Pershing restructure is ‘first step’ of multi-year service model shift

As custodial consolidation brings advisor service models front and center, BNY Mellon Pershing is in early stages of what will be a multi-year restructuring of its business.

The clearing firm said at the end of April that it would merge its bank and trust, broker-dealer and RIA custody units under one division, dubbed Wealth Solutions, in an effort to streamline its middle-office resources, technology integrations and service teams.

“Instead of having our business organized around legal entities ... It made more sense for us to organize around client segments,” says Ben Harrison, who is co-heading the Wealth Solutions division with Maura Creekmore, who oversees Pershing’s broker-dealer relationships.

The decision is the “first step” in what will be a multi-year evolution of Pershing’s business structure, according to Harrison, who has been responsible for Pershing’s RIA custody business since May 2020. While plans began last fall, Harrison and Creekmore will use the remainder of this year to plan how their division will work with clients and rethink how they align their employees, he says.

Wealth Solutions is one of two new divisions at Pershing. The other, Institutional Solutions, will be overseen by David Hopkins and serves institutional broker-dealers, investment banks, hedge funds and alternative asset managers.

As some RIAs scale into national operations and broker-dealers ramp up focus on their corporate RIAs, Pershing saw an opportunity to better service both firms, according to Harrison. Some hybrid firms may currently have two service teams at Pershing — one for their broker-dealer and one for their RIA business. The custodian wants to unify that relationship better, he says, although “it won’t happen at a snap of your fingers overnight.”

Through the change, the clearing firm also hopes to more effectively deliver enterprise solutions to smaller-size firms.

“You can do a lot of things right in the RIA custody or broker-dealer clearing business. But one thing you absolutely have to get right is client service, and we are laser-focused on that,” Harrison says.

Greg O’Gara, an independent wealth management consultant, says the reorganization will be a net positive for both Pershing and the firms it services.

“That’s clearly a better way of doing business than trying to structure an organization around legal entities,” he says, adding that a business or service model should always be centered around what a client needs.

The reorganization will not be paired with layoffs, Harrison says, noting that the company is still hiring four more business development employees for its RIA channel as well as more service team members. There will continue to be separate broker-dealer and RIA businesses within the Wealth Solutions unit, he says.

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The clearing firm, like several of its competitors, has seen an influx of net new assets and trading volumes in recent months. Pershing reeled in $28 billion in net new assets in the first quarter of 2021, according to earnings statements. However, revenue for the quarter was down 7% to $605 million from the year-ago period, which parent company BNY Mellon attributed, in part, to money market fee waivers as well as the significant one-time breakage fee from a mystery client in 2020.

Since he was named the new head of Pershing’s RIA segment last May, Harrison has led the RIA custodian through several significant changes, including the introduction of two new pricing models and a reduction in the company’s asset minimum.

Pershing currently serves approximately 500 broker-dealers as well as 740 standalone and corporate RIAs, according to the firm.