Fidelity tells sub-$100M custody clients to move as Schwab stops short of a promise

The letters Fidelity sent to RIAs that custody less than $100 million on its platform carried a plain choice: grow past the threshold or move the business by June 2027. No fee buys an exception. Fidelity confirmed the notices went directly to affected firms, and the weightiest detail is what the threshold actually counts — assets held at Fidelity, not the firm's total AUM, so a practice can be meaningfully larger than the number on the envelope and still be shown the door.

Fidelity's $100 million joining minimum, until now a screen applied only when a firm came aboard, now applies to RIAs already on the platform, as Financial Planning reported. A minimum evaluates applicants; applied to accounts already open, it works as a deadline. Michael Kitces called the hard no bizarre, and the reasoning bears following: earlier increases in minimums left small firms the option of paying a fee to stay, while this one leaves them nothing to pay.

The coverage does not say how many firms received letters or how far below the line a typical recipient sits, but it does establish that the population is defined by where the assets are held rather than by the size of the practice overall. A firm with a long client roster and a single custodian can be, in Fidelity's accounting, a small client, which makes the displaced group harder to size from the outside than a headline about small RIAs suggests.

The binary in the letter is its own statement: a custodian that would rather lose an account than charge it an exception fee has reached a conclusion about what that account costs to serve, and the conclusion now applies to every firm under the line. The arithmetic sorts the recipients into two groups the coverage treats as one. A book sitting just under the threshold has a plausible route to June 2027 — bring held-away assets onto the platform, consolidate a few accounts, clear the bar — while a book that is a small fraction of the minimum is not going to multiply its Fidelity assets on the strength of a deadline. For that firm the letter is not a growth target at all. It is a moving notice.

The welcome arrived quickly: Schwab says it already serves 11,000 micro-practices but stops short of promising to accept the clients Fidelity is pushing out, while Apex, Altruist and Robinhood's TradePMR also say they are open to the books. The alternatives advisors have named so far carry conditions of their own, and the coverage does not detail what those conditions are. Nor does it attach a dollar figure to "micro-practice," which leaves the 11,000 as a claim about a segment rather than a promise about a threshold.

Eleven thousand practices is an argument from scale, evidence that small books are workable on Schwab's platform, extended in place of a commitment. The distinction matters. A custodian that promises to take a category of clients has priced the promise and accepted it. A custodian that observes how many such clients it already serves has said something true and agreed to nothing, and the difference is what the displaced firm has to work with when it picks up the phone.

The other three have answered the same way, which is to say they have answered the easy half of the question: saying they are open costs nothing and commits nothing, while naming the conditions is where a custodian's economics become visible, and that is the half that has not been published. Those conditions are what separate a welcome from a term sheet, and for a book that has to move on a deadline they are the only details that decide the outcome.

None of this amounts to misconduct, nor should it be read that way. Custody is a business with a cost to serve and every platform draws a line somewhere; what Fidelity's letters add is that the line now moves backward through a book already on the platform. The mechanics of the next several months will sort the displaced practices by which platform's economics they can live with, and that sorting has little to do with how warm the welcome sounded.

Whether the same book Fidelity has priced as not worth serving is profitable elsewhere depends on what it costs the next custodian to hold it, and nobody has published that number. A welcome without terms tells an adviser that a platform is interested; it does not tell the adviser what the platform has decided the account is worth.

The regulatory backdrop moved the same week, when the SEC proposed custody relief for RIAs with discretionary trading authority — a 760-page proposal that would drop the written-agreement and outside-exam requirements for firms meeting three conditions. Both requirements sit between an adviser and a new custodian, and the proposal's direction is to take them off the table for firms that qualify. It is a proposal rather than a rule, and the relief is conditional by construction: the three conditions are the price of it, so the change narrows the paperwork without eliminating the test.

The population the relief covers is worth keeping separate from the population Fidelity displaced: the proposal reaches RIAs with discretionary trading authority, while Fidelity's letters reach RIAs whose assets at Fidelity fall below a dollar threshold. The two groups overlap in places and are not the same, and an adviser reading the proposal as a solution to the letters would be reading it wrong.

The SEC filed the custody relief alongside separate custody amendments acknowledging adviser self-custody for crypto, with an accompanying statement arguing that rules built for paper certificates cannot govern assets recorded on a distributed ledger. On its face the amendment addresses digital assets, but read beside the discretionary-authority proposal it points at where the commission's custody thinking is going — toward a framework organized around what an adviser can actually control rather than around the physical form of the asset. Both proposals cover advisers who hold something directly, one as trading authority, the other as keys rather than certificates, and both treat the older rulebook as written for a world that no longer matches.

For a small RIA weighing a move, the two proposals sharpen one question: if a written agreement and an outside exam are no longer the price of discretionary authority, then the friction that has historically made a custodian change expensive comes down, on paper, for firms that meet the conditions. Lower switching costs weaken the incumbent's advantage in inertia and strengthen whoever offers the better ongoing arrangement.

The scramble Fidelity set off is being described as a rescue, and the four platforms that say they are open have been described as rescuers. The word oversells what has been offered: what each has said, in effect, is that small practices are welcome in principle, while what none has said, in the accounts available, is what a sub-$100 million book costs to serve once it lands — which charges attach to the relationship, what sits on the product shelf, and what the platform expects the account to be worth over the years it holds it.

That is the contest the deadline is running. Fidelity's letters set a date and also set a price on the sub-$100 million relationship — in effect, that the account is not worth keeping even with a fee attached — and every custodian now saying it is open is implicitly disagreeing. The useful question for an adviser is not whether the door is open, then, but what the platform has decided the book is worth, and the two answers rarely arrive in the same sentence.

There is a second reason to expect the terms to stay quiet. Fidelity's move applies its joining minimum to relationships written under the old one, which tells the small-RIA segment that a custodian relationship it treats as durable can be reunderwritten by the custodian. Any platform that publishes a welcoming term sheet is publishing a commitment it may want to revisit, while an informal welcome carries no such obligation — which is what recommends it to the platform and what should temper the displaced firm's relief.

If the SEC proposal takes some of the friction out of moving, the difficulty of leaving explains less of an adviser's decision to stay, and the platform's economics — what the relationship earns the custodian after the transfer — carry more of the weight.

The coverage does not say which platform will land the most of these books, nor what any of them is offering beyond an open door. The date on the letters is June 2027, and the number anyone has volunteered so far is 11,000 — a count of clients a custodian already has rather than a term a custodian has agreed to.