The Basics: My Account
Matthew Sullivan
April 25, 2019

I remember when my mom took me to the bank to open my very first checking account. I signed a couple of things and a few days later my very own checks arrived in the mail. Mom dutifully showed me how to complete the check register and reconcile my account to the bank statement every month. I recall saying to my mom: “My check register tells me what I think I have in the account and the bank statement tells me what I actually have in the account. Any differences I should find out what they are right away.” A basic financial lesson learned.

There are many different business models that a financial services professional may leverage in order to assist their clients. One such business structure is very similar to the financial life lesson I learned so long ago. As a registered investment advisor (“RIA”) Contravisory maintains a sort of “check register” for all of our clients. Instead of using pen and paper, we leverage computers to keep track of all cash and securities owned by each client. Instead of waiting until the end of the month to reconcile our “register” to the bank, we reconcile client accounts every day.

One of the greatest benefits of this business structure is simplicity; it is so analogous to the very first bank account we all opened at one time. Even better, this service model is inherently secure. When you hire a RIA, one of the many things they will do is keep records of activity in your accounts and send you reports from time to time. You are trusting your RIA to manage your finances and the reporting allows you to monitor and keep track. Now for the best part…you, the client will also receive reports directly from the bank regarding your financial accounts. Reports from your RIA should match reports from your bank. And just like your very first checking account: ask about any differences right away!

As described, this business model has built in investor protections. Your RIA will manage your cash and securities but never actually hold either. At the same time, your bank holds both cash and securities but does not manage either. Admittedly, some RIA’s may have “custody” of your cash and securities, but that is a topic for another day. Remember to keep it simple and keep it safe.

Read more