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Is it bad to have most of your accounts with one financial company?

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rated:
So perhaps it's my paranoid side, but -

I have most of my financial accounts with Schwab. This is brokerage accounts, 529's, Rollover IRA's, Roth, etc.

Should I hedge and move something out? 

Perhaps there's a best practice - x amount of dollars with company A, etc. Thoughts? 

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Double sided sword. If the markets are melting down and I want to place a trade, I only want to have to access one place... (more)

websquirrel (May. 03, 2017 @ 10:40a) |

Why would you place the same trade twice?

DavidScubadiver (May. 04, 2017 @ 8:41a) |

Agreed. You'd preferably have different holdings at each broker.

stanolshefski (May. 04, 2017 @ 1:21p) |

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rated:
No. Your accounts are SIPC insured against Schwab somehow losing your money or investments. Coverage includes half a million dollars (up to $250k in cash) per account type per person per institution (I'm generalizing slightly, forgive me). This is on top of any securities or cash which are recovered. (So if you have a million dollars in stocks and someone at Schwab somehow pilfers half of it, you'd still be made whole).

Anyway, the chances of needing this are pretty small; even if Schwab goes bust your investments are still there and will be transferred to a new brokerage/custodian.

Schwab also provides excess coverage through Lloyds of London which increases the total protection to $150M (inclusive of recovered securities and SIPC payments) per customer, with a total limit of $600M for all customers.

http://www.schwab.com/public/schwab/nn/sipc_account_protection.h...

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Liquidity can become an issue if your account is frozen for any reason for months.

There have been FWF threads about such things.

So, maybe keep some cash in two/three accounts?

I personally find it easy to do "envelope budgeting" with my paycheck.
1. $X goes to mortgage/rent in Bank#1.
2. $Y goes to Fidelity brokerage account.
3. Rest is spending money into Bank#2.

My employer gives me an online tool using which I can easily allocate my paycheck to up to 10 external accounts.

This way - liquidity is not an issue if any freeze were to happen in any of these accounts.

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doveroftke said:   No. Your accounts are SIPC insured against Schwab somehow losing your money or investments. Coverage includes half a million dollars (up to $250k in cash) per account type per person per institution (I'm generalizing slightly, forgive me). The chances of needing this are very small, as even if Schwab goes bust your investments are still there and will be transferred to a new brokerage/custodian.
  
Only issue is .. it takes long time to get your money back if there is bankruptcy

But if you go with a big guys like Schwab ... the chances are so small.  

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I personally try to keep debt and deposits with different institutions in case something happens and I can't make payments. Other than that, stay below the insured limits and make sure your securities are covered by SIPC. Other than that - not sure what else you would be worried about, but perhaps you could provide insight into what's worrying you.

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I have had a brokerage account frozen for stupid administrative reasons. In my case it was correctable within a couple of months, but the experience motivates me to keep shorter-term money split between firms. I am willing to have money I'm unlikely to touch for 10-15 years concentrated at one firm.

If I had it to spare, I'd keep at least two years of spending at each of two firms. Ideally, I might have another year at a third firm. Whether that administrative hassle is worth it to you is going to be a personal decision, perhaps largely hinging on how you visualize the contents of the accounts and manage asset allocation across them.

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But what if you have separate accounts with the same brokerage? Same rules apply? I have a single brokerage account for myself, a joint one for my DW and I, kids have UTMA accounts too. 

Can one then put holds on all of them then? 

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Cashman said:   But what if you have separate accounts with the same brokerage? Same rules apply? I have a single brokerage account for myself, a joint one for my DW and I, kids have UTMA accounts too. 

Can one then put holds on all of them then? 

  It would probably depend on the reason for them freezing it. If they're suspecting money laundering activity or something like that, I'd imagine they'd freeze all your accounts.

If you're talking about SIPC limits - it's per account per entity (so a joint would be separate from an individual account-not sure about trust/UTMA accounts).

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marginoferror said:   
Cashman said:   But what if you have separate accounts with the same brokerage? Same rules apply? I have a single brokerage account for myself, a joint one for my DW and I, kids have UTMA accounts too. 

Can one then put holds on all of them then? 

  It would probably depend on the reason for them freezing it. If they're suspecting money laundering activity or something like that, I'd imagine they'd freeze all your accounts.

If you're talking about SIPC limits - it's per account per entity (so a joint would be separate from an individual account-not sure about trust/UTMA accounts).

  
Thanks for the clarification. 

Still curious what others are doing too.

rated:
I keep all my investments (Brokerage, Roth, Traditional, Rollover IRSa, etc) at Fidelity.  The cash is split between Alliant and whatever bank(s) give me the best interest rate with the least hassles.  So, at Alliant I have enough cash to cover this months and next months living expenses and everything else is at PurePoint which can be pulled back next business day via ACH.

I don't worry much about Fidelity and the Investment accounts.  There is nothing there that if it where frozen for a while I'd really need, but I am still 20 years from retirement, so I'll probably feel a lot different then.   On the cash side I do keep a checking/savings account at Ally with a low ($1 in each) balance.  If the unthinkable happens and Alliant where to freeze my account for some reason I'd update my direct deposit with my employer, pull some cash from PurePoint to Ally and go on while I worked out the details with Alliant.

I'd say it's always a good idea to have a backup plan for whatever your daily spending accounts are, but for funds you don't need for years, not worth the complications.

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If Fidelity compliance decides they don't like you, maybe for moving around your money with ACHs a bit more than they like (and as some FWFers were doing for some deal), you may be treated to any or all of the following:

1. No explanation of what you might have done "wrong" or chance to explain or remedy it
2. No access to the Fidelity website or your online statements (and no paper statements if you have it set to online)
3. No ability to buy new investments, and you must call in to sell them
4. Extra unannounced and unnecessary hassles, paperwork, etc, if you want to move your investments elsewhere 
5. Not sending you your 1099 tax forms routinely nor upon specific request (but presumably still reporting to them to the IRS)
6. Retroactive changes to your account transactions (reversals, etc) to your detriment without explanation or justification 

Of course if you think those are no big deal, sure, go ahead and use them.  They're like PayPal - if they decide they don't like you, for some inexplicable and often unjustified reason, they will make things as hard as possible on you and tie up your money for months and cause various unnecessary troubles apparently out of spite.  

these are just one example of how Fidelity's culture of overzealous compliance is making them a much less attractive broker.  I have heard many complaints about how they won't allow customers to buy various types of investments at all, despite it being your own self-managed brokerage account, and that list is getting quite long.  They know better than you that you shouldn't buy leveraged ETFs, munis in your retirement account, bonds or preferred stock without a sufficiently high credit rating, etc.  

Do yourself a favor and pick a different one of the majors.  ETrade , TDA, and Schwab would all love your business and will pay you to move over too.

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xerty said:   If Fidelity compliance decides they don't like you, maybe for moving around your money with ACHs a bit more than they like (and as some FWFers were doing for some deal), you may be treated to any or all of the following:

1. No explanation of what you might have done "wrong" or chance to explain or remedy it
2. No access to the Fidelity website or your online statements (and no paper statements if you have it set to online)
3. No ability to buy new investments, and you must call in to sell them
4. Extra unannounced and unnecessary hassles, paperwork, etc, if you want to move your investments elsewhere 
5. Not sending you your 1099 tax forms routinely nor upon specific request (but presumably still reporting to them to the IRS)
6. Retroactive changes to your account transactions (reversals, etc) to your detriment without explanation or justification 

Of course if you think those are no big deal, sure, go ahead and use them.  They're like PayPal - if they decide they don't like you, for some inexplicable and often unjustified reason, they will make things as hard as possible on you and tie up your money for months and cause various unnecessary troubles apparently out of spite.  

these are just one example of how Fidelity's culture of overzealous compliance is making them a much less attractive broker.  I have heard many complaints about how they won't allow customers to buy various types of investments at all, despite it being your own self-managed brokerage account, and that list is getting quite long.  They know better than you that you shouldn't buy leveraged ETFs, munis in your retirement account, bonds or preferred stock without a sufficiently high credit rating, etc.  

Do yourself a favor and pick a different one of the majors.  ETrade  , TDA, and Schwab would all love your business and will pay you to move over too.

  
E*TRADE did that to me 10 years ago for doing too much ACH.

​Thankfully - all I had in that account were horribly out of the money ESOP's. So I lost nothing.

Point is, the behavior you describe is common to all brokerages.

​The FI's are all paranoid about money laundering etc. So any time they sniff even a whiff of what could be considered suspicious in a blue moon - their employees are trained to pull the trigger first and think after. The penalty of NOT doing so is severe for the employee - were an issue to actually occur afterwards. Each and every employee of these brokerages (and any FI, in fact) are made to go through annual trainings that reinforces this behavior.

​This is not new. SOX institutionalized these and many more a decade and a half ago!

rated:
Theft and fraud may also be something to think about. Hopefully, you get all your money back if such a thing happens, and banks are supposed are supposed to credit your account while they investigate. Nevertheless, I think it is advisable not to keep all of your cash in one account alone or with one bank alone.

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xerty said:   
Do yourself a favor and pick a different one of the majors.  ETrade  , TDA, and Schwab would all love your business and will pay you to move over too.
 


If you search this forum you'll find plenty of people with complaints about ETrade , TDA, Schwab, etc.  No company has 100% customer satisfaction.  If I've learned one thing in my years reading this forum.  People who complain about a company's polices usually worked really hard to break those policies or otherwise game the system enough to get noticed.

I've been a customer of Fidelity for about 25 years now and never had so much as a blip from them in regards to my now 8 or so accounts.  But then I don't try and use one of my main financial accounts to game their system and jack them around.  The little bit of bonus I might get isn't worth the pain of getting my finger cut off.

Don't get me wrong, I am all for gaming the system and maximizing everything, when there is value.  For me, I only do it where there is a positive net return, which extends past just the balance in my account.  Basically, I don't screw around with Fidelity or Alliant because it isn't worth the pain.  Anyone else, sure.  I did major app-o-rama's back in the day, made lots on the 0% transfers and 5%+ interest.  What did I care if Citi, Chase, BoA, etc got upset with me.  I had their cash, not the other way around.  But my primary accounts, I always kept clean and reputable.
 

rated:
Personally, I try to keep at least two separate accounts, split fairly evenly. With banks getting hacked or unpredictable events happening, who knows when I'll want to do something (like sell during a market crash), and the broker's website is not working. For example, one of my pet peeves is I'll try to login to one of my broker accounts late at night to check progress, and their website is down for maintenance. 99.9% of the time it's just annoying. But what if I'm about to fly off to some country with limited internet and wanted to transfer some money to my bank?

Anyways, one perk about keeping a second (or third) broker is that you then have the ability to purchase their funds for no commission. Purchasing those funds from another broker will cost like $30. For example, Fidelity might have a nice low cost health index fund, while Vanguard might have a good low cost s&p fund. Trying to purchase the Fidelity fund from Vanguard will cost $30. Downside... managing two brokers, which I admit, is a pita.

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someday, one of the brokerage houses will decide they have overbooked their accounts and ask you to leave. when they do, make good choices.

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If a hacker decided to hack your financial accounts, he gets them all after hacking one of your accounts. They are insured to a certain extent, but why make it easy for the hackers?

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puddonhead said:   Liquidity can become an issue if your account is frozen for any reason for months.
... .



Why do accounts get frozen?

I'm not sure what the risk is there and does it depend on account activity?

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+1 to that. They only want money coming in to finance investments and stay there. Almost any significant two-way volume of money moving through as a conduit makes them jittery. Despite their desire to act like a bank- they're not one.

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Just keep in mind, government insurance up to $250,000 still gives them up to 50 years to pay the funds.

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Centora87 said:   Just keep in mind, government insurance up to $250,000 still gives them up to 50 years to pay the funds.
  
Where did you see that?   Which insurance?

DOesn't sound right.    
FDIC usually pays within days: 
https://www.fdic.gov/consumers/consumer/news/cnfall14/misconcept...

 

rated:
Centora87 said:   Just keep in mind, government insurance up to $250,000 still gives them up to 50 years to pay the funds.
  FDIC has paid out in a matter of days. In many cases, a healthier institution has taken over the assets and your accounts/balances simply get transferred to the new institution. In almost all cases during the 2008-2009 recession, this was done over a weekend; bank was closed on Friday and and folks had access to FDIC insured funds by Monday through the new institution

rated:
Spouse has fidelity IRAs I have Charles Schwab IRA. Plus we both have our work 401Ks ETrade and Ubiquity. I like Charles Schwab because I can reverse my Commission Free EFT trades without paying a 30 day short-term trading penalty. Spouse doesn't care and likes Fidelity because she has several accounts there.

Since spouses have different logons anyways, it makes sense to diversify in some situations. If for some reason you wanted to transfer between accounts it would be easier in the same company. - Which would be very rare for retirement accounts. If a spouse passes away, and you have the same company I am guessing getting the inherited account under the same login would be a big reason not to diversify.

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If you consolidate all of your investments with one company, there are certain services that you can qualify for once you hit a certain balance threshold. $500K at Vanguard qualifies you for Voyager Select and $1M total at qualifies you for Flagship Services and you get access to some of their closed funds. $250K at Fidelity gets you Premium Services and $1M gets you Private Client status (free TurboTax!). Larger balances with these companies also qualify you for funds with lower fees. Was kind of surprised to see when I qualified with Vanguard. They had combined my account and the Mrs. because we have the same mailing address.

rated:
Cashman said:   So perhaps it's my paranoid side, but -

I have most of my financial accounts with Schwab. This is brokerage accounts, 529's, Rollover IRA's, Roth, etc.

Should I hedge and move something out? 

Perhaps there's a best practice - x amount of dollars with company A, etc. Thoughts? 

  
This is scarcely more than a sad commentary on the times in which we live.  It certainly should not be necessary, provided you are with a solid, reputable, house, to spread your investments around.  However, in this era of the black swan, one cannot be too cautious.  Today one is wise to expect the unexpected.  So if your portfolio is of sufficient size, and provided spreading can be accomplished without undue cost, it might be wiser to spread things out just a bit.

rated:
I had a problem with Fidelity. I had a small account with approximately $5,000 of stock in it. It was one bank stock. After about five years I sold the stock online, no problem. When I tried to purchase other stock, however, there was an issue with my current address. Fidelity failed to inform me that they didn't accept my address change - some three years earlier. They claimed they had sent me a letter to the new address once regarding the matter.  

It seemed a bit ridiculous that I was authorized to sell stock online, but not to purchase other stock. Nor in the three years since Fidelity claimed they couldn't confirm my address, they couldn't have sent me another online message regarding the issue. Still Fidelity, kept sending me account statements to the new address they purportedly could not confirm was mine. 

rated:
The risk of FI failure is very low but not zero. The risk of getting an account frozen for some reason (there are many) is also low but not low enough to ignore. Another risk would be a hacker attack that shut down the entire entity (it's not a question of if only when). For that reason two accounts makes sense. I also keep a bank account separate from the investment account and transfer money when needed but always with a one month cushion. I also recommend at least one account even if small at a physical bank you can get to in a crisis that is not deeply tied into the FI structure (i.e. a local credit union).

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GADOM said:   The risk of FI failure is very low but not zero. The risk of getting an account frozen for some reason (there are many) is also low but not low enough to ignore. Another risk would be a hacker attack that shut down the entire entity (it's not a question of if only when). For that reason two accounts makes sense. I also keep a bank account separate from the investment account and transfer money when needed but always with a one month cushion. I also recommend at least one account even if small at a physical bank you can get to in a crisis that is not deeply tied into the FI structure (i.e. a local credit union).
  If the FDIC fails (which I admit is possible, but unlikely) it would be because there's a widespread run on more than one large institution. If that happens - we'll be in total chaos. Because of the interconnectedness of all major financial institutions, it's basically an end of the world scenario - the entire financial system will collapse. We were VERY lucky that the large banks (not IBs) were able to survive the crash. But if two of those institutions go down, the interbank lending chain is broken. If that happens it's game over.

Not trying to be a conspiracy theorist and I do NOT think this is going to happen. Just trying to say that worrying about FDIC insurance not being able to make you whole is unnecessary. Either it will make you whole and pretty quickly, or it won't and that means it basically doesn't matter what institution you choose to deposit your money at. If you think your local credit union will be able to save you from this, try walking in today (i.e. a period of no panic) and asking for $15k in cash. They'll tell you that you have to order it.

rated:
marginoferror said:    If you think your local credit union will be able to save you from this, try walking in today (i.e. a period of no panic) and asking for $15k in cash. They'll tell you that you have to order it.
  No, but you . . . you . . . you're thinking of this place all wrong. As if I had the money back in a safe. The money's not
here. Your money's in Joe's house . . . right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?

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I would love to have enough assets that I had to worry about diversifying risk between custodians.

rated:
One reason to have assets at more than one firm is that you may find that one firm's website is not functioning at a time when you want to place a trade. If the markets are melting down and you can't log on to schwab or reach a representative by telephone, it may be helpful to have an account at another institution where you can place the trade. This may or may not matter to you, however.

rated:
That's a great idea! Also, not every broker/clearing group has access to the same set of assets. Especially if you dabble in weird OTC microcaps or bonds.

rated:
Probably not a problem for you OP, but a bank's right to setoff can also be a consideration. (Though they can't setoff your qualified retirement account per IRS rules.)

rated:
DavidScubadiver said:   One reason to have assets at more than one firm is that you may find that one firm's website is not functioning at a time when you want to place a trade. If the markets are melting down and you can't log on to schwab or reach a representative by telephone, it may be helpful to have an account at another institution where you can place the trade. This may or may not matter to you, however.
  
Double sided sword. If the markets are melting down and I want to place a trade, I only want to have to access one place. Don't want to have to log in to two sites to execute the same trade twice.

rated:
websquirrel said:   
DavidScubadiver said:   One reason to have assets at more than one firm is that you may find that one firm's website is not functioning at a time when you want to place a trade. If the markets are melting down and you can't log on to schwab or reach a representative by telephone, it may be helpful to have an account at another institution where you can place the trade. This may or may not matter to you, however.
  
Double sided sword. If the markets are melting down and I want to place a trade, I only want to have to access one place. Don't want to have to log in to two sites to execute the same trade twice.

  Why would you place the same trade twice?

rated:
DavidScubadiver said:   
websquirrel said:   
DavidScubadiver said:   One reason to have assets at more than one firm is that you may find that one firm's website is not functioning at a time when you want to place a trade. If the markets are melting down and you can't log on to schwab or reach a representative by telephone, it may be helpful to have an account at another institution where you can place the trade. This may or may not matter to you, however.
  
Double sided sword. If the markets are melting down and I want to place a trade, I only want to have to access one place. Don't want to have to log in to two sites to execute the same trade twice.

  Why would you place the same trade twice?

  Agreed. You'd preferably have different holdings at each broker.

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