could you rate us?

Anthony Stich (07:56):
Yeah. Well, it goes back to the spirit of our mission. At the end of the day, if Entustody can drive the industry forward, that's great. That's great. I always like to say it's the rising tide lifts all boats, right? So that's fine. So if Entrustody along with other new entrants can drive the traditional custodians forward, improving them, if we can drive them to prove themselves, we've done our job. And so I do see this level of focus on this core channel of the advisor, sorry, their workflow. That's great. This is great. Let's shine the light on this. And if it's two or three new entrants banging the drum together, great, right? We will together be able to get people to reconsider what is acceptable by the custodian as it relates to the relationship with the advisor and the end investor.

So I think it's exciting and it's invigorating and there's plenty of opportunity to go around for multiple new entrants. But what happens now, I think, and I think we're going to see this a lot with advisors, is they're going to begin to, when they evaluate new custodians, ask a lot more questions. And this is good, this is good. Now we don't want a Cheesecake menu of options, that's just too much. But if we can have your traditional two or three custodians, the ones that everyone knows, and then a couple of new entrants with different distinct value propositions for different advisor types, perfect. But at the end of the day, what makes us very different than even the other new entrants along with the traditionals is that we'll never compete for assets and we'll never create a product that we expect you to purchase or invest in for your end investors. So we are going to be completely agnostic to that. Our mission is around providing a better experience for the advisor and the end investor and never blurring the lines between being a competitor to you or expecting something in return for using our services.

Justin Mack (10:16):
Sure, for sure. Then with that, you had kind of answered my next question too … is there room for the new players to kind of play? And it sounds more so if you're focused on driving things forward, then there will be space because there's room for things that drive the experience forward. Like you said, don't go Cheesecake Factory crazy, 80 pages of options. Everything is mid, but we want to give people that more curated list of options. I guess the last thing before we go into the break, why are those options so darn important? Especially for the advisors. Why are they so beneficial to have in the first place?

Anthony Stich (10:55):
Well, there's two. So there's two reasons why the options are important. One, again, it drives industry forward. So from a holistic point of view, if there's more alternative choices, everyone must perform better. Everyone must provide better customer service, more transparent fees and better technology. It just drives us in the right direction, which is fantastic, but more to the advisor themselves, him or her, she or he gets to choose based on the niche that they're providing. There's the idea that, hey, I'm just going to provide X, Y and Z services, so I don't need this kind of monstrosity of a custodial engine. I don't need that, or I really want deep integrations with X, Y and Z. They get to pick that, right? So I think that choice is good. It allows the advisor to select a business model that makes better sense for them in their business.

So that's kind of the two primary things that are of benefit for us. But quite frankly, at the end of the day, these advisors need to fool me once, shame on you, fool me twice, shame on me. I don't think these advisors are going to go back to that same well, I don't think they're going to go back to the traditional custodians because the acquisitions are happening. The frustrations are still going to exist. So they need to look at these alternatives that are built by advisors, designed by advisors for advisors. That I think is the new era of our space. But yeah, options are good. Choices are good. But yeah, Cheesecake menu, not so much.

Justin Mack (12:35):
Absolutely. Well, we'll keep those taste palates a little more refined in the second half. And with that, we're going to take a quick break and enjoy a word from our sponsors. But when we return, we'll jump right back into our conversation this week with Tony Stich, chief revenue officer at Entrustody. Stay locked. We'll be right back after this break. 

And welcome back to the Financial Planning podcast. I'm your host, Justin Mack, and we're diving back into our conversation this week with Tony Stich, chief revenue officer at Entrustody. Representing that team. It's now been more than a year, and we're catching up with him here talking about all things RIA custodial landscape. The good, the bad, the ugly, the disruption. And I kind of want to come out of the break following up on what you talked about, those big picture thoughts, room for the new players, the need to move things forward, not just the desire to, the need to, because like you said, that rising tide lift all boats, good competition, better options, happier advisors. Isn't that what we all want? So with that, I want to ask what's currently wrong with the system as it stands? What are the legacy custodians still missing about this experience, this process, the outdated aspects? How do we update that and fix what's broken in the current landscape?

Anthony Stich (13:51):
It's hard. I mean, that's a multidimensional question. And I think part of the challenge is through no fault of their own, they've had to grow to service more and more advisors, and as a result, they've had to acquire different firms or acquire different workflows. And then all of a sudden over time, the technology becomes extremely bloated. There's a lot of challenge with the technology, the interconnectivity of the applications. And then you look at the challenge is to service all of those advisors. And then you look at the third, third dimension is making sure you're achieving the objective set forth for your owners, your stockholders, your whoever it is. So that multidimensional challenge is presented, and again, I don't think it's the fault of these firms. This is just a natural progression. But now what happens is from those challenges come the new entrants that say, we do this better.

And so even with us as we're building this technology stack, the beautiful part about knowing what's transpired over time is we can prevent those same challenges from happening to us, especially as it relates to technology. Especially how you build the platform API first modern code base, thinking about reducing friction as much as possible, things that will not only delight these advisors and investors, but also help us be more frictionless with customer service models. If we can improve a workflow and simplify a workflow through contextual help or natural language processing, we're going to reduce the burden to our call center of customer service individuals. So the way we're looking at everything is in the spirit of not hitting the same challenges in shortcomings of the traditional custodians. And because of that, it's like the blank canvas of what can we do? And then it goes back to my commentary at the beginning of the podcast around turning over every stone, why do we do this?

Why is it traditionally done this way? Or why is this required and is it truly required? So that's kind of the spirit or the ethos of what we're doing. But those challenges, I don't know, we can't blame them. But then because there's a certain point where you just get too large, you get too big, you're trying to serve too many customers, you're trying to serve too many end investors, and as a result, you need to, it becomes too much. It becomes too much, which is why this is happening. So I think those are the biggest pain points. But I mean, I can go into detail, but we all know the challenges that exist internally or, I mean, we watch it all unfold in the media over the last few months. And these are things that they can't readily fix, which is also part of the problem is these are unwinding of things that have kind of over time just kind of grown but then atrophied at the same time. It's really a fascinating thing to watch, but it's for us to pick up the pieces and fix.

Justin Mack (16:57):
For sure. Yeah, you make a good point too about that size that creates the capability, but it also creates new hurdles and new challenges. Like you said, you get too big, you almost move away from the point a little bit, if that makes any sense. And with the additional size, you have the capability to do things, but sometimes makes it harder to respond when there are so many issues or things that can account for when an organization of your size might not be able to abandon it. So like you said, not placing fault, but just it is the way it is. And something else I wanted to follow up on with you too is that, like you mentioned, building that stack, building these tools that you're going to be able to empower the advisors who work with you with. I'm always interested in that feedback process, especially as the wealthtech reporter at FP. How folks like yourself are connecting with advisors to get that feedback and continue to create that by advisors, for advisors thing that you guys are very much going for.

And I do want to give a shout out too. I know, Tony, you're on the ground. I've seen you at the conferences. I want to shout out Tony's shoe game. If you have seen him at a conference, you've probably seen that he keeps some heat on the feet. When you see him, you'll know him before you know him. I just want to shout that out because the shoe game is immaculate. But what's that process like when you're working with advisors to figure out, hey, what do you want? What do you need? What's that like for you? And do you enjoy that process?

Anthony Stich (18:17):
I think there's nothing more edifying than the voice of the customer. And what we've done in our time is, look, we knew the industry was broken, so you don't need someone to tell you that. We knew that this space was, not broken, but there's space for opportunity. It's an opportunity zone, it's called that. So what we did was we actually established two different groups. We have a beta group, which are kind of like what you'd say your active users of the custody platform. We have about 15 very, I would say all advisors, and then we have maybe a couple dozen more, but come and go based on the different types of functionality. Average AUM of that group is about $225 million. So these aren't startup advisors, even though we welcome them as well. We have plenty of startups in the tranche, but the AUM is 225.

So these are folks that are kind of growing.They have aspirations to kind of be a bigger firm. So we wanted to get their feedback on the day-to-day test, the mettle of the application. We also have a design partner cohort. This is a group of larger multibillion dollar firms that provide feedback more at the holistic level, not only of our application or our platform, but what maybe our five-year plan is. And we've laid it out to them, but also we got their feedback on the industry and where they think it's going, especially as it relates to custody. And we found a lot of, I mean, it's obviously extremely enlightening. In fact, one of my favorite parts of this design partner cohort was we were working through a use case with a $3 billion firm, and the guy that kind of runs internal planning was on the call with us and he's like, well, this is what we have to do here.

And I'm like, well, that sounds like a workaround. He's like, yeah, well, you can't do this, so we have to do X, Y and Z and then export it to here and do this. And I'm like, what? He's like, yeah, that's not something they're going to change. I'm like, well, I took it back to the CTO at the time. I said, hey, this is what they currently do for the workflow. And he's like, well, we can solve that in 48 hours by doing X, Y and Z. So it was not only for us to hear all these workarounds to meet their kind of needs, but also our ability to say, why not? Rather than saying, no, not in the plan, not on the roadmap, no. It's like, no, this is something that you need. Is this something that would improve your practice? And what ultimately led to us is we shifted a bit of our mission from not only custody, but also efficiency.

How can we make advisors more efficient, firms more efficient? Now obviously we're leveraging naturalness processing and artificial intelligence on the platform. We're leveraging a digital kind of onboarding platform, fully e-signature, KYC, all that stuff. So efficiency, obviously in kind of the table stakes way, but also in taking the data, the performance of these firms and seeing how we can help them with visualizing that data and empowering them to do more at that data. So becoming a truly efficient engine. So that's how we got the voice of the customer. It is through those two groups. And so when we do launch the platform, it's truly going to be, in the eyes of those two groups, ready to use. Not MVP, minimum viable product, not it checks these boxes. It's truly going to be desirable and usable for these two groups if we believe if we meet their needs, those two types of firms, the entire industry will look at us and say, yeah, that's it. That's the one.

Justin Mack (22:14):
Nice. Nice. Yeah, tailored before deployment. Get that feedback before so you don't have to tweak later. It makes sense. And again, it's probably fun. And I just love hearing what your process is specifically at Entrustody. I'm a reporter, I'm nosy. I like knowing how the sausage is made. So appreciate the insight and I'm sure the listeners do too. And with that, just want to transition into the new year. We are here, the time is upon us. People are going to get their priorities straight. We're going to look at all the lists of things to know and things to follow. So I'm going to ask you a similar end of year, start of year question. What are you focused on in 2024? I guess any trends, anything you're following specifically personal goals. If you got any big, I won't have you make resolutions here on the show, then you'll have to come back and I'll have to ask you if you actually kept 'em. And I know most of us don't, but new year goals for yourself? And Entrustody? if you have any of those as well. But anything you want to share as far as your focus and what you see coming next year?

Anthony Stich (23:13):
I really appreciate that question. Personally. I think there's a lot going on in this world around this. I mean, I think when we see the world, it can be very hard. It can be very hard to stay focused and just kind of go into the next year with the right attitude. So I think for me, it's twofold. One, it's keeping my nose to the grindstone, just focusing on the blocking and tackling and not getting distracted by all the stuff going on without, of course, I mean not being ignorant, but that's one. And the second one, and this might sound a little cliche, is just being grateful every year. So I think if you can go into each year being grateful for the opportunities presented to yourselves, that's going to help move you forward, especially in light of what's going on in the world for us to be, we just need to be grateful for what we have.

And I think it relates to career, family, whatever that is. So for me, it's always this year knowing what's happened this year, going into 2024, it's definitely going to be nose to the grindstone, stay focused. Know that intuition or what we're building is the right thing. And two is to be grateful for what we have. Because quite frankly, again, the world around us can be so challenging. But as it relates to the industry and Entrustody, it is continuing to look at, if you look at these trends, these macro trends, you say, well, no, it doesn't matter what's going on. There's still something that needs to be offered, right? Custodian needs to be offered, right? Investors, and advisors need one. So it's making sure outside of all the things going on in this world and in their industry, not being distracted and knowing that there's a mission, right?

There's an ethos. There's something that needs to be done here. And that's what 2024 is all about as it relates to the industry. It's been a crazy few years. It's been a crazy few years. I mean, the fintech map has grown significantly, which has been just mind boggling to me. I think there's been consolidation, all-in-one versus best in breed. I feel like the next two years or so will be a bit of sorting that out at almost like a topological level. I don't think it'll be like one will win out all in best in breed or whatever it is. I think what's going to happen is we're just going to settle a bit, right? Because the market's been crazy, external world affairs, all this stuff. I think we're all just going to be like, take it down a notch, right? Let's all just try and do what's right for these advisors and investors. I think that's going to happen. I think we're all just going to collectively sigh in 2024. That's what I feel because there definitely has been some palpable stuff in the ether, and I think that's going to kind of just calm down in 2024. I don't know if I answered your question. I don't know what happened there.

Justin Mack (26:24):
No, that's perfect. You nailed it. And you know what? Palpable stuff is a really, really nice way to sum up what we're all kind of feeling. And I think that collective exhale in 2024 is something that we're all looking forward to. Let some dust settle because we spent a lot of time kicking up dust. But hell, I haven't seen it settle in years. So it'd be nice to see if we get any of that. And with that, we're actually going to transition to something that has become tradition on the Financial Planning Podcast. We begin with the paying of the toll, but we always end with some good vibes. And we talked about a whole lot, what you're working on now, Entrustody, the path, the very mission based path that got you into the industry in the first place. Being inspired to want to build forward advisors, which is the thing that brought you to the Entrustody team in the first place. And your passions of wanting to just take time to be grateful for what we've got. So a lot to talk about. So with all that considered, what do you love most about the work that you do? If you got a No. 1 thing on that list that keeps you coming back to this crazy, unpredictable, sometimes volatile industry, world and profession, what's that thing you love most that says, yeah, I can't wait to do that again on another Monday?

Anthony Stich (27:31):
That's not fair. You're asking me to pick my favorite child, Justin. I got five kids.

Justin Mack (27:35):
I'm sorry [laughs].

Anthony Stich (27:36):
I do have a favorite child, by the way. But don't…

Justin Mack (27:40):
That'll be for the next podcast. That'll be exclusive. We'll break that.

Anthony Stich (27:45):
Honestly. I could say anything and be happy with my answer, but it truly is the people of this industry. It really is. It really is. There's something so special about the people that work in our space. We're all motivated by the same thing, and it's improving the experiences of the advisor and the end investor, and everyone that I have the opportunity of interacting with at industry events, awards, whatever it is, podcasts just like yourself. I mean, these are good people. These are real people. And what you see is what you get, which I love. So if it's anything, it's knowing that I get to wake up and go to work in an industry where the people are delightful. I call many of them my friends now. So I'm very blessed and grateful for that. Yeah, that's my answer, even though I could go on. But yeah, that's it. We have some really fantastic people in our industry.

Justin Mack (28:44):
Awesome. Not a bad way to close things out, hard to find better good vibes. And people, you hear that? Keep being awesome because Tony, he keeps coming back to work because of it. So I want to appreciate that. And Tony, thank you so much for taking the time, sharing your passion and your energy with us this week on the Financial Planning Podcast. It's been a pleasure.

Anthony Stich (29:03):
Lot of fun, man. Let's do it anytime.

Justin Mack (29:05):
Absolutely. And I want to thank everyone for listening to this week's edition of the Financial Planning Podcast. This episode was produced by Arizent with audio production by Kevin Parise. Special thanks again to our guest, Tony Stich, chief revenue officer at Entrustody. Rate us, review us and subscribe to all of our content at www.financial planning.com/subscribe. From Financial Planning, I'm Justin Mack. Thanks for listening.