Eggs in one basket

[thepalmersinking]

I have multiple accounts, pre tax, tax tree, tax deferred accounts with Schwab, there are CD’s and Treasuries. Am I taking a risk with everything within Schwab regardless of government backstops. Should I spread out to Fidelity or elsewhere just in case there is a hack at Schwab and I need money?

 

[FlaGator]

If you're taking a risk, then so am I.

I consolidated everything at Schwab years ago. No regrets and no concerns about my ability to access money when I need to.

If your concern is about a major player in the individual-centric brokerage business having a problem, consider buying CDs at rollover time at a bank you can walk into. Within FDIC limits, of course.

 

[Jerry1]

It's not something I would worry about, but I think it's reasonable to have some money in another entity. I'm pretty evenly split between two brokerages, but I also keep about $50K in the credit union and I have about $40K in treasury direct. That should hold me over if one of the brokerages gets in trouble.

 

[marko]

I'm less concerned about a hack as eventually you'd get your money back.

My question is this: almost all my investments are with one house with about 15 different fund holdings. What would happen if they pulled a Lehman? Disappeared/bankrupt either from gross mismanagement or malfeasance.

Unlikely, but as an academic question.

 

[Car-Guy]

In the past ~10 years I've gone from 8 or 9 financial institutions to 3 and one of them is Schwab. Now I'm seriously considering moving everything to Schwab except for a small amount (maybe 50 to 100k) that I'll keep in a local B&M bank.

A huge reason for this is simplification for the DW in case something happens to me. Plus, Schwab has everything I want in an investment firm.

No worries here.

 

[Lewis Clark]

Last year - was it only last year? - I had many of my financial accounts locked after the Social Security Administration erroneously reported that I had died. Took about four months to fully restore myself to life.

If all of my accounts were with one institution, and that institution locked my accounts for any reason, it might cause an extreme hardship until the situation gets resolved. This is one reason I would never consider putting all of my financial eggs into one basket.

 

[target2019]

We're in the consolidation phase. Schwab has been the go-to institution for that. At this time we have:

37% Vanguard
58% Schwab
05% other

I'm trying to put together reasonable arguments to 1) consolidate further at Schwab, 2) Let it be, or 3) consolidate at Fidelity.

 

[Lsbcal]

What we do:

1) Some cash at home
2) A reasonable amount in checking to cover the monthly bills
3) Plenty of accessible money in iBonds which expire in 2031
4) Really good credit in case we would need an emergency loan
5) The rest consolidated with one of Vanguard, Schwab, Fidelity (guess who )
6) Oh yes, and there is that SS money coming each month
7) Could get a loan from DS but never thought about such an emergency situation

 

[Car-Guy]

So I got thinking about my earlier post on this thread. I crunched some numbers last night and I'm still torn between consolidating my 401k to my Schwab tIRA or keeping them separate. If I consolidated, that would take me down to just two financial institutions and make it as about as simple as I can for the DW if she ever needs to start managing our finances. "The problem" is I've been making ~2% more, on the average, where I have my 401k now over what I could make at Schwab. So it would seem like a no brainier to leave it alone. BUT, I'd have much greater flexibility if I moved it all to Schwab, "and" if I reinvested the money each month, that I'd make off of the fixed income investments that I'd certainly make with that money at Schwab, I could significantly reduce that extra 2% to something less. (Maybe just 1%) But I don't think I could ever fully make up the difference.

So do I consolidate and make things simpler for the DW in the future, and give me greater flexibility now, or leave things alone and keep earning the extra 2%. I'm not worried about having all my "eggs in one basket" (Schwab) and I don't need the extra money that I'm currently making by just leaving the 401k where it is.

Yes I know, first world problems indeed.

 

[W2R]

At this time we have:

37% Vanguard
58% Schwab
05% other

For me, it's

90% Vanguard (taxable and Roth)
6% TSP (401K equivalent for federal employees and retirees, administered by Uncle Sam)
4% bricks'n'mortar bank (OK, waste of money, but I don't care. Such a luxury to always have plenty at hand for the unexpected).

I am the absolute worst worry-wart in the universe, and I admit that I do worry about what would happen if Vanguard died for some reason. But, if that happened I surely wouldn't be the only one in trouble, plus I have my SS and mini-pension deposits each month.

 

[RE2Boys]

I consolidated all retirement accounts accept one at Vanguard. 39% of investable assets. The outlier is my TSP account, did not want to lose access to G fund, 5%.

90% of my investment activities are performed at Fidelity comprising 37% of investable assets, all taxable. Love their website, very easy to use for my purposes

10% of investable assets are in the form of paper I and EE bonds. Most in I bonds with 2+% fixed component purchased in 2001-2003.

Remainder is largely in a local credit union.

Works well for me and easy for my wife to follow.

 

[DJRR]

"The problem" is I've been making ~2% more, on the average, where I have my 401k now over what I could make at Schwab. So it would seem like a no brainier to leave it alone.

How are you making 2% more? Do you mean a fixed 401k money market instrument made from insurance products that is higher than the Schwab settlement account? Is your employer paying all expenses?

I find it hard to believe that you could not find an equivalent product at Schwab. 2% seems like a very large alpha to capture. Maybe it is a risk issue?

 

[Car-Guy]

^^^^^
I'm all in fixed income/stable value investments and simplification these days. My company managed stable value 401k is pulling in a little over 7%. My self managed Schwab CD's ladder is pulling in a little over 5%.

 

[DJRR]

^^^^^
I'm all in fixed income/stable value investments and simplification these days. My company managed stable value 401k is pulling in a little over 7%. My self managed Schwab CD's ladder is pulling in a little over 5%.

Figured something like that. Stable value fund put together with insurance product backing is probably doable, but not for an individual at the scale that we all operate on. That is a nice perk and one of the few reasons to stay with an old S&P 500 level company 401k.

 

[m3bs]

I had brokerage accounts with Schwab and TDA. They recently merged, so I no longer have that diversification. I also had a 401K with a SVF that was seriously lagging behind current rates, so I rolled that into a Schwab IRA and a small Roth for the post tax funds. I had the same concerns, but was assured by the Schwab rep that my funds were protected in the event of a security hack. It is nice having everything in one place, making it easy to manage. I did beef up my password, though….

 

[jazz4cash]

I have multiple accounts, pre tax, tax tree, tax deferred accounts with Schwab, there are CD’s and Treasuries. Am I taking a risk with everything within Schwab regardless of government backstops. Should I spread out to Fidelity or elsewhere just in case there is a hack at Schwab and I need money?

I would keep a chunk in a local bank or credit union. If I held everything in one place (Fido in my case) I would be at risk of a hack or other network issue as well as a hack on my device. I’d be more concerned with a delay while the issue is resolved as opposed to the funds disappearing. I’ve even considered putting a bit in a neighborhood bank with no electronic access that I could walk or bike to.

 

[SunGuy]

What is it that Warren Buffett said? Have all eggs in one basket but watch it close?

Certainly risky, but not the worst thing to do. Many business owners have 90% of their wealth in their business. Stock owners are better served thinking of each share as a tiny fraction of every business of the stock.

My highest concentration in my Roth IRA accounts for about 9%, and I am fine with that, every day it is up/down 1-3% on average.

Especially if you in the accumulation stage, and adding more each month.

 

[thepalmersinking]

Great replies, thanks. Not to be conspiracy theorist, if there is a black swan event, I would assume all of the major houses would limit trades and transfers. So keeping cash in a bank and at home may be the plan.

 

[jollystomper]

If you have all of your investments are one of the larger institutions that can be considered "too big to fail" you are okay, as there would likely be government intervention to keep things stable.

I use two (Fidelity and Vanguard) for almost all of my investments (I have one mutual fund that cannot be moved from its institution as it is a proprietary fund), as a habit from my IT days when I was an "availability" specialist and disciplined in having various levels of redundancy to allow systems to run 24x7x365/366 . As has been mentioned above, if for some reason one has to have accounts "locked down" at one institution, the accounts are the other institution are still available if needed.

For banking we have 2 online banks and 2 local banks. One of the locals is a credit union near my former place of work. I really should eliminate it but it will take time as that is where our electronic bill payment is done and where my pension is deposited. Not impossible to move, but with no issues (and no need to actually go to the bank), I am in the "if it ain't broke, don't fix it"mode with this .

 

[pb4uski]

Figured something like that. Stable value fund put together with insurance product backing is probably doable, but not for an individual at the scale that we all operate on. That is a nice perk and one of the few reasons to stay with an old S&P 500 level company 401k.

+1. While I highly value consolidation and simplicity, for access to a 7% SV fund I would absorb a little inconvenience.

 

[Andre1969]

This might be irrational paranoia on my part, but I don't like the idea of any one company knowing just how much I have. Earlier in the year, when Schwab acquired TD, suddenly Schwab had something like 60% of my investible assets.

One day I got a call from a Schwab rep, partly because the TD acquisition put my account holdings with them above some threshold that gave me some extra perks or something, but also, apparently a lot of TD customers weren't happy with the acquisition, and were starting to shop elsewhere, so I guess Schwab wanted to do their best to hold onto their customers, and that money!

I know it was just a courtesy call, and probably a good thing, to let me know about the extra perks. But at the same time, I just didn't like being on their radar like that, and it made me worry that they were going to try and sell me on some stuff I didn't need, that only served to make them more money.

Anyway, the sales rep wanted to know if I had any concerns, and was mainly focused on keeping my business. I just told him, don't take me out for a steak dinner and try to sell me an annuity, and I'll stick around.

 

[Dtail]

63% Fidelity
30% 401k SV
7% Ally
Minor checking at BOA

 

[MRG]

I have assets at two brokerages and our local bank. I won't consider consolidation as I've had my assets locked by the Commonwealth of Pennsylvania when my dad's estate did a TOD into an account, and they locked it until his estate was settled and all inheritance tax was paid. Took a few months.

Go to reddit sometime and read about the folks who have had accounts locked for much longer periods.

I used to be concerned about the providers' outages, as they happen. Look at Fidelity's record over the last month.

I fixed those systems when I worked. Generally, they are fixed in a day, with the backup data nice and secure both on and off site. Longer term outages would result in a DR plan being initiated and alternative data centers involved. Providers regularly test their ability to lay a system down in a recovery data center and be up and running over a 24-hour period.

 

[ncbill]

Too many different places currently have my money.

Will be consolidating down to one brokerage (with a local office) and one local bank.

 

[Midpack]

I have most of our money at Vanguard. Safety is the only real reason I'd spread our money, and I have been considering moving all our tax deferred and tax free accounts to Fidelity (which would be substantial) - this (below) is the only thing that gives me some reservations...

Fidelity and Vanguard are both privately owned companies. Descendants of founder Edward Johnson own 49% of Fidelity, and Fidelity employees own the remaining 51%. Vanguard, on the other hand, is owned by the more than 30 million investors in its funds.