Fidelity Investments is setting a new $100 million minimum asset level for registered investment advisors who want to use the company's trading and custody platform. The move may spur RIAs to move assets held at other custodians to Fidelity. Or, it could spark an exodus of small RIAs from Fidelity and a scramble among competing custodians to win their business.

Fidelity is the industry's second-largest custodian after Charles Schwab, providing RIAs with a trading platform and technology. It also safeguards client assets on behalf of RIAs.

A spokeswoman for Fidelity confirms that the Boston-based company will require existing RIA clients to maintain at least $100 million in assets on its custody platform. RIAs have until the end of June next year to meet the new requirement.

"We recognize that change requires thoughtful planning, and Fidelity has committed to providing firms with time to evaluate their options," the spokeswoman says.

RIAs new to Fidelity's platform were already required to meet the $100 million threshold, she says

RIAs don't frequently change custodians because the process can involve a lot of paperwork to move client accounts and assets, which requires approval from the client. Some RIAs, particularly ones with large assets under management, use more than one custodian.

Custody isn't an attractive standalone business, says Alois Pirker, founder and CEO of consulting firm Pirker Partners. It traditionally operates on low margins, forcing custodians to seek significant scale and to generate revenue in other ways, such as selling advisors asset-management or lending services.

Schwab says it has no asset minimum for RIAs and serves 11,000 advisory firms that have less than $100 million in assets under management. Last year, more than 65% of new state registrations chose Schwab as their custodian, according to Jon Beatty, head of Advisor Services at Schwab. "Small RIAs are the backbone of the independent advisory profession, and they always have been," Beatty says. "Whether an advisor is just launching a firm or managing billions, our role is the same: help them grow, compete, and succeed."

Although Fidelity and Schwab dominate the custody sector, they have been facing competition in recent years from new entrants trying to win market share. Their smaller competitors include investment bank Goldman Sachs, robo-advisor Betterment, and fintech startup Altruist, which recently agreed to sell itself to giant asset manager Vanguard. Some of them aren't hesitating to try to pick up business from small RIAs on Fidelity's platform.

Axos Securities, the clearing and custody unit of Axos Financial, has no minimum asset requirement. The company sees an opening to court RIAs in the wake of Fidelity's announcement. "When something like this happens, this is a huge opportunity for a custodian like Axos," Mike Watson, head of Axos Securities , says. "We work with firms of all sizes and we have the capabilities to support both small and large advisors."

Devon Klumb, director of sales at Betterment's RIA custody business, invited advisors to check out his company's offering in response to Fidelity's higher minimum.

"For what it's worth, we don't have minimums at Betterment Advisor Solutions, and the platform automates most of your portfolio management and back-office work," he wrote in a LinkedIn post. "What I love most about what we've built here is that we can (and want) to serve a firm well at any size."