In a special report on brokerage services published earlier this year, an advisor from another firm wrote, “I have used Schwab as my preferred custodian since the early 1990’s. Have experienced many transitions with Schwab. The last two years and still today. Schwab’s service to advisors is abysmal in nearly all aspects. Awful.”1 But this decline in service is not an isolated incident. Another advisor wrote of TD Ameritrade, “Last year with TDAI was a nightmare. Not only long hold times, but lack of replies through the message board on VeoOne, unqualified people handling the requests, and worst of all, they couldn’t keep up with the QCD’s (qualified plan distributions, like Required Minimum Distributions from IRAs) starting in October 2021. Some of the requests were not paid until after year end, some were sent without identifying the donor, and some were duplicated! It took forever to get it all straight, and I got tired of apologizing to clients.”2

With the stock market going through a bear market, it is pretty evident that financial service firms are seeing revenues down, meanwhile costs are tending to increase due to inflation. It would be nice if this was due to the bear market in both stocks and bonds because bear markets end. But this trend has been evident since before COVID in 2020. During the period from 2011 through 2018, over 60% of the firms in the financial services area saw record revenues and assets, but their costs rose faster than their revenues.3 The bear market and labor shortage have made it worse.

At AFC, we have always focused on finding and using those financial service vendors who are growing revenues faster than expenses. We use Interactive Brokers as our custodian, which has been growing profitably during these times. We just switched to Advyzon from Morningstar to produce our third-party client performance reports. That switch was smooth and relatively rapid.

We are moving our 401K clients to new service providers. That switch has been painful. With the exception of several smaller 401Ks, we began that switch in January of this year and it was just completed in October. What should have been less than three months has taken ten.

Our third-party administrator (TPA) for many years was Panagiotu Pension Advisors (PPA), but they sold to Definiti when their founder retired. Service at Definiti was terrible. When we notified them we were going to transfer out several clients to another TPA, they refused to communicate with AFC’s team. I had to reach out to the regional manager to get any response from Definiti. Not only that, but for one of the 401K clients they incorrectly filed form 7004 with the IRS instead of the 5558 form. The IRS responded by assessing the 401K client personally with a significant penalty. Definiti did not step up to their mistake or offer to settle the penalty. I am convinced they would have left the client to pay, although the IRS eventually forgave the penalty. Obviously, we will move all client 401Ks away from Definiti. We are moving to Hunnex and Shoemaker, whom we believe to be the best TPA in the northwest.

But Definiti was not the only problem. The recordkeeper, Aspire, sold itself to PCS Retirement Systems. The Aspire personnel we had been dealing with abandoned PCS and the service plummeted. They changed access to the client portal but took weeks to respond to requests to get login information. I had to call a former Aspire manager who called the PCS manager who finally got the PCS personnel to respond. In less than one year, PCS appeared to require a cash infusion from LLR partners. We moved away from PCS as well. We moved to Nationwide, but Nationwide, too, has been frustrating in its service.

This is the status of the industry today, and these are just the issues we see. For every problem we see, there are probably six to ten occurring internally with the financial services firms. And it seems not only we recognize these concerns. The SEC has proposed a new rule that would require financial firms to do due diligence on their vendors. “The 232-page proposal would also require RIAs to determine whether their vendors have material sub-contracting arrangements and require advisors to mitigate and manage any possible risks to their clients.

“The agency says any poor oversight of vendors could hurt clients financially, through either market losses, increased costs or lost opportunities. There is also the chance when services are outsourced that clients could be defrauded, misled or deceived, the SEC said in its proposal.”4

AFC gets a proposal a week to outsource some aspect of our business to an outside vendor. Other firms will outsource their investment selection or their back-office support or their marketing or their compliance or some other aspect of the business.

At AFC we have been doing our due diligence for years and selecting vendors that we believe have the financial resources to stay longer-term without squeezing service or putting any of our clients at financial risk. Now we see the financial regulators are raising the issue. I believe that there is a good chance a number of other financial advisors are putting their clients at risk. If you are seeing a drop in service at your financial advisor or custodian, you should give serious thought of making a change.

Mike Adams


1. “Inside Information: Custodial Alternatives Special Report.” Inside information, September 2022.

2. Inside information, 2022.

3. Lim, Dawn. “The Price of a Bad Year for Money Managers: Fewer Jobs, Less Pay in 2019.” The Wall Street Journal, November 19, 2018.

4. Longo Tracey Longo, Tracey. “SEC Proposes Rias Rigorously Upgrade Vetting of Their Vendors.” Financial Advisor, October 26, 2022.–vendors-70325.html?section=43&utm_source=FA%2BSubscribers&utm_campaign=2974eeac6d-FAN_AM_Send_070022_COPY_01&utm_medium=email&utm_term=0_6bebc79291-2974eeac6d-222675701.