Outsourcing Custody and Clearing

Hey folks – Bill Hamm here. As we get closer to the broker-dealer launch, I wanted to cover some important parts of starting this new journey and what it means for IFP. Today I’ll be discussing an incredibly important topic regarding broker-dealers: custody and clearing arrangements.

Although we have been an RIA for over twenty years, we’ve always outsourced the commission-based business to the broker-dealer with whom we were partnered. Self-clearing can be extremely profitable for the firm, however, we have decided against it for a number of reasons.


Cost is a significant factor in this decision-making process. We chose Pershing because of their relationships with over 600 broker-dealers. This level of scale allows us to pay wholesale prices, not retail, for clearing and custodial services, passing on most of those savings to financial professionals and their clients. If we were to self-clear, those clearing costs would typically be allocated as fixed costs. While this is normally not problematic, low trading volume during bad times (such as recessions) can create a drag on financial performance and create significant risk to the firm. Affiliating with Pershing provides significant scale/volume that enables us to characterize these costs as variable, which is extremely beneficial during volatile trading periods.

In addition, outsourcing the clearing and custodial function of our broker-dealer eliminates significant fixed costs associated with creating the infrastructure, hiring the personnel, and providing the resources needed to process securities transactions. There is also a significant cost in maintaining that infrastructure and based on the pricing that we’ve obtained from our clearing firms, it simply doesn’t make sense to bring it in house.


Utilizing an external provider enables our firm to keep up with the latest and greatest in technology. In our case, Pershing provides expansive API capabilities, enabling IFP to integrate multiple state-of-the-art systems in a very efficient manner. This alleviates our need to create that API capability, which is extremely expensive and time-consuming. Also, BNY Melon | Pershing’s annual technology budget of more than $2 billion gives them a significant advantage in staying up-to-date with the latest technology that works. Their business model of supporting multiple firms creates the need to be at the forefront of new technology in order to maintain a competitive edge. This is a fundamental part of what they do.


The cost and complexity of keeping up with changes in the regulatory environment are better suited to organizations that have the scale and ability to make those changes. The ability to spread the cost of regulatory changes across many firms reduces the risk and impact to any one firm.

Recruiting and Growth

Recruiting and growth of the firm is another consideration. By partnering with a firm that works with over 600 broker-dealers, we have the opportunity to recruit financial professionals where a clearing firm change is not an issue; the assets don’t have to move. If we were to self-clear, every new recruiting opportunity would require a movement of assets, which can be a speed bump during the recruiting process.

Multi-Custodian Support

Having been a financial professional for over 32 years and operating under both scenarios, I prefer a multi-custodial approach. My client base had different needs and the ability to service them through a multifaceted environment enabled me, in my opinion, to provide a better outcome for them and their families. It also provided them a greater sense of comfort in that by having multiple options, I was working with them on a consultative basis instead of a sales-oriented basis. The ability to bring the vast resources of these custodians to the table also provided them with a sense of comfort and ease.

Both options have their advantages and disadvantages, however I have always felt that having greater choice can help create greater outcomes for all parties involved.

Last Thoughts

I hope you enjoyed this first look into our thought process as we head deeper down the path toward our ‘Independence Day’, as I like to call it. This is the first of what I hope to be a series of posts over the next few months, so keep an eye out and we’ll see you next time.

Third party service providers mentioned in this post are separate entities from IFP. The Birth of a Technology Platform Publish Date; 11/6/2018 Author: Jordan Slack

Prior to the launch of our broker-dealer, we saw a need for a more intuitive user experience when interacting with our firm. As we sat down at a conference table overlooking Tampa Bay in the early hours of a cool March day, our team had an epiphany. A third-party technology stack was never going to provide the customization, innovative approach, or the level of direct accessibly that we prefer to provide for our financial professionals.

Enter Advisor[X].

We’ve invested a significant amount of time and money planning out the structure and vision of our platform. We started out by determining the core components that would create a frictionless experience for our users and then worked to identify key technology and tool providers that would grant us the flexibility to continuously improve based on user feedback. Here’s how we’re building it.

API Based

We’ve built Advisor[X] on top of established, comprehensive platforms that were developed by companies spending millions of dollars and thousands of developer man hours on R&D. This allows us to focus on what really matters: streamlining the financial professional’s experience. Our engineering team leverages existing APIs that allow for a more efficient transmission of data across applications.

Tech Stack

The underlying tools and methodologies we’ve chosen give us the flexibility to bring features to production more quickly, without sacrificing quality or intentionality. Python, the framework we used to build Advisor[X], is the same technology used to build Instagram. In addition, many of the components that are being used in our backend logic and data interactions are also being deployed by Facebook, Google, YouTube and Dropbox among others.

We chose this stack for a few reasons. In the short term, these tools allow us to bring features to bear far less code than other frameworks. This give us flexibility in how quickly we bring features into production.

In the long term, many of the more complex concepts that will power features within Advisor[X] are being used by the leaders in these fields. The Data Science community has brought a huge amount of knowledge and resource into Python, allowing the integration of machine learning, natural language processing and other complex algorithms to be used in platforms like ours.


Our team of stakeholders has years and years of experience in the financial industry. This combined experience has driven the vision of Advisor[X] from the beginning. That said, it is important that our users direct our roadmap. To quote our CCO, Chris Hamm: “We’re taking every financial professional’s pain point that we encounter and creating a solution for it.”

Our platform is not being built in a vacuum; instead, our financial professionals have the power to guide the development and priority of features that we provide. We have already added several improvements to Advisor[X] based on ideas from our early adoption users and we are excited for what the future holds.

Final Thoughts

We set out with the goal of creating a frictionless financial professional experience that would drive efficiency and reduce the cost of doing business. We’re building it to ensure that Advisor[X] will continue to be relevant as our industry changes and technology evolves. With all of that said, the importance of the tools isn’t in the technicalities; it’s about the flexibility that the tools provide. This flexibility allows us to hold true – now and in the future ¬– to our vision and ensure that Advisor[X] is the best tool for financial professionals.

Third party service providers (OR strategic partners) mentioned are separate entities from IFP.