Definition
The term custodian refers to a financial institution that holds securities in safekeeping for their customers. A custodian can hold assets that are both in physical form as well as electronic.
Explanation
A custodian has a responsibility to their customers to hold assets in safekeeping to minimize the risk of loss. Custodians are typically large financial institutions, such as banks and brokerage houses, that might hold billions of their customers' dollars in safekeeping.
Custodians frequently offer their clients a wide variety of services. For example, a financial account may be set up for a beneficiary and administered by a custodian, who has a fiduciary obligation to the account's beneficiary. Custodians can also help with trade settlements, foreign exchange, tax records, and the collection of stock dividends or bond interest payments. The fees charged for custodial services are typically created on a sliding scale, which is based on the total value of all of the customer's assets.
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