When setting up your practice, you’ve got a lot of things to figure out: where your office will be, what your buying and selling strategy is, how you’ll market yourself and grow your business, staffing decisions and so on.
But one of the most important things you need to decide is where your clients’ assets will actually be custodied. The custodian for these accounts is not only a business you need to trust, but that your clients need to trust, as well.
The financial world provides a multitude of options and you probably already know of, or at least heard of, some of the larger names: Fidelity and Schwab are two of the largest.
If you’re looking for a custodian for your clients’ assets, here’s a checklist of things to look for:
1. Regulation. Who regulates the firm? You will always want to work with a regulated custodian, since they’re typically audited on an annual basis, which can help ensure that your clients’ assets are being properly safeguarded.
2. Brand Name. Look for a well-known name and a recognizable brand. Does the financial institution you’re looking into have a well-established managerial/advisor relationship? Has the institute provided optimal services in times past?
3. Online Access, Email Statements and Confirmations. We’re in the modern age. Your clients will want online access in order to stay updated on their accounts. Look for custodians who also offer email statements and transaction reports so you can give them to the clients who want them.
4. Trading Platform. What may be most frustrating is trying to execute a time-sensitive trade and not having a simple, easy-to-understand trading platform at your disposal. The trading platform should be simple to work with and a snap to navigate and give you the information you need to execute a trade, such as volume and bid-ask spread.
5. The Trading Desk. When you reach out for some personal service, it should be there. Is the trading desk efficient in executing your trades? Is it communicative? These are some good queries to ponder as it relates to how you receive information on the commission structure, accounting and reporting styles of a potential custodian.
6. Cost. Fees eat into principal, so it’s going to be important to both you and your client that these costs are kept as low as possible. Research different custodians and do some fee and commission structure comparison-shopping.
7. Public or Private? If you custody with a public company, financial information and other information you seek may be easier to come by. A private company may not be so willing to divulge that information.
8. Back Office Operations, Accounting/Reporting. What kind of support does the custodian offer for fulfilling client requests and helping you efficiently manage portfolios? Is there a dedicated person you can count on to be there when they’re needed? You will also want to be sure that you have all the proper data to report to clients in an accurate and timely manner.