Fidelity gives custody clients below $100 million until June 2027 to grow

Fidelity Investments has told the smaller advisory firms on its custody platform to reach $100 million in assets by June 30, 2027, or the custodian "will initiate the process of discontinuing its custodial relationship" with them. The notice went to firms with less than $100 million in assets already on the platform, and it became public on October 1, when Alex Chalekian, founder and CEO of Lake Avenue Financial, posted the letter on LinkedIn; Financial Advisor Magazine reported the letter and Fidelity's response to it.

The $100 million number is not new at Fidelity's door. The custodian had recently imposed the same minimum on advisory firms joining the platform and is now extending it to existing custody clients "for consistency," a Fidelity spokesperson acknowledged by email, and that email framed the deadline as deliberate: by giving RIAs a next-summer deadline, the company "has committed to providing firms with time to evaluate their options." Two things the notice leaves open are how many firms received it, which Fidelity did not disclose, and where the bar sat before. Different sources put the previous threshold much lower, at $15 million to $30 million, a range the coverage reports could not be confirmed.

A minimum applied at the door screens for growth; the same number applied to the installed base re-underwrites the book, and a re-underwriting comes with a calendar. That calendar is most of what is new here. Client acquisition and market returns are what carry a practice across $100 million, and neither answers to a letter. What the letter changes for a firm holding one is the cost of standing still.

The distance to the line is not the same for everyone on the list. A firm at the bottom of the reported $15 million range would need to grow its assets more than sixfold to clear $100 million, while one sitting just below the threshold might get there on a strong year and a cooperative market. The same notice describes two different problems: for one firm a growth plan, for another a decision about whether the practice belongs on a platform that measures it this way.

Michael Kitces, the industry consultant behind Kitces.com, reposted Chalekian's letter and called the move a sign of "the ongoing squeeze in the custodial margin." His argument, made in his own post, is that free custody pays only when advisors route client cash, mutual funds and proprietary products into revenue lines the custodian owns, while the fiduciary obligation pushes advisors toward the lowest-cost solutions, which he called "the exact things that minimize the custodial revenue." His conclusion runs the rest of the way: "So basically, we have a fiduciary obligation to dismantle the custodian revenue streams. … And we're doing it. Except then the custodians derive all their profits from only large firms … And inevitably focus on only serving them."

Take that argument as given and the $100 million line reads less like a headcount decision than a revenue decision, sorting practices by the ancillary business they generate. Assets are a rough proxy for that; a $90 million book of planning clients billed at a comprehensive rate is not obviously less valuable to a custodian than a $150 million book of lightly traded accounts, though nothing in the coverage says how Fidelity weighs the two. The coverage also does not say whether the custodian is treating the number as a servicing-cost floor or as a segment call, and the difference matters to anyone below it: the first is a threshold a firm can argue about, the second is a definition of who the platform is for.

Chalekian's own conclusion is blunter. He said he holds several accounts at Fidelity, wrote that the notice confirmed his firm's earlier decision to make Altruist its primary custodian, and predicted the decision "is going to backfire." The question he put to the industry, about what happens to the launch and growth of independent firms when smaller firms have fewer custodial options, is the one the letter does not answer.

For a practice on the wrong side of the line, the routes are to grow past it, to move the accounts, or to sell, and the deadline is the only new input into a choice that had been open-ended. Growth is a client-acquisition problem, which a date cannot solve. Moving a book is the option the letter names in its own language, and it suggests every custodian still taking small accounts has a reason to make calls on firms holding the notice. A sale is the third path, and it converts a decision an owner had been deferring into one with a date attached, which is a different conversation with a buyer than the same conversation held on your own schedule.

Kitces' argument points toward a custodial market that serves fewer, larger firms, and Chalekian's points toward advisors with fewer places to go, but both are arguments rather than disclosed plans. Fidelity did not disclose how many firms received the notice, which leaves the reach of the policy unmeasured, and the choice now facing a firm below the line runs on a clock that ends June 30, 2027.