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In our previous article, we explored the topic of holding clients' assets on or off a company's balance sheet. In this article, we will look into the significance of holding clients' assets off-balance sheet and how iTrustCapital is working to ensure the security of its client's assets.
Understanding Off-Balance Sheet Assets:
Holding clients' assets "off-balance sheet" means that their assets are not recorded on the company's financial statements and do not influence the company's financial ratios or leverage. In simple terms, client assets remain client assets and are not commingled with the company's business activities or its total valuation.
This practice is particularly crucial for financial service providers, which are dedicated to maintaining a strong financial profile and providing the highest level of service to clients.
Building Trust and Transparency with Off-Balance Sheet Asset Management:
An important advantage of off-balance sheet asset management is the trust and transparency between financial service providers and their clients. Incidents involving the mismanagement of clients' assets on balance sheets have led to mistrust, but utilizing an off-balance sheet approach can help reassure the confidence of the financial industry.
By maintaining a clear separation between client assets and business operating funds, companies demonstrate their commitment to ethical practices and full transparency, which can further reinforce their reputation as trustworthy and reliable financial service providers.
The Role of Regulatory Oversight and Compliance:
Off-balance sheet asset management supports any regulatory oversight and compliance. Regulatory entities have been increasingly monitoring some financial institutions to ensure the proper handling of clients' assets and to prevent fraud, mismanagement or insolvency from impacting clients' funds.
By maintaining clients' assets off-balance sheet, financial service providers can more effectively comply with regulatory requirements and facilitate audits and inspections by the relevant authorities. This approach to compliance not only reduces the risk of regulatory penalties but also furthers the company's commitment to maintaining high standards of security and transparency for its clients.
The Pitfalls of the On-Balance Sheet Approach:
The events of 2022 shed light on the inherent risks associated with the financial industry's prevalent practice of incorporating client assets on their balance sheets. Numerous investors remain unaware of the potential disadvantages linked to certain financial entities. Several companies, such as FTX, have actively leveraged clients' assets entrusted to them, sometimes resulting in insolvency.
Despite facing financial distress, these companies continued to leverage clients' assets on their balance sheets, ultimately leading to the permanent loss of those funds.
Safeguarding Clients' Assets with Off-Balance Sheet Management:
At iTrustCapital, we prioritize the safeguarding of our client's assets above all else. To ensure their security, we hold clients' assets in custodial accounts managed by regulated chartered trust entities, with all assets maintained off the balance sheet. This arrangement allows us to offer compliant retirement accounts and ensures that client accounts are not mixed with business operating funds.
The innovative approach of off-balance sheet management provides our clients with peace of mind and confidence that their assets are in safe hands. Click here to learn more about iTrustCapital.
This article is for information purposes only. It does not constitute investment advice in any way. It does not constitute an offer to sell or a solicitation of an offer to buy or sell any cryptocurrency or security or to participate in any investment strategy.
iTrustCapital is a cryptocurrency IRA software platform. It is not an exchange, funding portal, custodian, trust company, licensed broker, dealer, broker-dealer, investment advisor, investment manager, or adviser in the United States or elsewhere. iTrustCapital is not affiliated with and does not endorse any particular cryptocurrency, precious metal, or investment strategy.
Cryptocurrencies are a speculative investment with risk of loss. Precious metals are a speculative investment with risk of loss. Cryptocurrency is not legal tender backed by the United States government, nor is it subject to Federal Deposit Insurance Corporation (“FDIC”) insurance or protections. Clients do not receive a choice of custody partner. The self-directed purchase and sale of cryptocurrency through a cryptocurrency IRA have not been endorsed by the IRS or any regulatory agency. Historical performance is no guarantee of future results.
Some taxes and conditions may apply depending on the type of IRA account. Investors assume the risk of all purchase and sale decisions. iTrustCapital makes no guarantee or representation regarding investors’ ability to profit from any transaction or the tax implications of any transaction. iTrustCapital does not provide legal, investment or tax advice. Consult a qualified legal, investment, or tax professional.
iTrustCapital makes no representation or warranty as to the accuracy or completeness of this information and shall not have any liability for any representations (expressed or implied) or omissions from the information contained herein. iTrustCapital disclaims any and all liability to any party for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising directly or indirectly from any use of this information, which is provided as is, without warranties.
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