Fidelity Investments has set a June 30, 2027, deadline for its smallest registered investment advisor clients to reach $100 million in custody assets or move their accounts elsewhere. The custodian, which trails only Charles Schwab in RIA custody market share, had already applied this threshold to new advisors; now it is extending the requirement to existing relationships, a move that affects 986 firms, according to industry data.
The $100 million figure is not arbitrary. Under the Investment Advisers Act of 1940, it is the threshold at which advisors typically shift from state registration to SEC registration. As of June 2026, more than 20,500 advisors were registered with states or exempt from SEC registration, per the Investment Adviser Association and compliance firm Comply. The custody market is highly concentrated, with Schwab, Fidelity, BNY Pershing, and LPL Financial controlling nearly 85% of U.S. assets, according to Cerulli Associates.
Industry observers see the move as a response to the economics of serving small firms. Tony Ling, managing partner at Rise Growth Partners, an Austin-based firm that takes minority stakes in RIAs, noted that custodians profit from scale. A $40 million RIA can cost nearly as much to service as a $400 million one, he said. "I don't read this as a verdict on whether smaller RIAs can provide strong service to clients; plenty of them do. But it does signal that sub-scale firms can no longer assume the infrastructure around them will remain inexpensive or easy to access," Ling said.
Allen Darby, CEO of Alaris Acquisitions, a Charlotte-based M&A advisory firm, was more blunt. He sees the minimum as evidence that smaller wealth businesses are not worth the custodians' time. "We think there will be a market for smaller firms to exist; it's just they won't be able to deliver the same degree of service, expertise or experience to their clients that larger firms provide," Darby said. He warned that relying solely on client relationships is "an incredibly bad business decision."
Ola Abdul, founder and CEO of London-based wealth platform Fundment, challenged the notion that small firms are inherently uneconomical. "Custody assets themselves are not what consumes capital; leverage, settlement exposures and operational complexity do," he said. "Modern technology has transformed what it costs to serve a $40 million firm. The minimum is a choice, not a law of economics."
Affected owners face three paths: switch custodians, grow organically, or join a larger platform. Moving to a smaller custodian is the most direct fix, but Ling cautioned that repapering accounts takes time and may test client goodwill. Growing independently preserves control but requires adding assets quickly without straining a lean team. Joining a platform solves scale but often means ceding ownership, brand, or decision-making. Abdul advised against letting a custody change drive strategy: "Don't sell your independence to solve a paperwork problem."
The timing coincides with a busy M&A market. Echelon Partners projects about 500 RIA transactions in 2026. Fidelity's midyear review found that acquired RIA assets nearly doubled to $343 billion in the first half, even as deal count fell 9% to 120 transactions; the median acquired firm managed $630 million. Ling expects the minimum to accelerate consolidation, but he noted that staying independent is possible with tradeoffs, including higher costs and a greater reliance on technology and AI. "For sole proprietors in particular, this may accelerate the need to put a thoughtful long-term succession plan in place," he said.
Darby argued that joining a larger firm does not necessarily mean losing independence, since many large firms are themselves independent RIAs. Cheaper technology will put once-exclusive capabilities within reach of smaller practices, he said. However, many owners of lifestyle businesses have little incentive to invest in systems built to outlast them. He expects technology to speed consolidation, as smaller firms struggle to compete on service and expertise. The decision, experts agree, is not just about custody—it is about the future shape of the RIA industry.
