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Custodial Services

Custodians are the financial organizations that actually hold onto the assets of a retirement plan or other investor. These are often trust companies and their job is to keep the assets safe, facilitate settlement and trading of the assets through broker dealers, facilitate informational services like proxies, facilitate cash flows like dividends and interest, and provide plan level reporting services to the trustees and plan sponsors.

Investment Options and Platforms

Depending on the custodian you choose, they may have different investment options available to their clients. Traditional stocks, bonds, and exchange traded securities are usually a given in the custodians ability to settle and service these assets. However, as it pertains to mutual funds, the landscape can vary greatly. This variance will depend on what the custodian has decided is part of their business model and what they see their specific target market in who their customers are.


The fee structure for custodians is usually in one of two forms, either as an asset fee such as basis points, or hard dollar fees such as a specific service fee or ala carte fees. Depending on asset size, you will usually see fees go from a more traditional asset fee on smaller assets, to hard dollar fees on larger assets. Do keep in mind that there are some variable costs to asset size, such as asset insurance, this can keep a variable nature within the hard dollar model. On a typical $10 million plan, custodial fees with regards to retirement plans may be in the 7 ‐12 basis point range.


One of the key objectives with a trust company is protecting client assets, to that degree, we believe that clients should understand how their assets are protected and what trust companies and custodians do to protect client assets.

The financial strength and integrity of the financial institution is the first thing we consider when considering custodians/trust companies. The good news is that custodians and trust companies are required to disclose what their balance sheets and profit loss statements look like to communicate to clients what's going on in their business. The bad news, is that often, these balance sheets can be deceptive and only after an extreme event, does it become obvious that something was amiss. Another good indicator is the publicly traded stock price of the custodian and the bond yield of the custodian if either has publicly traded securities. If the stock price is low, or the bond yield is high, that could be reason for concern.

Segregation of assets' One of the key differences between a custodian or trust company, and a bank, is that a custodian/trust company keeps client assets segregated from their own assets, where as a bank deposits client assets onto its own balance sheet. This is a significant difference should the entity fall on hard times. Some exceptions to this are where the custodian has loaned securities and the risk is that the borrower has not provided ample collateral. But do keep in mind, that a bank is likely to have a broker dealer and that broker dealer will act under the custodian rules, not the bank rules. Also, a bank may have a trust company and in that case, act under the trust rules and not actually deposit client assets onto its own balance sheet.

Should your custodian or trust company fail, insurance is the next line of defense. There are two kinds of insurance, public insurance like Securities Investor Protection Corporation (SIPC) and private insurance. SIPC is run as a government industry funded insurance company like FDIC insurance, but for the protection of custody instead of the protection of deposits. Private insurance is usually purchased by custodial and trust companies as well, these is usually a fallback if the SIPC limits are exhausted.

Auditors are an important part of the asset safety issue, we believe that investors should look at the reputation of the auditor and the consistency of the auditor. Changes in the auditor, changes in the accounting philosophies, frequent changes in senior management, are all signs of potential trouble. A good custodian will make this part of this evaluation of services easy and transparent.

Right for You

Every retirement plan has unique needs and requirements that should be addressed in finding the right custodian or trust company. Garde is agnostic to what trust company or custodian you the plan sponsor ultimately choose. For us, we simply want to be sure that the chosen trust company/custodian is an appropriate, cost efficient, safe, solution for the retirement plans we manage. We have experience with many of the service providers in this market and can help with this decision.