A qualified custodian is a bank, registered broker-dealer or similar regulated institution that holds an advisor's client assets, so the advisor doesn't hold them itself.
The SEC's custody rule lists four kinds: banks and savings associations with FDIC-insured deposits, broker-dealers registered with the SEC, registered futures commission merchants, and certain foreign financial institutions. For most people, that means a large brokerage firm or bank.
Keeping the advisor and the custodian separate means one can check the other: the custodian sends your statements, and you can compare them with what the advisor reports. If the custodian is owned by or affiliated with the advisor's firm, ask how that is overseen.
How to check
The firm's Form ADV Part 2A brochure names the custodian it uses or recommends, usually in Item 12 (Brokerage Practices). Confirm your account is in your name and that statements come straight from the custodian.
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