MML #051: Why Your Investment Returns Have Nothing to Do With Your Custodian

A quick highlight before I deliver the last edition of Money Meets Law for 2025. 

Back in November, I had the opportunity to present in collaboration with the American Bar Association on Retirement Readiness for small law firm owners and employee attorneys. We cover how to think about retirement when you are roughly five years out, common pitfalls that can quietly derail a plan, and several practical planning techniques to consider along the way. 

If you’re looking for a clear, high-level overview of how we help lawyers move from uncertainty to confidence in their retirement planning, this is a worthwhile watch.

Note: Must be logged into the American Bar Association to view this content

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And now, for the last edition of MML for 2025:

I hear this all the time from lawyers nearing retirement:

"I'm hesitant to consolidate my accounts because my Fidelity portfolio is crushing my Schwab one."

Or: "My investments have done really well at Vanguard. I don't want to mess with success."

Here's the thing—your custodian isn't managing your money. They're just holding it.

The Custodian Myth

Think of your custodian like a safety deposit box at a bank. Whether you store your grandmother's jewelry at Chase, Wells Fargo, or Bank of America doesn't change the jewelry's value. The bank is just providing the vault.

Same goes for Schwab, Fidelity, Vanguard, or T. Rowe Price. They're the vault. Your actual investments—the stocks, bonds, mutual funds, or ETFs you own—are what determine your returns.

You could own the exact same Vanguard Total Stock Market Index Fund at Schwab and at Fidelity. Same fund. Same return. Different custodian.

The performance difference you're seeing between accounts? That's about what you own, not where you own it.

So What's The Actual Difference?

If custodians aren't driving performance, what are you paying them for?

Honestly, not much—and that's largely a good thing.

Most major custodians charge minimal direct fees to consumers. You might see some trading costs or small annual account fees, but we're talking pocket change compared to a decade or two ago.

Instead, custodians primarily make money in three main ways:

First, account servicing fees. They charge for the infrastructure—recordkeeping, reporting, trade settlement, and all the administrative work that keeps your account running smoothly.

Second, the spread on your cash. When you leave money sitting in your account uninvested, they pay you a modest interest rate while earning a higher rate themselves on that cash. It's how they monetize the float.

Third, transaction-related fees. Trading commissions (though these have largely disappeared for stocks), fund administration fees, foreign currency exchanges, and securities lending. These add up across millions of clients but typically don't hit your account in obvious ways.

Bottom line: custodians get paid for safely holding your assets and handling the operational heavy lifting. They're the backstage crew, not the lead actor. And while you may not be paying them directly (or, at least not much), they’re using your money to generate revenue for themselves. 

What This Means For You

If you're carrying multiple accounts across different custodians because you think one is "performing better," you're solving the wrong problem.

The real question isn't where your money sits. It's what you own and whether your overall allocation makes sense for your retirement timeline.

Consolidating accounts doesn't hurt your returns. It just makes your financial life simpler—easier to rebalance, clearer to track, more straightforward to manage in retirement.

Your investments will perform the same whether they're at Fidelity, Schwab, Vanguard, or anywhere else. The vault doesn't change what's inside.