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Do You Know Where Your Assets Are?

wealth management retirement planning

When new clients establish a relationship with McKinley Carter Wealth Services (MCWS), especially those transferring their accounts from a brokerage firm, they sometimes express curiosity at our new account opening paperwork.  We ask them to sign not only an MCWS Wealth Management Agreement but also paperwork provided by a third party custodian.   Why, we are asked, is there additional paperwork reflecting our use of a third party?

Before delving into the function of third party custodians, it is helpful to understand the role of a Registered Investment Advisor (RIA).  MCWS is an RIA which means we’re regulated by the Securities & Exchange Commission (SEC) thus held to the highest standard of fiduciary conduct. While many advisory firms now offer fee-based investment programs, few hold themselves to the same “fee only” and “fiduciary” standard that we do in every transaction, always putting our client’s interests ahead of our own.

It’s also notable that McKinley Carter Wealth Services employs multiples levels of dual financial controls throughout our operations to protect our client assets.  One important way is our relationship with the institutional arms of discount brokerage firms like Schwab, Fidelity, and TD Ameritrade. As we do not take custody of clients, we rely on these firms to do so and, each day, we download information about every client account and reconcile the holdings, transactions, and balances with our own records. These firms provide four primary services:

  • Process transactions when we direct the purchase or sale of individual securities and mutual or exchange traded funds
  • Collect dividend and interest payments
  • Receive deposits and make distributions to you or a designated party
  • Produce end of year tax reporting and monthly statements that document holdings, cost basis, and current market value
The benefits of using a third party custodian far outweigh any additional paperwork our new clients are asked to sign.  Use of a third party custodian means that an RIA can never take possession of your investment assets and those assets will always remain in your name, an arrangement that protects you against potential fraud and theft.  The custodian can provide a layer of protection of sorts from potential improper activities of an investment manager. 

A second benefit to our using a Third Party Custodian is the access they provide to technology and support services for streamlining account transactions. For instance custodians offer our clients the convenience of standing instructions.  Such instructions can include linking a personal checking account so we can move a client’s money with just a phone call or making a regular deposit into a college savings account or a recurring entry to satisfy a client’s IRA Required Minimum Distribution (RMD). 

Finally, using a third party custodian allows MCWS to gain access to a vast, virtually unlimited array of investment products and trading services.  Unlike many financial firms, we have no revenue sharing or other agreements that could compromise our fiduciary duties and, instead, consistently seek out institutional class, index fund, and other low cost investment options whenever possible.  Total cost management is an important theme within our work so we’re committed to monitoring all expenses to produce the most cost effective investment strategies for our clients.

In summary, as a fiduciary, it is McKinley Carter’s responsibility to act in the best interest of our clients.  Custodians help us fulfill that obligation by keeping our client’s physical assets well-protected while minimizing the costs of implementing our investment strategies.
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