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Having all of your money at one brokerage
Old 02-06-2008, 12:05 AM   #1
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Having all of your money at one brokerage

The more that I look into investing the more I like Vanguard.

I'm tempted to just have all of my money invested with Vanguard but I have concerns of having all of my money with one brokerage.

My main concern is not that Vanguard will just go out of business but that I might get my identity stolen or something like that. And wake up one day and my accounts read zero and there is nothing that I can do about it!

I just wanted to see what others thought of having all of your money invested with one brokerage?

Thanks

Jim
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Old 02-06-2008, 12:15 AM   #2
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Quote:
Originally Posted by summer2007 View Post
The more that I look into investing the more I like Vanguard.

I'm tempted to just have all of my money invested with Vanguard but I have concerns of having all of my money with one brokerage.

My main concern is not that Vanguard will just go out of business but that I might get my identity stolen or something like that. And wake up one day and my accounts read zero and there is nothing that I can do about it!

I just wanted to see what others thought of having all of your money invested with one brokerage?

Thanks

Jim
If that is your only concern, I believe that they are insured for that. It would be a pain in the *ss and probably take time to recover, but IMO you would be covered.
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Old 02-06-2008, 12:20 AM   #3
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The banks could fail, the market could tank for 8 years, your house could burn down...etc.

Having all your eggs in one huge basket (Vanguard or others of the same ilk) should not cause concern. Having all your eggs in equities or just bonds or porkbelly futures would be more of an issue than the long term viability of Vanguard.

I have had 5 different brokerages over the past 20+ years. Some were bought out some merged and some are the same as they were years ago. My assets did not suffer because of any changes in ownership since I still owned the assets.

If you are concerned about ID theft then make your ID harder to steal. Make all passwords complex enough to make them virtually unbreakable (more than 8 characters and use symbols, caps. and lower case). The other thing is get away from paper statements. Don't leave paper in the mailbox or trashcan to leave a ID trail for someone to pick up. Password protect your computer. Don't let passwords be copied to Windows...they can be found. Clean out your cookies and other internet files weekly. Change your passwords frequently and keep them complex.

The internet is actually safer than the mail system. You just have to use good password protection and good secure data sites for your transactions. I have been using the internet in one form or another for decades and have not had a single problem that I did not myself create.

Don't worry about Vanguard. I have about 1/3 of my portfolio there and about 3/4 of my 85 year old mother's. I have no paper files sent to me or to her. Everything is electronic over secured webpages. I use data encryption on my internet connection and I don't use public gateways for sensitive information.

Smile...be happy...you have money to worry about.
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Old 02-06-2008, 06:47 AM   #4
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I understand your concern. So far I've been able to keep individual accounts below the 500k SIPC limit. I have a vanguard account but I also buy vanguard through my etrade accounts (of which my wife and I have 5 - one joint, one IRA for me, a traditional, roth, and SEP IRA for her). I still get BrownCo pricing so I can buy a vanguard fund for $5.

I've been able to keep each account below 500k without going out of my way to do so. In a year I have about 1.5MM worth of stock in myold ocmpany that gets unlocked, after which I'll be distributing that through exisiting taxable accounts. At that point I'll probably broach the 500k limit on a couple of my accounts.
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Old 02-06-2008, 06:52 AM   #5
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What's the SIPC limit...sorry to be naive, but never heard of that before...do I need to split my schwab account ?
thanks
R
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Old 02-06-2008, 07:23 AM   #6
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Assets under $500,000 per customer are protected By SIPC (Securities Investor Protection Corporation). Losses resulting from a fall in a security’s value are not covered, however.

See Securities Investor Protection Corporation for more information about SIPC.
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Old 02-06-2008, 08:50 AM   #7
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I will be the contrarian and recommend you avoid placing all your assets with one company. Having witnessed unpleasant, surprise events which people failed to foresee, I recommend you not take the unecessary risk.
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Old 02-06-2008, 09:16 AM   #8
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Yeah, it scares me too. We have accounts with Vanguard, Fidelity, TSP, and some cash with CITI (our checking account bank). I like the simplicity of a single account but I worry about what I don't know. When SIPC says they cover securities and cash do mutual funds fit their definition of securities?
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Old 02-06-2008, 09:21 AM   #9
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I'll have to admit that I never give any thought to Vanguard or any of the other bigs boys going bust. If it was some fly by night organisation I probably would be bothered.

We both have our 401k's with Fidelity, we buy mutual funds monthly thru our Vanguard and we have a separate account with Wells Fargo for brokerage. We won't move our brokerage account to Fidelity or Vanguard because we get 100 free trades with Wells Fargo and even if you get them for $8 bucks at either Fido or Vanguard, it is a $800 saving.
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Old 02-06-2008, 09:27 AM   #10
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Almost every brokerage house buys insurance above and beyond the SIPC limits.
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Old 02-06-2008, 09:29 AM   #11
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I would guess that if vanguard went bust our money would be the least of our problems.

I have my pile there and it's easy to manage instead of having money all over the place. We put everything there about 2 years ago and so far so good.
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Old 02-06-2008, 08:45 PM   #12
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saluki9, it that with Ambac or MBIA?
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Old 02-06-2008, 09:48 PM   #13
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It has been explained to me that despite being packaged under the Vanguard umbrella, the shares that you purchase are actually owned by you with a custodian (Pershing, I think) keeping an eye on the comings and goings. So if Vgd disappeared, the actual owned shares of stock are yours.

This may be an oversimplification but that's the general idea. You could make the case that spreading it around instead of keeping it mostly in one reputable company increases your risk of exposure to some company going bad, albeit with only a portion of your money.

I've made the leap. I guess the only hedge is that my next two years of spending money will probably always reside in my bank, maybe a CD here and there.
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Old 02-06-2008, 10:01 PM   #14
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While I don't have everything in one account for various reasons, one advantage to it is that you're likely to check it often and notice if something has gone wrong (like the identity theft issue the OP mentioned). I have an account or two I don't check very often at all, so if ID theft happens on that account it could be awhile before I notice.
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Old 02-06-2008, 11:37 PM   #15
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I have never had any issue about having all of my investments in one brokerage. As has been said by Rich, the actual securities are held in trust by a custodian AND there is insurance backing the accounts against fraud and the like.
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Old 02-07-2008, 12:11 AM   #16
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The more that I look into investing the more I like Vanguard.
I'm tempted to just have all of my money invested with Vanguard but I have concerns of having all of my money with one brokerage.
Tastes great, less filling. You should probably do what makes it easier for you to sleep at night.

With every passing year the seeming advantages of having our money spread out are outweighed by the hassle of dealing with multiple custodians. If Fidelity would match our CD rates from credit unions then we'd even invest our cash with them.

The pros of having all your money with [Vanguard/Fidelity/Schwab/T. Rowe Price/E-Trade] include:
- only having to worry about one login, one batch of marketing mail, one set of tax forms, one phone number, one website to navigate, one customer-service system to deal with, and one set of everything else
- easier Roth IRA conversions or RMDs or 72(t) withdrawal calculations
- easier portfolio analysis
- easier withdrawals & rebalancing
- better "package" deals for having assets above levels like $50K, $500k, & $1M

The cons include:
- one-stop ID theft
- if customer service is bad, it's all bad
- possibly limited choices and fees designed to "lock you in" to their products

Admittedly many of the pros can be worked around with website consolidators, portfolio tracking tools, and calculators. And all of the above will carry extra insurance (above & beyone SIPC) to make their customers whole.

Can't help you with the login/ID theft fear. In that case your best bet would be to stick to paper/phone transactions. If it's any consolation, though, you're more likely to be struck by lightning while jumping a water-ski over a shark.

I hardly ever hear about brokerage ID theft. That's either because it hardly ever happens or because brokerages quickly make their customers whole to ensure their silence satisfaction. Either way the result is the same, right?
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Old 02-07-2008, 01:24 AM   #17
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I'm not sure if all fund companies work this way, but Vanguard is structured such that each fund is an independent entity. The individual funds own part of Vanguard, and they pay Vanguard fees for services. Sort of upsidedown from what you'd expect, but it seems like a fail-safe organization.

Personally, I have accounts with multiple brokers and fund companies because I want access to a wide variety of tools, research reports, etc. It also helps when one of them has online access problems -- I can simply use a different service.
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Old 02-07-2008, 08:09 AM   #18
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Fidelity makes it easy for me to sleep at night:
The Fidelity Customer Protection Guarantee

Quote:
We value your business and the trust you have placed in Fidelity. We take security very seriously and use a variety of measures to protect your personal information and accounts. As part of our ongoing commitment to our customers, we're proud to offer our Customer Protection Guarantee: We will reimburse your Fidelity account for any losses due to unauthorized activity.
They also have lots of information on line about how to protect your accounts, keep your computers secure, etc. But the bottom line is the above protection.

Audrey
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Old 02-07-2008, 09:29 AM   #19
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Quote:
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I hardly ever hear about brokerage ID theft. That's either because it hardly ever happens or because brokerages quickly make their customers whole to ensure their silence satisfaction. Either way the result is the same, right?

I've mentioned this before but Fidelity called me once concerning a possible hacking attempt from someone overseas. They created new accounts for me and of course I changed all my passwords. All came about due to virus on my pc. Just goes to show, keeping your anti-virus software up to date is a must. BTW, I ditched my old pc.

I do feel good knowing Fidelity has good security in place to monitor my account. But that phone call did get pulse rate up a little.
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