Advisors looking for a place to park their clients' non-traditional assets without raising fiduciary concerns may find life getting a little easier now that Schwab is back at the table.
Schwab initially supported alternative assets on its custody platform, then wavered, booting real estate, limited partnerships, hedge funds, and other types of investment to Millennium Trust.
But now, the firm has an SEC letter in hand stating that it's okay to validate "uncertified" asset custody via the National Securities Clearing Corporation's new alternative investment product service.
To cut through the boilerplate, as long as an entity signs up with the NSCC, its securities can show up in Schwab accounts.
Schwab will need to monitor the NSCC system for updates and do some extra bookkeeping, but otherwise that's it.
This is huge for Schwab and huge for advisors whose clients want to integrate their exotic holdings into their traditional securities accounts.
It's also a ray of sunshine in a market so crowded with sketchy non-traded and unregistered products that all the due diligence in the world can't stop huge firms from adding toxic securities to the shelf.
To show up in custody accounts, all alternative securities have to be registered with the NSCC. They now have a much clearer paper trail. They're on the books.
This can help prevent future Madoff-style situations where money disappears from unregistered vehicles outside public custody. Transparency is coming!