Alternative Asset Custodian

Q & A

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  What is Alternative Investment Custody?

  Alternative investment custody primarily revolves around asset protection through third-party custodianship. These custodians are responsible for safeguarding assets to prevent potential losses. They also offer vital controls to ensure compliance with anti-money laundering (AML) regulations, enhancing efficiency in cash management and streamlining investor onboarding processes. Additionally, custodians extend their support to alternative investment managers by assisting in the completion of subscription documents on the manager's behalf. This can encompass handling core offering documents and fulfilling Know Your Customer (KYC) requirements for each investor. Furthermore, alternative investment custodians often provide comprehensive support throughout the entire investment lifecycle. This includes offering traditional banking services, managing escrow accounts, providing investor services, and administering fund-related tasks.

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  Is it required to have a Custodian for my Alternative Investments?

  IRAs and other tax-advantaged accounts require custodianship. However, alternative asset custodians also offer similar services for non-qualified plans.The need for a specialized alternative custodian often arises when traditional clearing firms are incapable of holding specific assets. This is particularly crucial for products that fall outside the scope of conventional custodians.These custodians offer consolidated billing and statements, streamlining processes for advisors and clients, particularly at larger firms. Additionally, they generate tax documents such as Form 1099, reducing the hassle of tracking multiple sources.Specializing in handling unique and unconventional assets, alternative custodians provide an indispensable service for assets that do not align with the traditional custodial model. Their adaptability in accommodating these assets makes them a valuable resource for advisors seeking support beyond what major clearing firms can provide.

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  Why can’t I custody my Alternative Investments with the traditional custodian?

  Historically, providing custodial services for alternative assets has posed significant administrative challenges. It involves the assembly and maintenance of numerous documents, along with complex servicing requirements that vary across different types of alternative assets. Currently, there is a lack of standardization in the custody of alternative assets.The custodial services needed for alternative assets do not align well with the automated, standardized processes applied by major custodians to handle cash, stocks, and bonds.Traditional players in the custodial industry, such as Fidelity, Charles Schwab, Morgan Stanley, and TD Ameritrade, have shifted their focus toward becoming comprehensive fiduciary institutions. Their responsibilities now extend beyond recordkeeping and tax compliance. These traditional custodians vet and approve investment offerings, often facilitating their distribution through the networks of their affiliated advisers and intermediaries.

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  Who are the leading providers of Alternative Investment Custody?

  In the past, alternative asset investments were primarily accessible to institutional investors, high-net-worth individuals, and families. However, the landscape has evolved as more mass affluent investors recognize the diversification and return potential of alternative investments. This shift often termed the "democratization" of alternative assets, has increased demand among individual investors. Many individuals now invest in alternative assets through self-directed individual retirement accounts (IRAs), which require a qualified custodian.Presently, there are over 30 independent self-directed IRA custodians in the United States. The combined total assets under administration for all self-directed IRA custodians stand at $600 billion, serving approximately 3-3.5 million individual accounts.Among the prominent players in this space, Equity Trust and Millennium Trust stand out as the largest incumbents. These companies offer diversified services encompassing retail self-directed custody of tax-advantaged plans, institutional services, and traditional brokerage solutions.

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  Why Alts Custodian?

  Our custody-as-a-service solution for alternative assets prioritizes financial advisors and seamlessly integrates with the software suites used by broker-dealers. This integration has been proven to revolutionize their operational efficiency and significantly expand their market reach.

  • Enhanced Advisor Experience

    Our unwavering focus is on enhancing the financial advisor experience. While many competitors primarily target retail markets, our commitment is to automate investments in alternative asset classes that are advisor-friendly. We place a premium on omnibus account administration capabilities.

  • Reduced Costs

    Our fully automated platform for alternative investment custody is recognized for its ability to minimize manual work and associated costs. Our proven track record shows that we consistently cut custodial fees by half compared to current market rates.

  • Hassle-Free Integrations

    Our solution has earned a reputation for seamless integration into existing advisor tools and frameworks. The adoption process has been streamlined, requiring no additional time or effort.