How Pershing is spending the $50M from parent BNY Mellon

Some of the biggest players in the financial services are darting their eyes — and their dollars — toward the RIA space. Last year, BNY Mellon invested $50 million in the RIA division of its custodial platform, Pershing.

“When the new [BNY Mellon] CEO, Charlie Scharf, came in, he looked across the enterprise and said, ‘Where are the stable businesses, where are the declining businesses and where are the growth businesses?’” says Mark Tibergien, CEO of Pershing Advisor Solutions. “The RIA custody business was identified as one of the fastest growing enterprises.”

A BNY Mellon spokeswoman declined to comment.

Pershing’s RIA division now holds 33% of the custodian’s assets, up from only 5% of its total assets a decade ago, he says. Advisory assets reached $665 billion in March, an 8% increase over last year, according to the firm.

With a portion of the investment, the RIA custodian plans to hire 35 new people by the end of this year, namely technology consulting specialists, Tibergien says. He adds the firm is recruiting from rivals, as well as other sources.

Pershing is also earmarking some new funds to technology integrations and tools, as part of its strategy to keep pace with heightened RIA expectations.

“The rate of change in technology is [about] every six months. ... Continuing to invest in proprietary seems to be a really hard game,” Tibergien says.

Akin to the other three large custodians, Pershing’s technology strategy has changed over the past three to five years. While it once focused on proprietary solutions, “we started to realize that our firms were changing,” says Michelle Feinstein, director of technology client engagement at Pershing. "The way that they were using technology was changing. And so we had to change,” she says.

The custodian is making a “major foundational shift,” Feinstein says. In part, it is focusing less on client accounts and more on other portions of the client relationship, she says. Flexibility is an important part of this strategy. Advisors will be able to better control how information is presented to clients. “It’s going to affect every screen that the advisor is leveraging going forward,” she says.

Integration and customization are key, according to Christina Townsend, head of platform strategy at Pershing Advisor Solutions.

“Being the master integrator is a core part of our strategy,” she says, adding: “We're focused on meaningful and relevant integrations versus just having a sheer number of them.”

Apart from new hires, the firm has also created an integration advisory council made up of 14 vendors on its platform, including Envestnet Tamarac, MoneyGuidePro and RedTail, Feinstein says.

“Rather than just doing an integration and walking away,” Pershing wants to work together with vendors on building out future developments that will work well on the platform, Townsend says.

Investments are also being made in digital initiatives such as Pershing's new tech assessment tool which aims to help advisors with technology decisions. After an RIA provides answers to questions, the tool generates a report of software recommendations, cost, implementation, integration, data management, special features and ease of use. The assessment tool will also analyze a firm’s entire tech stack. Townsend says it will benefit firms with specific needs, such as those working with many foreign currencies.

Because many RIAs prefer to develop their own tech solutions, or customize existing products for their own practices, Pershing is building the next generation of its API library and store, Feinstein says. This initiative currently has around 50 REST APIs and gives firms direct access to code. “It'll be a one-stop-shop experience for all services related to integration,” Feinstein says.

Pershing is also allocating funds from the new budget for customization between offices within the same firm. Later in the year, the firm will introduce a “flexible hierarchy,” where a firm can personalize its tech and tools practice by practice.

Beyond integrations, the firm is still experimenting with a proprietary AI engine that would predict life events or behaviors, such as whether a client is contemplating switching advisors.

It’s also investing in a new dashboard, dubbed “Money in Motion,” to help measure and visualize overall business performance outside of the markets “instead of just pure data mining,” Feinstein says. The new tool is in beta testing and should be available during the second half of this year, she says.

Other working developments include mobile alerts, testing chatbots and improving cost basis, billing and corporate procedures to make them more intuitive, according to Pershing.

Some advisors have noticed Pershing’s efforts. “What I see is a focus, number one on security, but beyond that, the end-user experience,” says Leah Eller, an advisor at Snowden Lane Partners in San Antonio, Texas. She noted “seamless” tech integration.

Looking forward, the custodian “is engaged in some additional conversations about additional investment as we continue to provide a return,” Tibergien says.

Either way, the custodian has its hands full on several projects. “We’re redesigning every aspect of the advisor experience. It will take us a little bit of time. But that is exactly what we're doing,” Feinstein says.