What Is a Financial Custodian?

A financial custodian is a company that has physical ownership of your financial assets. It is often a brokerage, commercial bank, or other types of institution that holds your money and investments for convenience and safety.

Learn what financial trustees do, who uses them, and how to find someone to protect your financial interests.

Definition and examples of financial custodian

Also called bank custodians, financial custodians have physical control over financial accounts, which include checking, savings, money market, 401 (k), and more. When you make deposits to any type of account, your checks are cleared and deposited directly into your custodian with reference to your account number.

A financial custodian may be needed for a number of reasons. For example, if you are spending time abroad to work, you may want to work with a financial custodian to keep your financial affairs in order while you are abroad.

Other situations that may require a financial custodian include a minor who has multiple assets that must be managed by someone other than a parent or an older person with financial assets who need help managing them.

People who have complicated or differentiated financial interests and don't have time to manage them all can turn to a financial custodian to do the work for them.

A custodial financial institution may charge an escrow fee for the custody of your money.

How a financial custodian works

A financial custodian will send you a monthly or quarterly statement, letting you know what they have on your behalf.

In addition to holding your cash and investments and submitting a statement, the custodian also acts as a broker when you want to buy or sell investments. In a system based on the electronic marketplace, the buyer and the seller never meet.

Therefore, the concierge has the important task of making sure that your money goes to the right person and vice versa.

When they accept your instructions to buy something, the custodian will arrange to find another custodian with a suitable seller of the shares you want to buy, exchanging your money for their shares.

If you want to sell a share that you own, they will also arrange a transaction to give you the correct amount of money to sell.

Custodians typically charge a transaction fee when you buy or sell an investment.

If you own a stock and it posted a dividend, be sure to receive it. A custodian will see to it that you receive your dividends and will file any documentation necessary for you to report those dividends to the IRS, if applicable.

Imagine the many stock transactions that take place during a calendar year. These buying and selling activities add up, such as paying and receiving dividends, as well as company-specific activities, such as stock splits or mergers. A caregiver tracks all of this on your behalf.

Alternatives to a financial custodian

If you want a stock certificate to be issued, for example, by the Walt Disney Company, you must request a physical certificate (for a fee) in your name, and whoever has physical possession of that certificate is now the custodian.

Once Once Once the share certificate is issued, the financial institution is no longer the custodian and no longer has the responsibility to track the investment property and transactions.

Additionally, registered investment advisory firms that manage assets on behalf of clients often use a custodian to hold client assets; they are not the custodians themselves. For example, an independent investment firm uses Charles Schwab as the custodian of the client's assets.

The company directs investments but does not have "custody" or ownership of a client's money. It is Schwab who really has custody of the assets.

We hope you enjoy watching this video about what is a cust

Source: Equity Trust Company

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