Holding client assets: the custody record FPI expects
What a South African planner must record under the FPI Code when it holds client assets or discretion, and how to keep them apart from its own books.
By Achekam · · 5 min read · For Financial services businesses in South Africa
Most financial planners never touch a client's investments directly: the money goes from the client to a product provider, and the planner advises. But practices drift into custody without always noticing. A client signs a mandate giving the planner discretion to switch funds. An elderly client hands over share certificates "for safekeeping". A practice collects a lump sum to invest on a client's behalf and holds it for a few days while paperwork is finalised.
At that point the relationship changes. The Financial Planning Institute of Southern Africa (FPI) Code of Ethics and Practice Standards treats a member who holds client assets or investment discretion differently from one who only advises, and it expects a specific record. This article sets out what the Code asks for, what it forbids, and how a practice keeps its own books clean so the two never blur.
Custody or discretion makes you a fiduciary
FPI rule 5.5 says that members who take custody of client assets, or who exercise investment discretion over them, do so in a fiduciary capacity. That sits on top of the Code's general requirement that members place clients' interests first and do not put personal interest or advantage, in any form, before them.
In plain terms, once you hold the asset or the power to deal with it, you are acting for the client in the full sense, and every decision about that asset has to be one you could defend as being in their interest.
What the custody record must show
Rule 5.5 also lists what the member must record. For each arrangement, the record shows:
- the date custody or authority began;
- the client's name and contact details;
- particulars identifying the assets;
- their value;
- the date custody or authority ends.
A simple worked example. A client gives the practice discretion over a unit trust portfolio from the date the mandate is signed. The record names the client and how to reach them, identifies the portfolio by provider and account number, notes its value at the start, and stays open until the mandate is withdrawn, when the end date is added. If the practice also holds a physical share certificate for the same client, that is a second line in the record, identified by the company, the certificate number and the number of shares it represents.
Keep the record current. A record that was right when the mandate began and has never been touched since does not track the client's assets accurately, which is the point of the next rule.
Keeping client property separate
FPI rule 7.25 bars members from commingling their own property with that of clients unless the commingling is permitted by law and explicitly authorised and defined in a written agreement. The same rule requires record-keeping that tracks each client's assets accurately.
The two halves work together. Even where some pooling is allowed by law and agreed in writing, the practice must still be able to say, for every client, exactly what is theirs. Without a written agreement, client assets simply do not belong in the practice's accounts.
Rules 7.26 and 7.27 add a related prohibition: members may not borrow money from clients or lend money to them. The exceptions are narrow, covering immediate family and lending institutions. An informal loan from a wealthy client to tide the practice over a slow month is exactly what these rules are written to stop.
The full wording is in the FPI Code of Ethics and Professional Responsibility, which sets out the fiduciary duties, the custody record and the conflict rules in one document.
The practice's books hold only the practice's money
Achekam gives each business its own double-entry ledger, with a standard chart of accounts created when the books first open; accounts can be added, renamed or switched off. For a planning practice, that ledger is where the practice's fees, salaries, rent and tax live. It is not a register of client portfolios, and it should not become one.
The bank reconciliation is the control that shows whether client money has crept in. A practice imports its bank statements as PDF, CSV, Excel, OFX, QIF, MT940 or CAMT.053, and each import is checked so that the opening balance plus the movements equals the closing balance. Bank lines are matched by suggestion and a person accepts each match. A line not yet in the books becomes a suggested journal that a person approves, and the reconciliation completes only once the difference is cleared or every leftover line is explained.
That last point is where client money surfaces. If a deposit from a client cannot be matched to a fee invoice, someone has to explain it, and "client's investment, passed on to the provider" is an explanation that should prompt a second look at rule 7.25. Where a practice genuinely needs to hold money for others, a separate account is the starting point, as discussed in a separate bank account for money held for others. Who in a small practice should reconcile, and who should approve, is covered in separating duties in a small advice practice.
File the custody record per client
The custody record is a document the practice keeps, not a set of ledger accounts. Achekam's Document Centre is a folder-based store where the practice can keep one folder per client: the signed mandate, the custody record itself, valuations and the letter ending the arrangement. Files can be tagged, searched and archived when the relationship ends, and a new version of the custody record keeps the earlier ones, so the history of changes is not lost.
Filing it this way pays off when a client asks for their papers. FPI rule 7.20 requires members, on a client's written request, to give the client or their authorised person any original documents and electronic files related to the professional services within seven days. A client folder that already holds the mandate and the custody record turns that request into a routine task.
A quarterly check for practices with custody
- List every client for whom the practice holds an asset or a mandate, and confirm each has a current custody record.
- Update the values and close the record for any arrangement that has ended.
- Review the bank reconciliation for any receipts or payments that relate to client assets rather than fees.
- Confirm there are no loans to or from clients outside the narrow exceptions.
Done regularly, that check keeps the practice's fiduciary duties visible rather than buried in one adviser's memory.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
