I'm in principle opposed to custodial services, with rehypothecation being the primary concern, but I completely get why people would be likely to do it.
Discussion
I agree. Like security, it’s perfectly good enough right up until it isn’t.
But the entire stock and bond markets are built around such trusted relationships. That doesn’t mean it is good, but it does mean it works most of the time. The probability of failure is low, but the cost of failure is high. Thus insurance via self custody makes sense. But how much to pay for that insurance? 1% is steep, imho
I think the probably of failure grows significantly the closer we get to the end of this monetary cycle. All the guarantees people thought they had in 1928 were completely gone by 1931. I'm not saying the end of the dollar is imminent, but it will happen. Any non-bearer asset is at risk of depreciation or confiscation by the banks. I've tried to get this across to my friend. His mental models won't allow him to think this way.
By the time probability of collapse of the custodial system reaches 1 in 100, I’d bet self custody IRA costs will be more than 1.5%
Have you read the great taking by David Rogers Webb?
It’s about the legal structure of bankruptcy regarding all the folks that stand between you and your retirement holdings.
No. I will even though noone custodies any of my retirement holdings.