Updated
GL-C-05
Glossary · Banks and finance
Custody - who holds your assets and what happens to them if the intermediary fails
01 / In 30 seconds
The short answer
- What it is
- Professional safekeeping and record-keeping of a client’s assets by a third party
- Who a custodian is
- An institution that holds securities and assets and keeps records of them
- The main point
- Assets are recorded separately from the custodian’s own funds
- Where you encounter it
- Investment accounts, funds, large portfolios, digital assets
- Why it matters
- What happens to assets if an intermediary runs into trouble depends on the quality of custody
02 / In plain words
What Custody / Custodian means
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.
A case from practice
When relocating, a client looked into where their securities were actually held and under which country’s law succession questions would be decided. It turned out that some of the assets were recorded in another jurisdiction — and planning had to take this into account rather than follow familiar rules.
Where custody is found
- A brokerage and investment account
- Funds and management companies
- Large securities portfolios
- Holding digital assets
- Transactions settled through a third party
- Succession planning
03 / What it covers
What to check with a custodian
Status
- Licence and regulator
- Jurisdiction
- Track record
Registration
- Segregated records of assets
- Reporting to the client
- Audit
Conditions
- Custody fees
- Settlement of trades
- Access to assets
Rights
- What happens if there are problems
- Succession arrangements
- Powers of attorney
04 / How it works
How to choose a custodian
Check the licence and jurisdiction
Who the custodian is, which regulator and which country's law.
Confirm how assets are recorded
Whether your assets are recorded separately from the custodian's.
Work through the problem scenario
What happens to the assets if the intermediary fails and on inheritance.
Compare fees
Fees for custody, settlement and transfers.
Set up the custody arrangement
The agreement, access rights and documents for heirs.
05 / Key facts
What you need to know
01Who the custodian is
A bank or specialist firm
It holds securities and assets, keeps records and settles trades.
02The key point
Segregated accounts
Client assets are recorded separately from the custodian's own. This protects them if the intermediary runs into trouble.
03Does not manage
Custody is not management
The custodian makes no investment decisions. Portfolio management is a separate agreement.
04Digital assets
Custodial or not
In the first case the provider controls the keys, in the second you do. The risks differ.
Common mistakes
Not knowing where and how your assets are held
Ask your broker who the custodian is and in which country the records are kept.
Thinking the custodian manages your money
Arrange portfolio management separately if you need it.
Not arranging access for heirs
Find out the custodian's inheritance procedure in advance and prepare the documents.
06 / Expert advice
How to prepare in advance
When opening an investment account, it is worth finding out who acts as custodian of the assets, which jurisdiction it is in and how records are kept. The scenario of problems at the intermediary and the procedure for heirs’ access are discussed separately: they are rarely discussed at the start, yet that is where the most difficult situations arise.
What we do for you. When you relocate, we look not only at taxes but also at where and how your assets are held: the custodian’s jurisdiction affects both your rights and succession. These questions are cheaper to clarify before the move than to sort out later.
Robert HaasHead of Company Formation
07 / Questions
Frequently asked questions
The professional safekeeping and record-keeping of your assets by a third party — usually a bank or a specialised company.
No. Its job is to hold the assets and keep records of them. Managing the portfolio is a separate function and a separate agreement.
So that your assets are not mixed with the intermediary’s own property. This protects your rights if it runs into trouble.
With digital assets, under custodial holding the provider controls the keys; under non-custodial, you do. The risks differ: trust in an institution versus your own discipline.
Yes. It determines the applicable law, how disputes are resolved and the rules on inheriting the assets.
It depends on the agreement and the jurisdiction. It is worth clarifying and arranging this in advance rather than leaving it as a task for your heirs.
INITIAL ASSESSMENT
Tell us what outcome your family needs
We will design a solution for your case, choose the country and the right status, and take the whole process through to the result.
