“What does a custodian do?” “How is a custodian paid?”
The custodian bank is charged with safeguarding your financial assets, to report required information to the IRS (e.g., 1099’s, etc), and provide you statements of your holdings. They are essentially the accountants and safe keepers.
There are many custodian banks. I use TD Ameritrade Institutional primarily in order to be most familiar with their process, forms and procedures.
Under the Structured Investing program I use, the custodian is paid through the operating expenses of SA Funds. Loring Ward also pays any transaction fees, for example trade costs, the custodian may charge a client when enrolled in this program.
Disclosure: This posting is not a soliciation for SA Funds. More information is available on them for those interested. This posting is the result of many client questions about the functions of a custodian and how they are paid. SA Funds come up since that is how the custodian I use is paid.