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Custodian Due Diligence

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Feb 5, 2010 1:42 pm

Good Morning,

  My firm is considering changing custodians for some of our direct clients, and was wondering if anyone had tips for conducting due diligence on the prospective custodian.  The one we are looking at is a smaller younger custodian.  I'm mainly thinking about regulatory actions and verifying financials - but I haven't had to do this before so I don't know what would be shared and what wouldn't.   Any additional insight would be helpful.   Your Humble Wet Blanket.
Feb 5, 2010 2:16 pm

Watch their commercials.  Go for the one that has the best commercials.  Purple helicpoters, talking babies, little talking gekko’s, whatever.  Just go for the best commercials. 

Feb 5, 2010 3:03 pm

I don’t think they advertise on TV.  The main selling point for us is that they wrap everything into a fee instead of the client paying transactional costs.  The catch to this arrangment though is that it works like a UMA - the firm does the investing, we just provide the model (if that is even a downside).

Feb 5, 2010 3:05 pm

Trust Co of America?

Feb 5, 2010 3:07 pm

WB - NAAIM is a good resource for this,if you don’t belong yet. Lots of active investment managers there. People are always giving their pros/cons on custodians.

Feb 5, 2010 3:07 pm

Nope.  From my understanding, they mainly provide UMA services to RIA firms - but they can act as a custodian if we want them to.