Real Estate Investor · Member since 2011 · 29 posts · 40 votes
I'm not much of an accountant, not like a real CPA but, i was wondering, I went and looked at opening an account at Equity trust company www.trustetc.com. SO as part of due diligence, I asked them for documentation and they sent me a 'Safety and security" package,
which included their balance sheet.
one thing i don't understand
it lists some $57M as customers accounts, but there is no offsetting liability for custumer obligations.
do i just not understand trust company accounting?
I would have to see the thing to be sure, but here's what I'm guessing.
A balance sheet follows the simple equation: Assets - Liabilities = Shareholder Equity
Therefore, this company probably shows $57 million in Assets (customer accounts) with nearly zero liabilities (debts, etc.), so the shareholder equity (the customers) have their $57 million nearly intact.
Sorry, if I'm not wording this correctly. It's late and I'm tired. zzzzzzz
it lists some $57M as customers accounts, but there is no offsetting liability for custumer obligations.
i can email the sheet to anyone who is interested
Hi Pat - I would have to look at the balance sheet to be sure, but I'm guessing the listing of "customer accounts" IS the liability. The actual deposits would have been in a Cash account. The transaction would be a debit to cash and a credit to "customer accounts." If you send me a copy of the balance sheet (REMOVED)I might be able to tell if my guess is correct :-)
As Bill said, accounts at institutions like this, or banks for that matter, are generally considered Liabilities. The balancing entries would likely be cash or investments. They may have the assets titled Investments - Customer Accounts or something like that to denote that they have no control over the investments and cannot liquidate them for their own uses.
it lists some $57M as customers accounts, but there is no offsetting liability for custumer obligations.
i can email the sheet to anyone who is interested
Hi Pat - I would have to look at the balance sheet to be sure, but I'm guessing the listing of "customer accounts" IS the liability. The actual deposits would have been in a Cash account. The transaction would be a debit to cash and a credit to "customer accounts." If you send me a copy of the balance sheet (REMOVED)I might be able to tell if my guess is correct :-)
i have sent the package to bill.
Like i said, I am no CPA but, if someone could
explain to me what "Due from Related Parties" means
and
1) they show customer accounts as 57M, so where's the Liability for that.
they don't "Own" my account, they entrust my account, so even if the assets
are bookkept with them, they need a countervailing liability.
2) Note 7: THe notes are missing, should the accounting firm make the full report available?
3) Asset "Due from Related parties". What the heck is that?
i would imagine the balance sheet of a trust company would be like the balance sheet
of a parking lot. They shouldn't include customer cars at all as assets, but if they
do, shouldn't they say they owe the iabilities on those cars?
1) They bought a smaller trust company last year, so the Customer accounts was actually
the "IMplied value of the accounts" that they purchased from sterling.
2) The Due from related ntities is the deposit value of orders with companies that they
own but don't carry on balance sheet. their servicing company is actually a wholly owned subsidary.
3) The notes would explain this
4) they don't disclose the P&L or statement of cash flow because they are
a wholly private firm, and they want to keep some matters confidential.
5) so all i have to do is validate their insurance with accord, and i'm good.
I validated their insurance. These guys check out, their CPA checks out, their insurance checks out,
their banking checks out. I even spoke with the president of the company.
Not bad.
My investments may be shite, but these guys passed the sniff test.
But if they rip me off, they won't ever find the remains,,,,
They operate in a regulated industry and must supply their company balance sheet. Regarding the "parking lot" analogy, I agree... the $10B or so of their custodial accounts do not show up on their company balance sheet. I don't know what organization regulates SDIRA companies... it isn't the FDIC.
ETC isn't a bank, but the cash accounts are held at banks on their (actually their custoimer's) behalf. When you login to your account, go to an investment then click on the "Cash Transaction" on the bottom left side. Note the transactions described as "CASH SWEEP DEPOSIT CASH ACCOUNT" which occur when (in my case) a rent check comes in from the RE Manager. Then to fund a "bill pay" operation, there is a corresponding "CASH SWEEP WITHDRAWAL CASH ACCOUNT" entry.