Bad Homes for Your Investments: Where Not to Hold Stocks and Mutual Funds

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Written by: Andrew V. Tignanelli, CPA, CFP®

Forty years of experience gives me a good understanding of where not to hold stocks, bonds, or mutual funds.  It is vital that I communicate this issue to every financial spouse, and they have that lightbulb moment and follow through on this recommendation. What is a financial spouse? It is the spouse in a marriage that most likely is monitoring and managing the household wealth. They are the ones most likely paying the monthly bills and gathering the tax information at the end of the year. Granted, some households will do this as a team, but the most likely scenario is that one person has taken on that responsibility. If you are single, then the importance of this issue is heightened, because there will come a day when someone outside your household will need to take over.

The institution that holds assets for you is called the custodian. For example, if you have a checking and savings account at Bank of America, then Bank of America is the custodian of those cash assets. If Fidelity holds an IRA or 401k for you, then Fidelity is the custodian of that IRA or 401k. If you have mutual funds at Vanguard, then Vanguard is the custodian of those mutual funds. The custodian’s policies of how to handle a disabled or deceased customer’s account will determine the degree of difficulty your family or friends will encounter when taking control. There are some custodians, for the love of your family and friends, you would prefer they not have to deal with.

The worst custodians for your family or friends to deal with are the transfer agents. Here are some common transfer agents: Computershare, Equiniti Trust, American Stock Transfer, and Broadridge. The transfer agent is the company responsible for the recordkeeping of every share owned by any publicly traded company. They make sure that dividends are paid or reinvested into more stock and handle stock splits. They can also serve as custodian for that stock for you. It is common to have AT&T, Verizon, Comcast, McCormick, UPS, MetLife, or Disney held by the transfer agent. If you have shares held at a transfer agent and they are eligible to be moved, then do not procrastinate and begin the process of getting them safely into a brokerage account such as Schwab or Fidelity. This is important because these transfer agents have no relationship or ability to have personal contact with their customers. Therefore, they rely on identity verification methods such as a Medallion Signature Guarantee. In the 1980s, a Medalion Signature Guarantee was common, but in 2025 they are almost impossible to get. A Medallion Signature Guarantee is when a bank or brokerage firm signs off with this unique stamp saying we absolutely guarantee that the person signing to transfer these certificates is the right person. Banks and brokers have been burned too many times to be willing to do this anymore. As the owner of those stocks, you can sign a transfer form for your broker, like Schwab and Fidelity, and they will send a Medallion Guarantee to the transfer agent to send the shares to the brokerage firm. When your family and friends need to take over, they merely get in contact with your broker representative and shortly thereafter are in control of the assets.  The Financial Consulate employs proactive measures so that it is even easier. These proactive devices are not possible with transfer agents.  If you hold shares at Computershare, Equiniti, American Stock Transfer or Broadridge, then please get them safely into the hands of a broker so that your family and friends have a personal contact to deal with.  Michelle Seda, our head of Client Services, and I can tell you the months of headaches of dealing with transfer agents.

Second on the hit list is holding mutual fund shares directly with a mutual fund group. This is a little harder to explain, because some mutual fund groups are also brokers; therefore, you can have a Fidelity statement, but the shares are held directly with the fund group and not in a brokerage account. Why is this a problem? I could own two Fidelity funds, one Janus Henderson Fund, two T. Rowe Price Funds and one Vanguard fund, all directly with the fund group. Each mutual fund is a separate account and requires documentation to go to each to gain control. In this illustration, I have six mutual funds for which I must send documentation. All six of these funds can normally be held in one brokerage account to simplify the efforts to gain control. My successor merely goes to one brokerage account and provides necessary documentation to my contact person, and all six funds are handled. Another problem with direct registration with a mutual fund is that they commonly require a Medallion Guarantee Signature. One issue that has to be considered is that some funds are proprietary to that fund group and cannot be transferred. This is very rare, but it is possible, and the only way to get it out of there is to sell and realize any gains.

Last on the hit list is holding assets with multiple custodians. You have a brokerage account with Merrill Lynch, Schwab, Vanguard, Computershare, T. Rowe Price, and four banks. If this were the 1920s, then this kind of diversification would be brilliant, but in 2025 this is nothing more than an administrative nightmare. Seventeen years ago, Lehman Brothers Brokerage firm went under, and within a short period of time, SIPC made sure every customer of Lehman Brothers had all of their assets.  Many banks go under in the course of a year, and FDIC makes sure on Monday morning the bank is open for business. Keeping assets in multiple locations is only an administrative hassle for someone to take over.  Ninety percent of stocks, bonds, mutual funds, or ETFs can be held at Schwab or Fidelity.

There is one more that I have not seen in 15 years, and that is holding the actual stock or bonds certificate at home or in a safe deposit box. Hopefully, everyone knows why this is a bad idea. If you have certificates at home, get them out today and deposit them in a brokerage account with Schwab or Fidelity.

If you have any of these forms of assets at transfer agents, mutual fund groups, multiple custodians or in certificate form please make it your goal next month to rectify the issue, for the sake of your family and friends. If you are a client of the Consulate and have assets at any of the above and want to bring them all into your brokerage account at Schwab or Fidelity, talk to your advisor. Legacy assets held are normally not billable by the Consulate. We do that so you will not be reluctant to consolidate. Contact your advisor to help you consolidate and simplify.

Financial Consulate aims to help lessen the worry and burden of wealth management and enhance financial wellness so our clients can pursue relationships and true fulfillment. Choose the professionals at Financial Consulate as your Certified Financial Planners™ (CFP®) to take advantage of our educational, ethical approach to financial planning. Our services are comprehensive, including tax planning, investment planning, retirement planning, estate planning, and more. We operate completely independently and offer fee-only services to keep your vision in line with our recommendations at all times. While we have offices in Hunt Valley, Maryland, Fernandina Beach, Florida, and Gettysburg, Pennsylvania, we serve clients across the nation. To begin your partnership with a trustworthy wealth advisor, please contact Financial Consulate today.