Who Actually Holds My Money When I Use a Financial Adviser?

When you use a financial adviser, you might assume the adviser holds your money. In most cases, they do not. Understanding who actually holds your investments is one of the most important things you can do to protect yourself.

This guide explains, in plain language, the difference between giving advice, managing investments and holding client assets. It is written for an ordinary client, not an industry professional.

The key roles in international financial advice

When you invest through a financial adviser, several different parties are typically involved. Each has a different role:

1. Financial adviser — gives you advice and recommends investments
2. Investment manager / DFM — makes day-to-day investment decisions
3. Platform — the technology and administration layer for your investments
4. Custodian — the regulated entity that actually holds your assets
5. Fund manager — manages the underlying funds your money is invested in

Let's look at each in more detail.

The financial adviser

The financial adviser is the person or firm that gives you advice. They assess your circumstances, recommend a strategy, and suggest specific investments or products. They may also provide ongoing reviews and adjustments.

What they do: Give advice, create a financial plan, recommend investments.

What they do not do: Hold your money or investments directly.

The adviser is paid through an adviser fee — either an initial fee, an ongoing annual fee, or both. This fee is typically 0.5% to 1.5% of your assets per year.

The investment manager / DFM

A Discretionary Fund Manager (DFM) is an investment professional who manages your portfolio on a discretionary basis. This means they make investment decisions — buying and selling investments within your portfolio — without consulting you on each individual trade.

What they do: Make investment decisions, manage the portfolio day-to-day.

What they do not do: Hold your money directly. They instruct the custodian to buy and sell, but the custodian holds the assets.

Not all arrangements use a DFM. Some advisers manage portfolios themselves, and some use model portfolios provided by a platform. When a DFM is used, they charge an additional fee, typically 0.5% to 1.5% per year.

The platform

The platform is the technology and administration layer that lets you and your adviser view and manage your investments. It provides the online portal where you can see your holdings, valuations and transaction history.

What they do: Provide technology, administration, reporting and tax wrappers.

What they do not do: Give you financial advice (though they may facilitate advice from your adviser).

The platform charges a fee, typically 0.1% to 0.5% of assets per year. Some platforms also act as the custodian, but it is worth understanding which role each provider plays.

The custodian

The custodian is the regulated entity that actually holds your assets. This is the most important role for your protection, because it means your investments are held separately from the adviser firm.

What they do: Safekeep your investments, settle trades, collect dividends and income.

Why this matters: If your adviser firm encounters financial difficulties, your investments are held separately by the custodian and should be protected. Your assets are not part of the adviser firm's estate.

In many arrangements, the platform also acts as the custodian. But the key point is that the custodian is a separate, regulated entity from the adviser. You should always know who your custodian is and how to contact them directly.

The fund manager

The fund manager manages the underlying funds your money is invested in — for example, a global equity fund, a bond fund or a real estate fund. They decide which securities to buy and sell within the fund.

What they do: Manage the underlying investments within each fund.

What they do not do: Hold your money directly or give you personal advice.

The fund manager charges a fee, known as the Ongoing Charge Figure (OCF), which is embedded in the fund price. This is typically 0.1% to 1.0% per year depending on the type of fund.

Why this separation matters

The separation between advice, management and custody is a fundamental protection for investors. It means:

• Your adviser cannot run off with your money — they do not hold it.
• If your adviser firm fails, your investments are safe — they are held by the custodian.
• You can move your investments to a different adviser without having to sell everything — the custodian can re-platform your holdings.
• You can verify your holdings independently — you can contact the custodian or platform directly to check your balance.

What to ask your adviser

Before appointing a financial adviser, ask these questions about custody:

1. Who is the custodian of my investments? (get the name of the regulated entity)
2. Is the custodian separate from your firm?
3. What investor protection scheme applies? (for example, FSCS in the UK, FOS in Australia)
4. How can I verify my holdings independently? (online portal, direct contact with custodian)
5. What happens to my investments if your firm ceases trading?
6. Can I move my investments to another adviser or platform? (and what are the costs?)

Red flags to watch for

Be cautious if:

• The adviser firm holds your money directly, rather than using an independent custodian
• You cannot get a clear answer about who holds your investments
• You are asked to make payments to the adviser firm's own bank account rather than to a regulated platform or custodian
• You cannot access an online portal to verify your holdings independently

These are not necessarily signs of wrongdoing, but they are worth questioning. A reputable international adviser should be able to give you clear, confident answers to all of the above.

Summary

When you use a financial adviser, several different parties are involved:

• The adviser gives advice but does not hold your money
• The investment manager / DFM makes investment decisions but does not hold your money
• The platform provides technology and administration
• The custodian actually holds your assets — and should be independent of the adviser
• The fund manager manages the underlying funds

Understanding this separation helps you protect your investments and ask the right questions before appointing an adviser.

If you are not sure what type of adviser you need, the Link Independent Expat Planner can help you organise your circumstances. Link Independent is a curated introduction service that helps expats and internationally mobile clients connect with appropriately regulated financial advisers based on their circumstances.

Find an adviser or use the Expat Planner to get started.