Practice software vs a custodian platform: what each does for a small RIA
A custodian holds client assets, executes trades and provides statements and account data. Practice software is the firm's own system of record: clients and households, the model each account follows, IPS documents, billing and compliance records. Some custodians bundle software with custody, but the firm stays responsible for its own records, and keeping them outside the custodian means they stay put if the firm ever changes custodians.
Ask a small-firm advisor what platform they're on and you'll often get a custodian's name. Ask where they'd look to prove which model an account was meant to follow last March, and the answer is usually a folder, a spreadsheet or "I'd have to check". Those are two different systems, and it helps to see them separately.
What is the difference between a custodian and practice software?
The custodian records what happened in each account. Practice software records why, and what was supposed to happen. The custodian is where client assets sit and where trades are executed. The firm's own system of record is how it knows what each account should look like, what each client agreed to, what it billed and which procedures it follows.
| Job | Custodian | Practice software |
|---|---|---|
| Holds client assets | Yes | No |
| Executes trades | Yes | No |
| Account statements and data files | Yes | Imports them |
| Fee deduction | Yes, when authorised | Calculates and documents the bills |
| Which model each account follows, and since when | Usually not | Yes |
| IPS documents and their versions | Usually not | Yes |
| Procedures, registers and compliance records | No | Yes |
| Reason behind each trade | No | Yes |
This is the general pattern. Individual custodians and platforms vary, so check what yours provides.
Why keep the practice record separate from the custodian?
The practice record should be separate because the firm's obligations don't move when its custodian does. Three situations make the point:
- Custody decisions change. Minimums, pricing and service levels shift. If the firm's records live inside the custodian, every custody move becomes a records rebuild.
- The firm owns its records duties. Those duties sit with the adviser, not the custodian. "The custodian keeps everything" is not a records plan.
- One firm can use more than one custodian. A single practice record keeps their accounts on the same models, billing method and procedures.
How does this play out for a small firm?
Take a hypothetical two-person RIA with about 100 households, all at one custodian. Its models are in a spreadsheet, its IPS documents are PDFs in a shared folder and its billing is a workbook that reads the custodian's balance file each quarter.
A client asks why their account sold a bond fund in the spring. The custodian's trade confirmation shows the sale, the price and the date. It doesn't show that the firm moved that client from its income model to its balanced model in February, or that the IPS was updated and re-signed the same month. That history lives in the firm's spreadsheet and folder, if it was recorded at all.
Now say the firm decides to move to a second custodian for new clients. The custodian data for the new accounts will arrive in a different format. Nothing about the models, IPS documents or billing rules needs to change, as long as those live in the firm's own record and not inside the first custodian's tools. If they do live in the first custodian's tools, the move is also a records project.
What should you ask before moving either?
Ask these before you change a custodian or a software vendor:
- What account data does the custodian send, in what format, and how far back?
- If we leave a platform, what can we export, and in what form?
- Where do our models, IPS documents and procedures live today, and do they move with us?
- Who reconciles fee deductions to our billing calculations?
For the full list of records to carry across, read the custodian-move records checklist.
When is separate practice software overkill?
For a solo firm with one custodian, a few dozen households and one or two models, the custodian's tools plus a well-kept folder can be enough. What matters is that the firm's own records exist, are dated and can be produced. Software becomes worth it when keeping that folder current takes more time than the work itself, or when you add a second advisor and the records start living in two heads.
| Firm | Reasonable setup |
|---|---|
| Solo, one custodian, simple billing | Custodian tools plus a disciplined folder and spreadsheet |
| Two or more advisors, several models | Practice software on top of the custodian |
| Planning to add or change custodians | Practice software, set up before the move |
Where does Advorra sit?
Advorra is practice software. It doesn't hold assets or execute trades. It keeps a small RIA's clients and households, versioned models and the strategy each account follows, IPS documents, the trade blotter, quarterly billing and compliance registers in the firm's own workspace, on top of the custodian it already uses. It works from your custodian's account files. To see how it sits alongside your custodian, visit the product page.
General information, not legal, compliance or investment advice. Custodian services vary; check details with your custodian.
Questions advisors ask
What does a custodian do for an RIA?
A custodian holds client assets, executes trades, deducts fees where authorised and provides statements and account data files.
Can a custodian platform replace practice software?
Some custodians include software tools such as portals or reporting. Whether that covers your firm's records, procedures and billing method depends on the platform. Check what you can export and what stays with you if you leave.
Do I still need practice software if I only use one custodian?
Not always. A solo firm with one custodian and simple billing can keep its own records in documents and spreadsheets. The case for software grows with households, models and the number of records you have to keep current.
Who is responsible if the custodian's data is wrong?
The custodian answers for its own statements, but the firm answers for its own records, including its billing. That is why firms check fee deductions against their own calculations instead of assuming the custodian's figure is right.
Is Advorra a custodian?
No. Advorra does not hold assets or execute trades. It sits on top of the custodian a firm already uses and works from its custodian's account files.
See it on a demo firm
Advorra is practice software for independent RIAs: clients, models, IPS, billing and compliance records in one place, on top of the custodian you already use. Built by The CollabHub.
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