Custody / Custodian

In plain words

Custody is the professional safekeeping of a client’s assets and the keeping of records of them. A custodian is an institution that does this: usually a bank or a specialised company. Put simply: your securities and assets are held by a reliable custodian, not “somewhere at the broker’s”.

The key idea is segregated record-keeping. Clients’ assets are recorded separately from the custodian’s own assets. This is what protects your rights if an intermediary runs into trouble: clients’ assets must not be mixed with its property. The custodian also records transactions, handles settlement of trades and keeps supporting documents.

The subject has become more prominent with the growth of digital assets, where custodial and non-custodial holding are distinguished: in the first case the provider controls the keys, in the second you do. Each option has its own risk logic: in one you depend on the institution’s reliability, in the other entirely on your own discipline in keeping the keys.

Where custody is found

What to check with a custodian

How to choose a custodian

1. 01Check the licence and jurisdiction
2. 02Confirm how assets are recorded
3. 03Work through the problem scenario
4. 04Compare fees
5. 05Set up the custody arrangement

What you need to know

• Clients’ assets are recorded separately
• A custodian holds and records, but does not manage the portfolio
• The custodian’s jurisdiction affects your rights
• In digital assets custodial and non-custodial holding are distinguished
• Succession arrangements for the assets are worth confirming in advance

Common mistakes

• ✕Not asking where and how your assets are held
• ✕Assuming the custodian manages your money
• ✕Ignoring the custodian’s jurisdiction
• ✕Not arranging access for heirs
• ✕Holding large digital assets without a well-thought-out arrangement

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