Custodian

What a custodian does

• Holds client securities and cash in segregated accounts in the client's name.
• Settles trades and processes corporate actions.
• Sends required account statements to the client at least quarterly.
• Provides the platform for adviser trading on behalf of clients.
• Often provides ancillary services — research, technology, lending, banking.

Adviser-custodian relationship

The relationship is a triangle:

1. The client owns the assets.
2. The custodian holds the assets in safekeeping.
3. The adviser has discretionary or non-discretionary authority to direct trading and certain other actions.

The adviser does not "own" the relationship with the custodian in the legal sense — the client does. The adviser has limited authority granted by the client and reflected in the custodian's records.

Choosing a custodian

RIAs typically work with one or more of the major national retail custodians. The choice considers:

• Pricing for clients (transaction costs, money-market yields, lending spreads).
• Adviser technology platform and trading interface.
• Service quality for the adviser's specific business mix.
• Required asset minimums or client-type restrictions.

Custody-rule implications

Use of a qualified custodian is the central safeguard under Rule 206(4)-2. When the custodian sends statements directly to the client at least quarterly, the adviser benefits from the rule's safe harbors. Using a custodian that does not meet the qualified-custodian definition triggers additional safeguards.

How StratiFi thinks about custodian relationships

The custodian is a structural counterparty to the advisory relationship. The discipline that holds up under examination is documenting the relationship clearly — the adviser's authority, the client's account ownership, the fee-deduction arrangements — and reconciling the firm's records against the custodian's at a meaningful cadence. The custodian is not the adviser's bookkeeper; the adviser is responsible for its own records.