Why Custody Structure Matters

While many family offices focus on hiring top investment managers, they sometimes overlook an equally important consideration: how assets are held, safeguarded and reported.

As portfolios grow more complex, these gaps can increase operational risk and costs. Even established family offices should periodically reassess their custody approach to ensure it aligns with their needs.

The Role of a Custodian

A custodian safeguards client assets, facilitates global investing across multiple asset classes and delivers consistent, consolidated reporting that allows performance comparisons across managers.

Choosing the Right Type of Custodian

Family offices that have experienced a liquidity event often outgrow their private bank. Although private banks offer strong service, they may lack the resources to support a global, growing portfolio. They may also be reluctant to accommodate multiple managers and might even limit reporting flexibility. In some cases, appointing numerous managers, each with its own custody and reporting, creates a fragmented, difficult-to-manage structure.

Most family offices need the global scale and capabilities of a major custodian, as well as the personalized service of a boutique firm.

Challenges and Risks of Working with Multiple Custodians

The Advantages of a Master Global Custodian

A Master global custodian serves as a single point of contact-overseeing complex structures and coordinating with multiple managers globally.

Master global custodians also safeguard against issues that inhibit the family office’s ability to protect the family’s wealth, such as bookkeeping errors or fraud.

How a Master Global Custodian Enhances Security, Efficiency, and Administration

Structuring an Investment Portfolio Within Master Global Custody

Another advantage of a master global custodian is that family offices can maintain relationships with their investment managers, while the custodian provides the structure to support them. The client sets up accounts at the custodian and appoints each manager to transact directly on its respective accounts.

Through this arrangement, family offices can appoint or replace managers without disrupting the overall structure or reporting. Managers execute trades, either directly or through third-party brokers, and instruct the custodian to settle transactions, typically via automatic SWIFT messages tied to the accounts.

The custodian safekeeps the assets and provides the family office with consistent reporting for each manager and the entire portfolio. The family office can then analyze manager performance and monitor exposure to securities, countries and industries-both at the manager level and across the total portfolio.

Working With BNY Mellon Global Family Office

The BNY Wealth Global Family Office team brings nearly 240 years of experience, with over 50 years dedicated to family offices. Leveraging the strength of the world’s largest global custodian, our specialized Relationship Managers deliver trusted custody and reporting services to some of the world’s wealthiest families, pension funds, banks, Fortune 500 companies and sovereign wealth funds.