Custodial institutions and fiduciary structures may both “hold assets,” but legally they are completely different. The distinction comes down to the relationship, the level of discretion, and who is allowed to act on behalf of the owner. Under EU regulations, this difference determines why custodians remain allowed for Russians, while fiduciary services are banned.

A Simple Analogy: Safe Deposit Box vs. Personal Chef

Custodial Institution = Safe Deposit Box Manager

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• Holds assets securely.
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• Cannot touch, manage, or move anything without explicit instruction.
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• Their duty is pure safekeeping.
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Fiduciary Structure = Personal Chef With Your Credit Card

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• Authorized to make decisions for your benefit.
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• Can buy, sell, and manage assets without constant permission.
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• Their duty is loyalty and prudent management.
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Custodial Institution vs. Fiduciary Structure

1. Core Legal Relationship

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• Custodian: Principal–Agent or Bailor–Bailee. A contract for safekeeping and execution of instructions.
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• Fiduciary: Fiduciary–Beneficiary. A relationship of trust requiring good faith.
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2. Key Duty

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• Custodian: Safekeeping and exact execution of instructions.
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• Fiduciary: Loyalty and prudence in managing assets.
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3. Discretion and Control

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• Custodian: No discretion. Cannot make independent decisions.
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• Fiduciary: High discretion. Expected to make judgment calls.
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4. Primary Role

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• Custodian: Holder of assets; operational, mechanical role.
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• Fiduciary: Manager of assets; judgment and strategy.
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5. Examples

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• Custodian: Banks, brokerages, central securities depositories.
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• Fiduciary: Trusts (trustees), estates (executors), guardianships.
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6. Liability

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• Custodian: Negligence — loss of assets or failure to follow instructions.
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• Fiduciary: Breach of fiduciary duty — conflicts, self-dealing, bad decisions.
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7. Client Relationship

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• Custodian: The client owns assets directly and gives instructions.
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• Fiduciary: The fiduciary controls assets; beneficiaries benefit but often do not control.
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