Understanding Custodial Relationships Amidst the Silicon Valley Bank Collapse
When working with a Registered Investment Advisor (RIA), investors may have heard the term “custodial relationship.” This refers to a partnership between the RIA and a financial institution that acts as the custodian of the client’s investment assets.
For example, Ballast Advisors uses Charles Schwab as custodian for client investment assets. However, recent events involving the collapse of Silicon Valley Bank have raised questions about the safety and security of custodial relationships.
The collapse of Silicon Valley Bank has had significant repercussions for its clients, including investors who had entrusted their assets to custodial relationships managed by the bank. Many of these clients have been left uncertain about the safety and security of their assets and have been forced to seek out new custodians to protect and manage their investments.
What Investors Need to Know
While the full impact of the Silicon Valley Bank collapse is still unclear, it serves as a reminder of the importance of understanding custodial relationships and ensuring that investment assets are managed safely and securely. As an investor, here are three key questions you should be asking your RIA:
1. Are my accounts held separately and are my investments being lent out? This is important to know because if your investments are being lent out, it can increase the risk of loss in the event of a market downturn or other adverse event.
2. Are my CDs invested at specific banks and are they protected by FDIC insurance? Certificates of Deposit (CDs) can be a safe way to earn a fixed rate of return, but it’s important to ensure that they are invested in reputable banks and are protected by FDIC insurance.
3. How does my RIA conduct due diligence on their custodial relationships? It’s important to know that your RIA is regularly reviewing their custodial relationships to ensure that they meet high standards of safety and security.
For clients of Ballast Advisors, our custodial relationship with Charles Schwab ensures that their investment assets are held securely and that they receive professional investment advice and management services. Additionally, Ballast Advisors conducts due diligence on their custodial relationships each year to ensure they meet their high standards.
Recent events involving Silicon Valley Bank serve as a reminder of the importance of understanding custodial relationships and asking the right questions of your RIA. By doing so, you can ensure that your investment assets are being managed in a safe and secure manner.
Disclosures
The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice.
Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request. BAL-23-15