Key considerations for choosing a global custodian in an evolving landscape

As the wealth, outlook and investment scope of ultra-high net worth individuals and families becomes increasingly global, choosing the right custodian becomes ever more crucial. Unprecedented developments in 2020 resulting in profound changes to lives and businesses caused by the COVID-19 pandemic underscore the value of having a holistic custody services provider at hand.

We have always maintained that individuals and families should examine a wide spectrum of considerations to determine the type of custodian that is best suited to achieve their specific goals and address their priorities in stable as well as challenging investment climates. These include:

1. Asset consolidation using a global custodian

Wealthy individuals and families – as well as the family offices that serve them – often build networks consisting of multiple private banks, brokers, and other institutions across a variety of jurisdictions globally. While having multiple providers does have its advantages, creating a consolidated view of all assets held can be very challenging as each provider’s custodian may have its own reporting process and periodicity.

However, there is another choice that is frequently overlooked – asset consolidation using a global custodian. Global custodianship involves the wealth owner transferring all assets to a single custodian. That global custodian then safeguards clients’ assets in one centralized place, while the wealth owner continues to receive advice and trade execution from multiple portfolio managers and brokers.

2. Safety of assets

When considering the safety of assets, our first thoughts are usually about the risks involved with particular investments. How much volatility might our equities suffer? Might the issuer of a certain bond default? However, alongside such concerns, the safety of such assets can also be affected by the type of custody relationship under which they are held – either with a bank custodian or a broker-dealer.

Investors often don’t understand the differences or nuances of their custody arrangements. As the portfolio grows more complex, perhaps spanning multiple accounts and providers, understanding where assets are held is pivotal, and the need to centralize assets for safety benefits matters.

3. Real-time information and reporting capabilities

We believe the age of Custody 4.0 is well and truly here. Across the global custody sphere, risk, treasury and collateral tools to support additional middle and back office services are getting more and more advanced. Data services and market analytics are here to meet increasing requirements from clients to support their reporting needs. While some clients may be content with accessing basic reports at the end of reporting periods via a simple portal, those with complex portfolios spanning multiple providers, regions and currencies may require access to live information and tailored reporting capabilities.

Custodians with real-time reporting allow their clients to view and access detailed information on their wealth in one place wherever and whenever they need it. Ultimately, those who provide automated ways to send and receive trade data, and portfolio holding information can help reduce the risk of manual intervention and help convert and process trades electronically and it would be advantageous to consider such bespoke services.

4. Global reach

Finally, the aforementioned service agility could count for little if the custodian is limited by its global reach or ability to hold assets around the world. Obviously, this is a significant factor when clients with international asset needs seek a custodian to work with. But even if a client’s end requirements are predominantly domestic in nature, we believe the influence of international events on multiple asset classes demands a custodian with global expertise.

The benefits of working with a global custodian include access to a large number of countries around the world, by using either their proprietary network or creating relationships with top tier third-party local banks, allowing clients to consolidate assets globally.

Furthermore, lockdowns in the wake of COVID-19 have made financial institutions unwittingly demonstrate why a custodian with a solid business continuity plan (BCP) matters just as much. The agility and resilience of global custodians cut through in 2020 when it came to maintaining service levels during the pandemic, something that deserves scrutiny when it comes to choosing the right custody partner in 2021.

Citi Private Bank’s Custody team provides professional portfolio administration to clients seeking to consolidate accounts and simplify securities recordkeeping and safekeeping. With $23.7 trillion in assets under custody and administration,¹ and a global custody network spanning 100+ foreign markets – 63 of which are Citi branches or affiliates, Citi is one of the largest institutional custodians in the world.

Our dedicated private banking team and custody specialists provide institutional-level expertise through a highly personalized service. To find out more, please contact your Private Banker, who will be more than happy to set up a meeting with a Custody Specialist.