Did you know that a Third-Party Custodian is your first line of defense for your investments?

A traditional custodian is a trust company, bank, broker-dealer, or similar financial institution responsible for holding and safeguarding securities. However, an Independent Third-Party Custodian provides an important layer of protection between you and your investment advisor’s firm.

This means an advisor cannot dip into your account for personal use. The third-party custodian also sends out client statements independently, making it impossible for someone to cover up withdrawals or report false performance on these statements.

Sometimes, self-custody goes wrong. For example, do you remember the case of Bernie Madoff? Madoff self-custodied his clients’ assets, which allowed him to access their accounts at any time and take out money. He then created and mailed false statements to hide withdrawals and show bogus performance. His clients lost their life savings to someone they believed had their best interests in mind.

Some advisors may say their firm is large enough that self-clearing and custody don’t matter. Think again – Lehman Brothers had $691 billion in assets when it filed for bankruptcy, and MF Global had $41 billion when it collapsed.

You need a third-party custodian to serve as your first line of defense.

Zhang Financial utilizes third-party custodians to safeguard clients’ assets. The firm works with LPL Financial, TD Ameritrade, and Charles Schwab; leaders in the brokerage industry.

“If an adviser tells you that you don’t need [a third party custodian], end the meeting and leave immediately. This is a deal-killer and should raise many red flags.” – U.S. News

*Source: http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2011/09/01/6-question s-to-ask-your-financial-adviser