Of Clearing Firms and Custodians

How important is your clearing firm or your custodian to you?  I always took these relationships for granted up until a few years ago.

I’ve cleared with everyone in my career – Bear Stearns Oppenheimer, PaineWebber (which became UBS which became CSC), National Financial Services, Pershing, Schwab, TD Ameritrade – you name it, I’ve probably worked with them at some point.  And some are better than others but on balance, you find that each of them have their virtues and their annoyances.

But the one fear I’ve never had to face (knock on Herman Miller) is the very greatest fear that any advisor can have – what happens if the clearing firm is no longer a going concern?

During the events of 2008-2009 there was a lot of coverage of the prime brokerage scramble when it became apparent that Lehman wasn’t going to make it.  Hedge funds and their clients were all of a sudden faced with the possibility of frozen accounts at the very moment when illiquidity meant death.  There wasn’t a lot of coverage about how it felt for the advisors and brokers who were faced with the retail version of this very panic.

In my piece today at the Wall Street Journal, I look at the recent blow up at Penson Worldwide (PNSN) and get into some these issues.  Click over for my post, you won’t be disappointed…

Your Custodian and You (WSJFA)

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