GRAPEVINE, TEXAS — The era of subscription fees taking hold in the world of RIA custodians may still be a long way off.
In an interview with Citywire on the sidelines of Pershing’s Insite conference, Pershing wealth solutions co-head Ben Harrison (pictured) said the custodian’s 2020 effort to introduce subscription-based pricing to its customers never really got off the ground.
‘We didn’t have a ton of adoption of subscription [pricing] over the last couple years,’ Harrison said.
In early March of 2020, just weeks before the pandemic halted large amounts of economic activity in America, Pershing rolled out a pricing model which allowed advisors to custody their assets with the BNY Mellon subsidiary for as little as $25 a month, with the fee charged on a tiered basis depending on the amount of assets an RIA held with the custodian.
The model was a victim of poor timing, Harrison explained. When the Federal Reserve cut interest rates to effectively zero in response to the pandemic, it kneecapped a key portion of Pershing’s subscription fee model: cash yields.
Subscription fee users were offered access to different tiers of cash yields, which were dependent on how much money advisors held in Pershing’s cash sweep accounts. The yields jumped when cash balances exceeded a $100k threshold.
The problem is that all yields essentially fell to 0% in 2020. ‘Once there was no yield in any cash products, the idea of having that benefit really didn’t have…