Your account is opened in your name at an independent qualified custodian — Altruist, Betterment and Interactive Brokers — which holds the assets and issues account statements. Under the advisory agreement, you may elect to have Aduna Capital or the custodian calculate the advisory fee. You may authorize the custodian to deduct the disclosed fee from the account, or elect to receive an invoice and pay the firm directly. Apart from any written trading discretion and any fee-deduction authority you authorize, the firm cannot withdraw or transfer your assets.
Who holds what
| The custodian | Aduna Capital | |
|---|---|---|
| Holds the assets | Yes — in an account in your name | No |
| Issues your statements | Yes | No |
| Calculates and deducts the fee | Yes | No — we instruct, they execute |
| Can move money out to a third party | Only on your instruction | No, ever |
| Places trades in the account | No | Yes — under written discretion you grant |
| Chooses what you own | No | Yes — that is the job you hired us for |
| You can log in directly | Yes, independently of us | — |
The custodians we use are Altruist, Betterment and Interactive Brokers. Each is a qualified custodian holding the account in your name, not ours, and each gives you your own login. You could fire us tomorrow and the account would not move.
What we can and cannot do
Our authority over your account is two things and no more:
- Place trades, under the discretionary authority you grant in the written advisory agreement. That is what discretionary management means: we buy and sell inside your account without asking you to approve each trade.
- Instruct the custodian to deduct the advisory fee we disclosed to you before you engaged, calculated on the schedule at our fee page.
What we cannot do is the part that matters: we cannot direct a single dollar to anyone but you. Not to us beyond the disclosed fee, not to a third party, not to another account. The custodian will not execute it, because we have no authority to ask.
What the rule actually says — including the part that surprises people
Here is where most firms write something slightly untrue, so we will write the true version.
California Code of Regulations title 10, section 260.237 defines custody as “holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them, or having the ability to appropriate them.” And subsection (d)(2)(B) is explicit that this includes “any arrangement…under which the investment adviser is authorized or permitted to withdraw client funds or securities maintained with a custodian upon the investment adviser’s instruction to the custodian.”
Read plainly: the authority to instruct a fee deduction is itself a form of custody under California law. An adviser that debits a fee — which is nearly every adviser — is inside that definition. Any firm telling you flatly that it “never touches client money” is either not billing from your account or has not read the rule.
What the rule then does is provide a safe harbour, at subsection (b)(3), on four conditions:
- Written authorisation from you to deduct the fee.
- Notice to the custodian of the fee amount, at the same time.
- An invoice to you, at the same time, itemising the fee — including the formula used, the value of the assets it was calculated on, and the period it covers.
- Written notification to the Commissioner that the firm uses these safeguards.
The third condition is the one that protects you, and it is the one to check at any firm. You are entitled to an invoice that shows the arithmetic — not a line on a statement, the arithmetic.
How to check, in two minutes
- Log in to the custodian directly, not through us. If you cannot, that is the problem, and it is the problem in every famous case.
- Compare the custodian’s statement to anything we send you. If the two ever disagree, the custodian’s statement is the real one and you should call us that day.
- Find the fee line on the quarterly statement and check it against the invoice and against the published schedule. It should be reconcilable to the dollar.
- Check the firm at adviserinfo.sec.gov. Form ADV Part 1, Item 9 is the custody question. Read what we answered.
Why the frauds worked. In the well-known adviser frauds, one firm both managed the money and produced the only statement the client ever saw. There was no independent record to compare against, so the fiction held for years. An independent custodian is not a courtesy or a marketing point — it is the thing that makes that fiction impossible.
What to ask any other adviser
- Who holds the assets, and can I log in to them without going through you?
- Who produces the statement I will see? If the answer to both is “we do”, stop.
- Do you have custody as Form ADV Part 1 Item 9 defines it, and if so, are you subject to a surprise examination?
- Will you send me an invoice showing the fee formula and the asset value it was calculated on?
- Can you move money out of my account to anywhere other than me?
You are entitled to all five answers in writing before you sign anything, from us or from anyone. Our fiduciary standard → · Our fee schedule →
Ask us the five questions
Fifteen minutes, free. If any adviser will not answer all five in writing, that is your answer.