The short answer
Usually the adviser does not hold your securities. A qualified custodian does. That is a bank, or a broker-dealer, that keeps the account and sends you the statement. Your deposit or transfer should name that custodian, not the adviser as a person.
Form ADV Item 9A is the custody question. Custody, on that form, is wider than a vault. It includes authority to take money out. A Yes can mean the firm deducts its fee from the account. That is a different fact from the firm holding the stocks in its own name. Read the brochure sentence that explains the Yes before you panic, and before you ignore it.
| Who | What they should have | What you check |
|---|
| You | The account in your name | The registration on the statement |
| Qualified custodian | The cash and securities | The logo and address on the official statement |
| The adviser | Authority the contract allows, which may include trading or fee deduction | Item 9A, the brochure, and the payable-to line |
| A related person of the adviser | Sometimes the custodian itself, if they are affiliated | Item 9A and whether statements come from that affiliate |
What to do
- Pick up a statement from the last 90 days. Circle the company that issued it. If the only report you ever get is a PDF from the adviser, with no custodian statement, stop and ask why.
- Open the firm on Search. Read Item 9A, including 9A(1)(a) cash and 9A(1)(b) securities. Write Yes or No for each.
- Open the custody section of the brochure. Look for three phrases: qualified custodian, deduction of fees, and related person. Fee deduction is still something to understand. It is not the same as handing the adviser a check payable to them.
- Look at the transfer form or the deposit instructions. The payee should be the custodian, for your account. A check payable to the person, or to a company that is not the custodian, is a reason to stop. See advisor red flags.
- Log in to the custodian at least once, at the custodian's own site, not only through a link in an email. Confirm the balance is in the same range as the last statement. A market move can explain a change. A missing account cannot.
- If Item 9A is Yes and the brochure says a related person is the custodian, you still want statements. Affiliation is a fact to read, not a slogan.
What to look for on Best Investors
- Item 9A(1)(a) and 9A(1)(b). Cash custody and securities custody are separate Yes or No answers. Read both. A Yes on one does not describe the other.
- The dollar and client counts under Item 9. They describe how much of the business the firm says sits in a custody arrangement. They are not a safety score.
- Surprise exam and audit boxes later in Item 9. The form asks what the firm reports. A checkbox does not prove the exam was useful. The brochure should say which protection applies to your account.
- Item 5E(1) next to a custody Yes. A percent fee taken from the account is a common reason Item 9A is Yes. Confirm that story in the brochure before you treat the Yes as something worse, or as nothing.
Common mistakes
- Hearing "we don't custody assets" in a meeting and never reading Item 9A. The form may still be Yes because of fee deduction.
- Making the check out to the adviser because the meeting felt personal. The payable-to line is the test.
- Reconciling only the adviser's performance report. Performance math can be honest and still omit a withdrawal. Use the custodian statement.
- Assuming a household-name custodian means the adviser is careful. The custodian holds the shares. The adviser still chooses, or recommends, what to buy if the contract says so.
- Ignoring a related-person custodian. "Independent" and "our affiliate holds it" are different sentences. Item 9A is where the firm has to address the second one.
Related questions
So a Yes on Item 9A means they stole, or might?
No. It means the firm reports a form of custody under the instructions for that item. Fee deduction is a common reason. Direct holding, or a related person who is the custodian, is a wider kind of access. The brochure has to say which. If it will not, do not move the money.
Where should the statement come from?
From the custodian, to you, on a schedule. Quarterly is a common custodian practice. The adviser can send a review on top of that. The review does not replace the custodian's pages. If you stop receiving the custodian's mail and email, call the custodian, not only the adviser.
What if the adviser and the custodian are the same company?
Read Item 9A and the brochure's related-person language. Then confirm you can reach the custodian side without going through the adviser. RIA vs broker covers the case where a broker-dealer holds the account.
What do I do if the names do not match?
Do not send more money. Ask the firm, in writing, to reconcile the statement name to Item 9A. If you still cannot match them, call the custodian with the account number on the statement, and use IAPD for the firm's CRD. The CRD is the firm's ID number.
Limits
This page is a way to match three names: the statement, the payee, and Item 9A. It is not a fraud investigation, not legal advice, and Best Investors is not the SEC.
The firm answered Item 9. We do not audit custodians or count the cash. A market loss and a missing account are different problems. This page does not tell them apart for you. The statement does.
If our page and IAPD disagree, use IAPD.
Sources
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