It's easy to overlook the important role that custody plays in how financial markets operate. However, it's critical that a family office works within a custody model that best suits its objectives and allows it to operate efficiently. Given the challenges of working with multiple custodians, the master global custody model offers the solutions family offices need to be successful.

A master global custody structure addresses the many challenges family offices face, providing clients with core solutions, a greater level of safety for its assets and increased operational efficiency. Here are some of key challenges that arise when working with multiple custodians, and the solutions a master global custodian offers to help family offices overcome them.

1

The Safety or Accessibility of Assets May Be Unclear

With a master global custodian, families can feel confident that their assets are kept safe in a stable bank that has the ability to protect assets across regions and the balance-sheet strength to withstand a downturn in the financial markets.

2

Operational Tasks Distract From the Core Mission

Dealing with a single point of contact allows family office investment professionals to focus on their primary mandates: setting strategy, uncovering compelling investment opportunities, preserving capital and serving the family.

3

Managing Reports From Multiple Custodians Can Lead to Errors

Consolidated reporting — by region, asset type and investment manager — ensures that the family office always has an accurate, comprehensive view of the performance of the family's holdings.

4

Engaging With Many External Vendors Is Complicated

Integrating key disciplines and maintaining a team of seasoned professionals reduces the number of additional vendors needed to carry out important tasks such as performance reporting, capital markets trade executions and private equity administration.

5

Operational Errors Can Be Lengthy and Expensive to Correct

A single system that provides end-to-end visibility into execution and settlement is used to settle all trades for each manager across all regions of the world.

“In helping family offices meet these challenges, the master global custodian becomes not just a provider to the family office, but an extension of it.”
Decide on a custody model up front and take advantage of the many benefits that a master custodian offers.
Decide on a custody model early in the process

It can be difficult to change the custody relationships midcourse, and family offices can be saddled with the wrong solution for years. Considerations such as the type of investments the family holds and the skills of the family office staff are key.

Select a custodian with international capabilities

By using multiple custodians to hold different assets, the multicustodian model and investment manager custody model increase the complexity of managing and protecting the assets, and require consolidating the information to present a single view or reporting solution.

Look for a good reputation and a strong balance sheet

Working with multiple custodians may seem like a good way to mitigate risk by diversifying where the family's assets are held. However, the best way to protect those assets is to select a custodian with strong fundamentals and the financial resilience to withstand challenging market conditions.

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