Having multiple asset managers and providers can make it harder to get a consolidated view of your wealth. We outline two potential solutions to the problem.
The more that wealth grows, the more sophisticated the needs around it typically become. Deeper access to markets around the world, more specialized investment strategies, and a greater proportion of illiquid asset holdings are among the most common requirements. To satisfy these needs, wealthy individuals and families – as well as the family offices that serve them – build networks consisting of multiple private banks, brokers, and other institutions across a variety of jurisdictions globally.
Positives and negatives of multiple asset managers
Having multiple providers may bring a number of benefits. Different providers have different specialties and strengths, and in different countries and regions of the world. Having multiple providers can thus enable wealth owners to achieve the level of service and access they seek. However, it can also have drawbacks. One of the main challenges that can arise is when the wealth owner – be it an individual or the wider family – wants to see a single comprehensive overview of their many accounts and portfolios across providers.
Consolidated view of assets
Creating a consolidated view of all assets held can be very challenging. Each provider’s custodian may have its own reporting-process and periodicity. Disparate data and information sources – such as index benchmarks – can make it even harder to make meaningful comparisons of portfolios. While consolidating disparate data from multiple providers is possible, it is also very time-consuming. This can make it very difficult indeed to get a consolidated view in a timely fashion.
Wealth owners with multiple custodians have to rely on manual consolidation of the reports they receive. This is a laborious exercise of gathering, inputting, and standardizing, which is prone to human error. As a result, many wealth owners and their family offices choose to outsource this important responsibility to a third-party aggregation service. However, there is another option that is frequently overlooked: using a global custodian.
Custodianship of assets
Global custodianship involves the wealth owner transferring all assets to a single custodian. That global custodian then safeguards clients’ assets in one centralized place. Nevertheless, the wealth owner continues to receive advice and trade execution from multiple portfolio managers and brokers. So, the wealth owner benefits from the same levels of access and service, while having comprehensive and consolidated insights into his or her entire holdings at any given time.
So, does it make more sense to use a single global custodian or to combine multiple custodians with an asset aggregation service? The answer here is not necessarily straightforward. It will depend on the specific needs and circumstances of a wealth owner, the wider family, and perhaps the family office. Both approaches can each achieve a comprehensive and consolidated financial picture, and robust reporting of transactions, holdings, and performance. However, there are important differences between them, with their own advantages and disadvantages.
To understand and compare the two approaches with regard to asset safety, reporting accuracy, service, cost, and more, you can read our white paper: Is your custodian helping you protect and grow your wealth?