How do I know my assets are safe with an independent advisor?
Most registered investment advisors are in the business of advising and managing client accounts; they are not in the business of custodying (physically safekeeping) the assets they manage. The custody of those accounts should be and typically is handled by an independent, third-party custodian. Regardless of which mutual fund, ETF, bond or stock you may own, the accounting, reporting, and housing of the account which owns those assets is maintained by the custodian. As with your personal checking account, your investment asset accounts generate monthly or quarterly reports identifying the investments, transactions, and balances. Depending upon the custodian (we use Charles Schwab & Co., Inc., a SEC-registered and FINRA member broker-dealer/custodian), you probably have round-the-clock access via internet or 24-hour phone support allowing you to verify and confirm any assets in any of your accounts.
In addition, Schwab offers "The Schwab Security Guarantee" that provides the following: "Schwab will cover 100% of any losses in any of your Schwab accounts due to unauthorized activity." The Guarantee doesn't cost clients anything and applies to accounts at Schwab that are managed by independent investment advisors such as S.F. Ehrlich.
While advisors may be given access by their clients to trade within these accounts, their ability to unlawfully remove funds is prevented by authorization controls required by the custodian. Just as you would not leave your car keys in the ignition when you run into the mall, each investor should recognize their responsibility in reviewing their account statements in a timely fashion and should feel free to ask any questions of their advisor if they do not understand what they're looking at. Our mantra: "It's YOUR money".