Here’s what you need to know about custody pricing methodology – your cost corresponds to the services you require. Understanding what elements factor into determining your rates will help you make smarter decisions in the future.

Contracts and agreements need to be reviewed and updated regularly – whether it’s because you’re adding services, or your custodian is changing operational procedures. No matter the reason, renewing is the perfect time to review the costs associated with your investment portfolio and confirm the fee schedule is appropriate. 

Enticing pricing is just that, an enticement. When a bid seems too low to be realistic long term, it usually is. And when you don’t anticipate upcoming fee increases to rebalance your ongoing or changing servicing needs, they can often come as a shock.

Staying aware of your portfolio’s makeup – knowing the details of its structure and activity – can help you avoid surprises. Learn what factors weigh into your cost and what red flags might signal an approaching change.

How are pricing structures built?

Knowing what elements weigh into fee structures can help you look at your strategy and make smart decisions for the future. These are the primary factors that determine your cost.

1. Do you need a custodian or a trustee?
   This is the most critical aspect of your fee. Trustees require more fiduciary responsibility (reflected in a higher price), custodians require less (reflected in a lower price).
   
   
2. What securities are you holding/ do you need serviced?
   Are you invested in equities, bonds, real estate? A mutual fund, hedge fund or exchange-traded fund? Private equity or debt funds?
   
   
3. How many accounts do you need?
   Are you a single client with one long-term investment account? Or are you a holding company with multiple subcompanies or wholly owned subsidiaries?
   
   
4. Are you involving outside parties?
   Do you have outside managers? Do you have outside advisors or consultants authorizing trades on your behalf and communicating with your custodian? Or are you doing all your work inhouse?
   
   
5. What level of service do you expect?
   Do you require frequent in-person meetings? Reporting customization? Daily confirmations?
   
   
6. Are your securities priced daily through industry pricing sources? Does your custodian have to do manual work to process transactions in private markets?

Why is my pricing changing?

Knowing what elements weigh into fee structures can help you look at your strategy and make smart decisions for the future. These are the primary factors that determine your cost.

1. A change in investment strategy
2. Acquiring a company
3. A change in asset allocations
4. An initial comparative pricing bid
5. Elevated servicing demands
6. Special customization or vendor involvement

Knowing what factors can impact custody pricing is crucial to creating successful investment strategies in the future. That’s why U.S. Bank has a team of experts ready to offer you a tailored solution that meets your needs and allows you to focus on achieving your goals. Visit usbank.com/custody to learn more about our custody solutions.
 

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