When you put your hard-earned money in the hands of a registered investment advisor (RIA), you want to know your investments aren’t just managed wisely but also kept safe and secure. This is where RIA custodians come in.

In this blog, we explore the integral role RIA custodians play in financial planning and wealth management, outlining their responsibilities, the importance of their financial services, and how they contribute to the security and performance of your investments.

What is an RIA custodian?

Independent advisors and RIA firms provide critical investment guidance and strategies, but they rely on other entities for the custody and safekeeping of client assets. According to the Investment Advisers Act of 1940, RIAs must ensure that client funds and securities are held by a qualified custodian. This could be a bank, a broker-dealer, or another type of financial institution authorized to hold assets in secure accounts either under the client’s name or in a pooled account under the advisor’s name.

An RIA custodian’s primary role is to safeguard the assets from unauthorized access, fraud, or misuse. But many custodians also provide additional services, such as executing trades as directed by the RIA, offering compliance support, and assisting with strategic business planning. This comprehensive support system enables RIAs to concentrate on their core mission of making informed investment decisions on behalf of their clients, secure in the knowledge that the administrative and regulatory aspects of asset custody are in capable hands.

What can you expect from an RIA custodian?

When your RIA selects a custodian, as an investor, you benefit from a suite of services that the custodian provides. Here’s what you can generally expect from an RIA custodian through your RIA:

Custody of assets: On a daily basis, custodians ensure the secure storage of physical or electronic securities.

Advisor service platforms: Custodians often have advanced technology built to support client communication and reporting, helping RIAs improve the client experience.

Transaction execution: If qualified, many custodians will buy and sell securities as directed by the RIA.

Investment product access: Custodians typically offer RIAs a platform of investment products, such as mutual funds, stocks, bonds, and possibly alternative investments.

Account administration: This generally includes collecting dividends and interest, monitoring account balances and activities, and providing regular account statements.

Reporting: Custodians have access to tools that streamline reporting on account performance, transactions, and holdings.

Compliance and oversight: They manage accounts in accordance with regulatory requirements and industry standards.

How are they regulated?

RIA custodians are subject to various regulatory requirements depending on their specific function. For example, many qualified custodians are SEC-registered broker-dealers, which means they are directly regulated by the Securities and Exchange Commission (SEC). These custodians must comply with SEC rules designed to protect investors and ensure market integrity. In contrast, various entities regulate banks depending on their charter. No matter the regulatory body, all custodians are held to the highest accountability standards, ensuring the secure holding of client assets.

How do you find the right one?

Your custodian ultimately depends on your investment advisory firm, as they are the ones to select which custodians they’d like to work with. To make sure you’re getting a custodian that aligns with your needs, consider the following steps:

Inquire about the custodian: Ask your RIA about their custodian choice, how they protect your assets, the services they support, and the benefits this custodian offers.

Evaluate services and platform: If possible, review the custodian’s platform through your RIA, looking at its usability, reporting tools, and investment information accessibility.

Review performance and reliability: Consider the custodian’s track record in handling market volatility and customer service issues.

Assess your RIA: If your RIA checks all the boxes for your investment strategy, ethics, and service expectations, their chosen custodian likely does, too.

Want to learn more about our trusted custodians? Contact us and discover how we ensure your investments are secure and support your financial plan.