Key takeaways
Managing institutional assets often requires both operational support and fiduciary oversight. Trust and custody services work together to help organizations safeguard assets, support governance responsibilities, and simplify administration.
Custody services focus on asset safekeeping, administration, and reporting. Trust services provide fiduciary oversight and trust administration. Together, they help organizations manage assets with confidence while supporting long-term objectives.
Although the terms are sometimes used together, a trustee and a custodian perform distinct roles. Many institutions choose a provider capable of serving both roles, creating a more integrated operating model with fewer handoffs and a single source of accountability.
| Trustee | Custodian |
|---|---|
| Acts in a fiduciary capacity under a trust agreement | Safeguards and administers assets |
| Responsible for carrying out trust provisions | Responsible for operational servicing and asset administration |
| May have discretionary or directed fiduciary authority depending on the trust structure | Doesn’t typically make investment decisions |
| Oversees distributions, trust administration, and fiduciary obligations | Handles trade settlement, income collection, reporting, and corporate actions |
| Accountable to beneficiaries and trust documents | Accountable for accurate custody and recordkeeping functions |
Trust and custody needs vary by organization. Whether you’re managing donor assets, retirement plans, operating reserves, or public funds, the right trust and custody relationship should support your governance, reporting, and fiduciary responsibilities.
These organizations typically face unique fiduciary responsibilities as stewards of donor assets and mission-driven capital. Many institutions must balance spending policies, investment oversight, donor restrictions, and board reporting requirements while managing increasingly diversified portfolios.
Healthcare systems frequently oversee operating reserves, foundation assets, self-insurance trusts, and long-term investment pools. These assets often require transparent reporting and governance structures that satisfy finance committees, executive leadership, and boards.
Public institutions often operate under heightened transparency requirements and rigorous audit standards. Pension assets, other post-employment benefits (OPEB) trusts, and other public funds require clear reporting, asset segregation, and strong operational controls.
Trust and custody relationships often extend beyond asset safekeeping. Organizations may rely on a range of services to help support fiduciary responsibilities, simplify administration, and meet reporting and governance requirements.
Custody account services provide the operational foundation for institutional asset management.
These services can include:
- Asset safekeeping
- Trade settlement
- Income collection
- Corporate actions processing
- Proxy administration
- Cash management support
- Comprehensive reporting
Trust services extend beyond safekeeping to include fiduciary administration. Principal Custody Solutions can serve as trustee, co-trustee, or directed trustee depending on organizational needs and governance structures.
Trust administration can include:
- Interpreting trust documents
- Supporting fiduciary obligations
- Coordinating distributions
- Maintaining records
Institutional stakeholders often require reporting tailored to different audiences. Finance committees, boards, investment committees, auditors, and executive leadership teams may each need a different level of detail.
Financial analytics and specialty reporting can include:
- Performance reporting
- Portfolio analytics
- Customized data views
- Reporting schedules aligned with organizational governance requirements
A Rabbi trust is commonly used to help finance nonqualified deferred compensation plans while allowing assets to remain subject to the claims of a sponsoring employer’s creditors.
Principal® supports organizations that use rabbi trusts to help:
- Protect promise to plan assets
- Support executive benefit arrangements
- Provide confidence to key employees
During mergers, acquisitions, and leadership transitions, change-in-control services can help support continuity and plan administration objectives.
Benefit payment services help organizations streamline the administration of retirement, deferred compensation, and other benefit obligations.
Services may include:
- Payment processing
- Participant distributions
- Tax withholding administration
- Reporting support
- Recordkeeping coordination
Consolidating these functions can simplify operations and create a more consistent experience for participants and administrators alike.
As institutions continue to diversify portfolios, custody requirements have become more complex. Alternative investments such as private equity, real estate, hedge funds, and other private market investments often involve specialized documentation and reporting needs.
Alternative investment custody services can include:
- Document management
- Valuation support
- Transaction tracking
- Specialized reporting
These services are increasingly important for endowments, foundations, and other institutions with diversified portfolios.
Choosing a trust and custody provider is about more than asset safekeeping. The right partner can help support governance responsibilities, simplify administration, and provide the reporting and oversight your organization needs.
Considerations:
Can one provider serve as both trustee and custodian, with a single relationship team accountable for both?
Can they custody private equity, real estate, and hedge fund positions, not just marketable securities?
Will boards, committees, and auditors each get the views they need, on the schedule they need?
Can they serve as trustee, co-trustee, or directed trustee as your governance structure requires?
What chartering, oversight, and audit standards does the provider operate under?
Who will your team actually work with, and how consistent is that team over time?
Have they supported institutions with your governance model, asset mix, and reporting obligations?
Trust and custody relationships require both modern technology and knowledgeable service teams. Principal Custody Solutions combines both with online tools and resources tailored to meet your needs, and experienced people who feel like an extension of your team.
Simple, modern tools and resources
Get flexible reporting and information with our intuitive platform. A single login gives you access to the timely, relevant account information you need so you can finish tasks efficiently.
Continually enhancing your experience
Many clients participate in user groups, pilot new products and services, and share input to help drive the future direction of our trust and custody technology platform.
A full range of processing capabilities
Leading technology allows our experienced and dedicated service team to provide high-quality, proactive client servicing for trade settlement, corporate actions, and cash movement in your portfolios.
