Choosing the first custodian for a family office
Built on Chapter 6 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
The first custody relationship should support the family's actual assets and controls. A billionaire family needs more than an attractive presentation or a familiar banking contact. It needs to understand where assets will be held, who can move them, and how the office will verify the records.
Chapter 6 emphasizes mapping assets, advisors, and responsibilities before implementation. Apply that work to custody selection. The family should compare proposed service arrangements against the accounts and investments it expects the office to administer.
Begin with the account and asset inventory
List the entities that need accounts and the assets each expects to hold. Include unusual holdings and investments that may be recorded differently from publicly traded securities. Ask prospective providers to explain the treatment of each relevant asset type.
Identify what reporting the office needs and how the information will reach its accounting process. A consolidated display may include assets held elsewhere. Staff should understand which institution actually holds an asset and which information is supplied by another party.
Ask the appropriate advisors to review the proposed account arrangements. Establish the account owner and authorized signers from the governing documents before onboarding.
Examine custody and other services separately
A firm may offer custody alongside lending or investment advice. Understand the scope and price of each service. The family should be able to compare the custody arrangement without assuming every proposed product is necessary.
In my summit opening remarks, I urge people to conduct full diligence even where an existing relationship is claimed. That principle fits provider selection. A familiar banker can help the process while the office still verifies the agreement, controls, and responsibilities.
Ask who will handle the relationship when the main contact is unavailable. A service model that relies entirely on one person can create problems during an urgent payment or account issue.
Test authority and payment controls
Give the provider the actual approval requirements the family intends to use. Ask it to demonstrate how permissions are established and how changes are controlled. The office needs to understand which controls are performed by the provider and which remain internal.
Review the process for changing bank instructions, adding users, and responding to suspected fraud. Keep emergency contacts and escalation steps available to the authorized employees.
Confirm how the office will receive evidence of completed transactions. Reconciliation should use appropriate records and remain separate from the person initiating a payment where the control design requires it.
Compare complete costs and restrictions
Request a clear schedule of fees and the circumstances that trigger additional charges. Compare the full cost of the services the family is likely to use.
Ask about restrictions relevant to moving assets or ending the relationship. Some holdings may require separate consent or procedures. Understand those conditions before the office assumes a future transfer will be quick or inexpensive.
Have qualified professionals assess proposed lending terms and any related commitments. Custody selection should not leave the family with obligations it has not separately considered.
Plan onboarding as a controlled transfer
Assign an office coordinator and agree what information each party needs. Maintain a list of accounts and assets to be opened or moved. Confirm ownership records and signers before initiating transfers.
Reconcile the receiving records to the source information. Investigate missing assets or unexpected differences instead of treating account opening as proof the migration is complete.
Keep the old and new responsibilities clear during the transition. The family still needs payments and reporting while providers are changing. Avoid closing a working route before the replacement has been tested and approved.
What to take from this
- Compare providers against the actual account and asset inventory.
- Separate custody from optional advice and lending services.
- Test permissions and escalation procedures, including independent checks on changed instructions.
- Reconcile transferred assets before closing the transition.
Ask the shortlisted provider to walk through one proposed payment and one asset transfer. Use the demonstration to identify the instructions and internal controls the office still needs to complete.
This page is general information, not legal advice. Family governance documents and dispute processes should be reviewed by a qualified attorney.
Questions and answers
Should the family use its existing bank automatically? Compare the actual custody scope, controls, costs, and service requirements. An existing relationship is useful context but does not replace assessment.
Does a report prove where every asset is held? Understand which assets are held by the provider and which values or records are supplied from elsewhere.
When is onboarding complete? When the authorized accounts work, assets and balances reconcile, and the office can perform its required reporting and payment controls.