There are a handful of issues that can stop an otherwise serious independence conversation in its tracks. Securities-based lending is one of them.
I hear some version of this all the time:
"My clients have large lines of credit against their portfolios. I can't leave. Independent RIAs don't have that capability."
They do.
The real issue is not whether lending exists in the independent world. It does, and in many cases an independent RIA can create more choice around lending than the advisor had inside the wirehouse.
The issue is transition mechanics.
An existing securities-based line does not simply move with the client's account. The loan, the pledged collateral, the lien and the destination account all have to be dealt with in the right sequence. If you know that early, it is manageable. If you discover it during transition week, it can become a mess.
That distinction matters.
Where the Myth Comes From
I understand why advisors worry about this.
At a wirehouse, lending is woven into the client relationship. The bank is right there. The advisor knows the process. Clients may have used the same lending platform for years. And for many advisors, lending balances are part of how the firm measures the total relationship.
So when an advisor starts considering independence, it can feel like lending is one of the institutional capabilities they would have to give up.
But the lending capability is not unique to the wirehouse model. What changes is how you access it.
Inside a wirehouse, you generally have one firm's balance sheet, one set of underwriting standards and one lending ecosystem.
As an independent RIA, you can build a lending bench around the needs of your clients: custodian-affiliated programs, private banks and third-party lenders.
That is a different model. And for the right firm, it can be a better one.
What Actually Happens to an Existing Line at Transition
This is the part I care about most, because this is where theory meets an actual breakaway.
An existing securities-based line of credit generally does not transfer with the brokerage account. The loan is a separate agreement with the lending institution, and the assets securing that loan are pledged. You cannot treat those assets like an ordinary unencumbered ACAT.
For each client with an outstanding line, you need a plan.
Sometimes the client pays it off. Maybe the line was used for a short-term real estate bridge or a tax payment and the balance can simply be retired.
More commonly, the client refinances into a new facility. The new lender establishes the line, proceeds are used to pay off the old loan, the existing lien is released, and the assets can then move to the new pledged account.
Technically, a client can also leave the pledged assets and existing loan behind for a period of time. In a real breakaway, however, that is rarely the outcome an advisor wants. Leaving meaningful assets at the former firm creates an opening for another broker or advisor to establish a relationship with your client. That is exactly why the lending solution has to be solved before the move, not treated as something you can clean up later.
None of this is particularly exotic. But it does have to be planned.
Before a team resigns, we want to know: Who has a line? What is outstanding? What assets are pledged? What is the current rate? Are there concentration issues or other underwriting considerations? How sensitive is the client to any change?
That inventory should happen early, and needs to be understood well before you resign.
And this is where the conversation usually gets bigger than SBL.
An advisor may start with a very specific concern: What happens to my clients' securities-based lines when I leave? That's the immediate transition question.
But if you're building an independent RIA, the better question is broader: What lending capabilities do my clients use today, what might they need tomorrow, and how should I build the new firm's lending architecture around them?
That includes SBLs. But it also includes margin, portfolio margin, mortgages, specialty credit and, for some UHNW practices, much more.
Once you look at it that way, lending stops being a transition obstacle and becomes a design decision.
Beyond SBL: Designing the RIA's Lending Architecture
Start by being precise. Margin, portfolio margin and securities-based lending are different tools designed for different needs.
Margin is the traditional brokerage loan against eligible securities in an account.
Portfolio margin (sometimes referred to in practice as aggregate margin) looks at risk across a broader portfolio and can create different borrowing capacity for eligible clients and strategies.
Securities-based lending, or SBL, generally refers to a non-purpose loan secured by eligible investment assets. Unlike margin, the proceeds are not used to purchase securities.
Those are not obscure products unique to independence. They are versions of the same lending tools advisors and clients are accustomed to seeing at banks and wirehouses.
The real diligence question is not, "Does this custodian offer lending?" Of course the major custodians have lending capabilities. The better questions are: How strong is the balance sheet behind the program? How much appetite does the institution have to lend? How does it treat concentrated positions? What are the advance rates and pricing at the loan sizes your clients actually use? How does it handle larger or unusual credits?
This is where a team's current book matters. If you have $75 million of existing client loans, show the custodian the book. If several clients routinely need eight-figure facilities, put those scenarios on the table. If you expect lending demand to grow, say so. Due diligence should be based on the business you are actually bringing and the business you intend to build.
Schwab. Schwab Bank offers its Pledged Asset Line to eligible RIA clients through Schwab Advisor Services. It is a non-purpose line secured by eligible non-retirement assets. Pricing and advance rates depend on the size and composition of the relationship. Schwab has also made clear publicly that lending is an area where it intends to continue investing.
Fidelity. Fidelity provides access to securities-backed lending through banking relationships, including programs designed for RIA clients. Depending on the client and facility, that can create access to substantial non-purpose borrowing without requiring the RIA itself to become a bank.
BNY Pershing. Pershing has long offered securities-backed lending capabilities through LoanAdvance, with collateral and borrowing information integrated into the advisor environment. Its connection to BNY can also matter for firms serving clients with broader private-banking needs.
Goldman Sachs Advisor Solutions. Goldman came into RIA custody with lending as an important part of the value proposition. For UHNW firms, the ability to have more sophisticated balance-sheet conversations (including around certain alternative assets) can be particularly relevant.
And then there are third-party lenders.
This is an important part of the independent model that advisors sometimes miss. You are not limited to whatever happens to sit inside your custodian. Independent RIAs can establish relationships with banks and specialty lenders and create competition around a client's borrowing needs.
Product terms, eligibility, pricing and availability change. We verify the current capabilities and actual economics during the custodian and lending diligence process rather than designing around a brochure.
Now Make the Lenders Compete
This is where independence really flips the model.
At a wirehouse, the advisor and client operate largely inside a closed ecosystem. The firm manufactures or selects the solutions, sets the economics and distributes them through its advisors. If the client wants to borrow against a $10 million portfolio, the answer is largely determined by that institution: its advance rates, its treatment of concentrated positions, its underwriting rules and its pricing.
Independence changes who gets to compete for the relationship.
If one custodian's lending rate is not competitive, you do not have to pretend it is. You can take the opportunity to another custodian, a private bank or a third-party lender and ask them to compete for the business.
That is one of the most powerful parts of open architecture, and it extends well beyond investment products. Custody, technology, banking and lending can all be evaluated around what works for the client and the RIA rather than what one institution happens to distribute.
For the end client, that matters. Their assets are no longer captive to one institution's menu. The advisor can use the scale and quality of the relationship to create competition in the marketplace.
Suppose a client has a $10 million portfolio and wants to borrow $3 million. Maybe one lender is more aggressive on pricing. Another is more comfortable with a concentrated position. Another has a better solution for the client's broader balance sheet. You can put the facts in front of the market and see who wants the business.
That does not mean the independent answer will always be cheaper or better. Anyone promising that is overselling it.
It means you have choices, and the institutions have to compete.
We have seen independent teams obtain very competitive lending terms and, in some cases, improve upon what clients had before. We have also seen situations where the existing economics set the benchmark the new lenders had to meet.
Once you stop and think about it, that is a meaningful inversion of the wirehouse model. Instead of distributing the solutions of one institution, the independent advisor can make multiple institutions compete to solve for the client.
The Tradeoffs Are Real
I would not tell an advisor that this is frictionless.
At a wirehouse, there may be a banker down the hall or one phone number to call. In an independent firm, you have to build the bench. Someone has to own the custodian relationship, the private-bank relationships, the specialty lenders and the process for getting a client from question to funded loan.
And the more complex the client base, the more important this becomes.
If your clients regularly need aircraft financing, commercial real estate credit, art lending, large mortgages, letters of credit or other bespoke balance-sheet solutions, that is not something I would wave away with "we'll figure it out after launch."
We would design for it before launch.
For many RIAs, those situations may involve a small number of households. For a UHNW or multi-family-office business, they may be central to the service model.
Know which firm you are building.
What the Best Teams Do Before Day 1
The teams that handle lending well tend to do four things.
- First, they inventory the lending book early. We want every household with a line, the outstanding balance, pledged collateral, current economics and anything unusual about the facility.
- Second, they make lending part of custodian selection. If borrowing is important to your clients, it belongs in the RFP and the scoring. And the diligence should cover the full lending toolkit (margin, portfolio margin and SBL) against the actual needs of the book.
- Third, they test real scenarios. I would rather see indicative terms on actual client fact patterns than 30 pages of marketing material. When the advisor asks, "What happens to Mrs. Smith's $4 million line?" we want a real answer.
- Fourth, they build the refinancing sequence into the transition plan. Payoff. Lien release. Asset movement. New pledged account. Funding. Everyone involved should know the order and who owns each step.
This is the kind of detail that clients may never see when it goes well.
They absolutely notice when it goes badly.
The Bottom Line
Securities-based lending is not a reason an advisor cannot go independent.
It is a reason to build the new firm correctly.
You may leave behind a familiar lending platform. What you can build in its place is broader: a lending architecture around the clients you actually serve, with multiple institutions competing for the business where appropriate.
That is a very different idea from simply asking whether the new custodian has an SBL product.
But none of it happens automatically.
This is a good example of what we mean when we say we build RIAs.
We do not hand a team a custodian comparison and wish them luck. We get into the operating details that can derail a transition: pledged accounts, lien releases, lending relationships, client communication, sequencing and ownership. You can read more about what it actually costs to launch and how we structure the build from day one.
The goal is not simply to get the assets out.
The goal is to have the new firm ready to serve the client when they arrive, and to give that firm the freedom to keep making the marketplace compete for the client's business long after launch.
That is the difference between leaving a wirehouse and actually building an RIA.
Fusion Financial Partners has guided 78+ teams through the move to independence. If lending is the last thing standing between you and a decision, let's have a confidential conversation and go through your book line by line.