Wisdom/Risk of Using 1 Investment Company?

[Tyro]

We have our assets split between 2 Fund Families. In considering moving it all into one, the question of safety/wisdom came up -- is there any danger or risk in doing this? Assets would still be split among different funds, but within the same family. Thanks.

Tyro

 

[hlfo718]

Even though you current have two fund companies, they may use the same custody for the fund(s). There are only of handful of large custodians in the US. They are JPM, BONY, SS, and Citi. And since each fund goes through an annual audit and fund companies reconcile the NAV daily against the custodian's record, there shouldn't be any concern. Besides, I seriously doubt the gov't will let another one of these institutions fail given what happened after Lehman. So you are save with one.

 

[Tyro]

Companies like VG, FIDO, TRP, etc. don't handle their own funds?

 

[hlfo718]

They all have to use a custodian to save keep the assets. Read the fund's annual report and you will see who that custodian is. I think Vanguard uses JPM and Fidelity uses StateStreet or BONY.

 

[REWahoo]

Per the Bogleheads Wiki on Vanguard safety:

...Vanguard (and every other US-regulated mutual fund company) must custody their assets with a third party. All of the funds managed by Vanguard have their assets held with JPMorgan Chase

 

[Animorph]

I like have at least some funds at a second company. Less chance of a single computer or natural disaster freezing everything up.

 

[Rustward]

I like have at least some funds at a second company. Less chance of a single computer or natural disaster freezing everything up.

It is highly unlikely that anything mission critical is exposed to a single point of failure.

 

[bUU]

I think two can't hurt, but three gets too complicated to manage. Actually, even with two, I view one exactly in the way Animorph suggested... if I need something quick, and the primary company is having a bad week systems-wise, it is nice to have a second company to pull assets from. So maybe 90% in the primary - to secure from then superior, attentive customer service - and 10% in the secondary.

 

[LOL!]

Lots of good responses in this thread on the subject: Bogleheads • View topic - Diversifying across mutual fund companies?

In particular, we know that many places are under cyberattack, so maybe, just maybe, spreading assets around is helpful.

 

[easysurfer]

I don't lose any sleep having all the funds with a place like VG. The way I look at the situation, I've been there for about 25 years without a problem. 25 more years and I may not be around. I'll take my chances and enjoy the simplicity of only one family.

If the waves get rougher and risk more real, I'll wait until then to adjust, but not now.

 

[TOOLMAN]

I limit the amount of funds to any one account according to the SIPC maximum coverage----500k. When I reach that limit I open another account. Also no more than two accounts per broker, just to play it safe.

I hope having too many accounts will be may future problem.

 

[MichaelB]

We have two accounts, Fidelity and vanguard. Even though it shouldn't, it it helps me sleep better. The recent regulatory changes on cost basis tracking removes the last real obstacle to combining them.

I also keep a strict limit of how much money we will have in any one account, the current cutoff is $100M.

 

[MDJO]

100 M? Really?

 

[obgyn65]

Has MichealB won the lottery ?

100 M? Really?

 

[ERhoosier]

Agree with having accts at 2-3 investment firms. But 7-10 tends to get too complicated. Don't ask me how I know that

 

[GrayHare]

"Why backup your hard drive? What could go wrong?"

 

[heeyy_joe]

Keep cash/cash reserves under $250k per registration to maintain SIPC coverage in full.

Registration should not exceed $500k total.

Here's a link:

http://www.sipc.org/Portals/0/PDF/HSPY_English_2011.pdf

 

[W2R]

I have investments in Vanguard, and in the TSP.

I am not too worried about Vanguard. Between the TSP, Social Security (which I have not claimed yet), and my teeny-tiny pension, I will be fine even if Vanguard falls into a black hole, never to be seen again.

I am not actually expecting that to happen any time soon.... But, the possibility of failure of any one income stream is why I planned my retirement to depend on multiple income streams, not just one or two.

 

[ejman]

I think the only virtue of using a couple of investment companies is that there MIGHT be a slightly lesser chance of having group think color all the investments (and risks) with the same view

 

[MichaelB]

100 M? Really?

Has MichealB won the lottery ?

I never said I had $100M, only that if my account ever reached that amount I'd stop adding to it and open another. I figure I have the same chance of that happening as I do of Scarlett Johansson calling and asking me out for a date, but it's good to have a plan in place just in case it does.

 

[foxfirev5]

My DW and I have VG for our Roth's, Rollover IRA's and brokerage. Our 401K / 403b funds are with Fidelity. I had planned to roll it all into VG, however now that the Fidelity Spartan Adv class shares are very close to VG Admiral in expenses we may keep them separate just in case.

 

[scrabbler1]

When I was nearing my ER date in 2008, I became a little concerned about the $500k SIPC limit. However, Fidelity has excess insurance coverage of assets which made me feel better.

Back in the 1990s I had a more even split of investments (excluding my 401(k)) between Fidelity and another company. But in the 2000s, after a few bad returns in the funds of the other company, I stopped investing more money with them. Still, I am glad to have not quite all of my eggs in a single investment company basket. If something strange happens with Fidelity and I can't access my money from them for a short time, I can still go to the other company to tap into funds in a pinch, like an "emergency brokerage company."

 

[rbmrtn]

When I was nearing my ER date in 2008, I became a little concerned about the $500k SIPC limit. However, Fidelity has excess insurance coverage of assets which made me feel better.

Many institutions have additional insurance coverage above the SIPC limits.

Here is vanguards

https://personal.vanguard.com/us/whatweoffer/stocksbondscds/accountprotection

 

[REWahoo]

Note the above refers to 'brokerage accounts'. This should get your attention:

Vanguard Brokerage Services is a division of Vanguard Marketing Corporation. Vanguard is a member of SIPC, which protects securities customers of its members up to $500,000 (including $100,000 for claims for cash). Explanatory brochure available upon request at www.sipc.org.*

In addition, a private company provides for coverage of losses in your brokerage account that would exceed the SIPC limits. Neither SIPC or private coverage protects against loss in the market.

Vanguard mutual funds, including any Vanguard money market fund linked to your Vanguard brokerage account, are not covered by the SIPC.

https://retirementplans.vanguard.com/VGApp/pe/pubnews/BankInsurance.jsf

And from Fidelity:

While SIPC and Lloyd’s of London protection applies to brokerage accounts, it does not apply to directly–held mutual fund accounts.

http://personal.fidelity.com/global/content/protecting-our-clients-asset-is-our-priority.shtml

 

[rbmrtn]

Good point ( probably overlooked ) MF in general are not covered. If held in a brokerage account, they are.

I thought the Treasury Dept back stop program for MMFs got extended but I can't find a link for it.