The Where and Why of Maintaining Client Accounts

by Michael Branham

We recently met with a prospective client who asked where we “held” their money, and the process we use in making those choices?  We get the first question often, but rarely does a client, or prospective client, ask the second.  We admired the diligence of that individual and we thought you, too, would benefit from having each of these questions answered.

Based on recent mergers, and the legacies of multiple firms, The Planning Center has two primary relationships with firms where we open client accounts and “hold” client money.  These firms are known to financial planning firms as a “custodian”.  Without getting too in-depth with regulatory language, having “custody” of money simply means a firm is holding funds on an investor’s behalf, allowing them to buy investments easily and servicing their various needs.

Where we hold client money:

We believe strongly in using a third-party custodian in our work, which simply means The Planning Center doesn’t physically hold your money, or house your accounts.  Using a third party custodian allows for a number of advantages to client and firm alike:

  • It allows us to focus on our core competencies of comprehensive financial planning and investment management.
  • It allows us to take advantage of economies of scale within larger firms who can provide a wider array of services at lower cost to our clients.
  • Most importantly, it provides an extra layer of security for clients to ensure their assets are properly cared for. In other words, clients get reporting from multiple sources on account balances, individual holdings, and transactions that allow them to compare one against the other to make sure everything is on the level.  As fiduciary planners, this is an integral part of our security process!

With that background in mind, our answer to the question of “where we hold” client money has two predominant answers- Trust Company of America and Charles Schwab.  We do have clients who hold accounts at other companies, but we can best serve our clients, and more efficiently do our work, when their assets are held in accounts at one of those two companies.

If “where” is the easy question to answer, “why” is the more important.

By what criteria do we choose from the many custodial options available?  Here are the key components we look at within our due diligence:

  • Financial strength – Does the firm with whom we custody assets have the financial wherewithal to withstand the ebbs and flows of the business cycle? Do they have a secure balance sheet, or are they untenably leveraged?
  • Client Safety – Does the custodian have responsible and identifiable measures in place to protect the assets, and the private information, of our clients? Are the proper processes and protocols in place to protect from identity theft or fraud?
  • Pricing – Does the custodian offer a variety of services at competitively low prices?
  • Reputation – Do our chosen custodians have good reputations within the financial services industry? Do they have positive public perceptions?
  • Execution capabilities – Can our custodian offer the investment choices we demand, handle the trading volume required, and offer a well-designed platform that allows us to efficiently meet client needs?
  • Service – Does the custodian provide the level of service required to meet our needs, and those of our clients? Do they meet the ever growing technology demands expected in today’s world?
  • Research – Does the custodian offer objective, comprehensive investment and practice management research?
  • Relationship with TPC – Does The Planning Center have a positive, long-term relationship with the custodian? Do we have a voice with the firm to address any questions or concerns we may have over time?  Is the custodian willing to work with us to be sure client needs are met?

Trust Company of America and Charles Schwab

As we look at the custodial options available in the marketplace we’ve deemed Trust Company and Schwab to be our top choices.  Our due diligence in this area is always active, and we could make changes if needed, but we enjoy good relationships with each of these firms.  A bit about each:

  • Trust Company of America (TCA)– a mid-sized, independent custodian based in Denver, Colorado. Our offices in Moline, the Twin Cities, and Fresno have had a long-term relationship with TCA, which gives us accessibility to company leadership we can’t get with a larger custodial firm.  As a result, we’ve been integral in helping TCA develop and customize their world-class technology offerings, which have allowed for a streamlined and efficient investment management process.  Recently, Trust Company of America announced that they have been purchased by E*Trade.  We’re excited about the potential enhancements that could result from this acquisition, including further technological advancements, additional services for clients, and a nationally recognized brand.  With that said, we will be vigilant in our due-diligence process as the merger unfolds to be sure they remain an excellent fit for our clients.
  • Charles Schwab (Schwab)– rarely requires introduction, and has been a long-term partner of our offices in Chicago and Alaska. Schwab has been an industry leader for decades, and holds the majority of the market share in the independent financial advisory space.  With a top of the line technology platform, and suite of services many custodians don’t offer, Schwab is an important partner in our work with clients.

Meeting Your Needs

We feel strongly that having each of these firms in our custodial offerings allows us to best meet any individual client situation.  It’s important to note, given our standing as a fee-only financial planning firm, that neither of our custodians provide any form or revenue to The Planning Center.  Instead they focus their efforts on meeting the needs of our clients in a cost-effective, efficient manner.

michael_branham_thumbMike Branham, CFP®, is a Sr. Financial Planner in the Anchorage and  Twin Cities offices of The Planning Center, a fee-only financial planning and wealth management firm. Email him at: