The Family Firm Blog

The Role of Custodians

Posted by Adam Van Deusen on 11/17/20 2:03 PM

Who Holds Your Money?

If you are considering working with a financial planning firm, you might wonder who will have control of your assets if you become a client. Will the financial planning firm hold your assets? Will you be able to access your money when you need it?

The Role of Custodians

In the past, investors held their investments in a variety of manners, including paper stock certificates. Today, nearly all investments are maintained electronically, generally at investment custodians where the assets can be held securely.

Here at The Family Firm, we do not directly hold any assets on behalf of our clients. Instead, we recommend that clients move assets to a custodian, which allows clients to retain control of their assets while permitting our investment team to place trades and monitor portfolio performance, among other actions.

How to Choose a Custodian

As described in The Family Firm’s ADV disclosures, we evaluate custodians on their ability to offer access to a broad range of investments, provide competent and timely execution of our trade instructions, provide competent and timey services on paperwork and other account management processes, and charge reasonable fees. As a Fee-Only™ firm, we are not compensated for directing client assets to a particular custodian.

Based on these criteria, we suggest Charles Schwab & Company, Inc. as custodian for clients’ assets. Schwab offers discount brokerage services and is a qualified custodian.

Will All My Accounts Be Held at Schwab?

Schwab offers a wide range of account types, from taxable brokerage accounts to trust accounts and Individual Retirement Accounts (IRAs). We prepare the paperwork necessary to move client assets to Schwab when possible. However, employer-based retirement accounts, such as 401(k), 403(b), 457, and TSP accounts, must remain at the employer’s choice of custodian until you leave that employer.

What Happens if the Custodian Goes Out of Business?

When using an investment custodian, you retain ownership of your assets. In compliance with the Securities and Exchange Commission’s Customer Protection Rule, customer securities are segregated from securities owned by the custodian itself. Customer assets are unavailable to the custodian’s creditors in the event the custodian became insolvent. Charles Schwab also maintains insurance to provide further confidence that investors will be able to access their assets when needed.

As you can see, custodians provide an important service for investors. Please contact us to find out more about how we can help you reach your financial goals.