About to Pull The Fire Trigger; Question About Too Many Eggs in Schwab Basket

[johkar]

Hello - long time lurker, first time posting. I am counting the days down, as I will retire from medium mega corp in June. Last day will be my 57th birthday, the first day I am eligible to retire and have access to retiree health benefits. DH fired'd at the first of the year at 58, and is enjoying life - can't wait to join him!! Walking out the door for the last time will be the greatest birthday gift ever!!

So, on to my question....When DH retired, we rolled his company 401K from Fidelity to Schwab, where we have several other accounts - individual Roths, taxable accounts, an inherited IRA. We have been happy with Schwab as we have a relationship with a guy in the local office who gives fairly good support, and the folks I've talked to at the 800 number are all very knowledgeable and helpful. Their fees have come down and so are pretty competitive. So in all, seemed to make sense to have his 401k and soon, my company 401k rolled over there too.

My question - Is this too much of our assets at Schwab, once we both have our 401k accounts there? That would make approximately 75% of our investable assets under that umbrella. The way I understand it is that Schwab is a custodian of our accounts, and they do not actually have our money - except that many of our investments are actually under the Schwab brand (index mutual funds, and ETFs, for example.) Many others are with third parties (Vanguard, iShares, for example.)

DH posed this question to our local guy a few weeks ago at our last visit, and he assured us we are fine. But thought this group would be good to bounce it off of. There are so many knowledgeable folks here!

I like the convenience of having most of our accounts together - is this something we should have a concern with? Anyone else ever have similar thoughts?

Many thanks in advance!

[braumeister]

Schwab is not going away any time soon; they are a solid company. So if you're happy with their service there really isn't any need not to use it.

I'm the same way with Fidelity. I've been very happy with them, and I have most of my stash with them. However, I do have a small percentage with Vanguard, partly because it's an easy way to use the Wellington/Wellesley funds, and partly because in the extremely unlikely event there was a big problem at FIDO, I would still have access to money through Vanguard.

But I would stress that I don't seriously consider that a likely need. I would probably be just as happy with everything at any of the big three.

[pb4uski]

I agree... we have a high % of our assets at Vanguard and I don't worry at all... Vanguard is just a custodian/middle-man for the assets.

[NW-Bound]

Quote:

Originally Posted by johkar ... Is this too much of our assets at Schwab, once we both have our 401k accounts there? That would make approximately 75% of our investable assets under that umbrella. The way I understand it is that Schwab is a custodian of our accounts, and they do not actually have our money - except that many of our investments are actually under the Schwab brand (index mutual funds, and ETFs, for example.) Many others are with third parties (Vanguard, iShares, for example.)...

Made me look.

I still have some accounts with Schwab, but Merrill Edge now has 67% of our investable assets. The reason is simple: they offered us a few $K to move money over, but the real attractiveness is the free trade privilege on stock/ETF, and low fee on option trades.

Any of the large institutions would be a safe place to keep my money. I just feel no need to consolidate, because I am now doing more trading, er rebalancing, in the Merrill Edge accounts to take advantage of the free trades.

[pb4uski]

Made me look too. Currently 80% at Vanguard... if the PenFed CD money finds its way back to Vanguard where it started out then make that 90%.

[MRG]

I'm split between two custodians, currently Fidelity(65%) and Vanguard(35%). I'll never go completely to one.

My career was IT in the financial services industry and I'll be sure to have my assets adequately distributed. Having assets at two of the big 3 assures that. Going past 3 and you're not benefiting yourself(you might find all your assets in the same data center).

I don't have expectation that any big fund company is going under, they'll get acquired. Some of my career was DR, unfortunately I never was in a DR drill, all real world. I understand what folks plan for contingency, I use much worse plans. If something happens I use a 90 day outage for my planning, with contingencies for additional fallbacks.

If say Fund Company's X data center(s) falls into a hole in the earth, there's another one, geographically dispersed from the other. In my case, if Philly or Boston isn't there anymore I can get to some of my assets. If both get hit, well it's been nice knowing all you guys.

[donheff]

Argh - disaster recovery. I went through a few of those drills at work. This thread got me thinking about our situation. We have about 1/2 of our assets at Vanguard and half is handled by Mass Mutual which is custodian to DW's work accounts. BUT - the best investment options at DW's firm are Vanguard indexes so most of her Mass Mutual funds are in VG indexes. In the event of a major disaster cutting VG out for months I assume we would lose access to the stuff Mass Mutual handles as well as the accounts under VG directly.

I guess I need to thing about whether to roll over one of DW's two Mass Mutual accounts to Scwhab or Fidelity but which one? Does anyone know where their data centers and backup facilities are located?

[joeea]

Quote:

Originally Posted by johkar My question - Is this too much of our assets at Schwab, once we both have our 401k accounts there? DH posed this question to our local guy a few weeks ago at our last visit, and he assured us we are fine.

I agree with your local guy.

There's no reason to put your funds elsewhere if you are happy with Schwab.

[VanWinkle]

85% Vanguard and 15% Merrill Lynch that will be rolled over to Vanguard or Fidelity in June 2019. I may open an account with Fidelity as I like their website. I am not concerned with too much at one provider but may use 2 just for the extra benefits of 2 perspectives.

[johkar]

I admit, I had just been thinking of financial / insolvency type issues and not disaster recovery. So now I have something new to worry about.....
Appreciate everyone's perspective!

[swakyaby]

Quote:

Originally Posted by MRG I'm split between two custodians, currently Fidelity(65%) and Vanguard(35%). I'll never go completely to one.

I too will not go completely to one. I had an experience nearly 20 years ago that probably very few here have had, but it has made an impression on me that I think about every time I consider consolidating my accounts at just one major financial company.

I had a retirement account at Dreyfus Bank of NY that I stopped contributing to and would receive quarterly statements for about 3 years or so. Then I noticed the statements stopped coming. To make a long story short, this financial institution froze my account, and refused to send me any information or access this account, even though I followed all their instructions to un-freeze my account by sending documentation, notarized letters, and more. I have no idea why as they refused to divulge any information. After 6 months of fruitless phone calls and letters, I involved a 3rd party who eventually compelled the financial institution to transfer my funds after 89 more days.

So now I am retired. I have no pension, only my savings and investments to live on. The thought of one institution holding all my investments and possibly withholding my funds from me for that length of time without explanation leads me to split my assets: Vanguard 60%, Fidelity 30%, TRowePrice (the aforementioned 3rd party) 10%.

[gayl]

https://www.schwab.com/public/schwab...rotection.html covers me. Brokerage, Roth, Ira all regarded as separate accounts so that covers 1.5m. All CDs under FDIC so carve that out. If you've both got accounts there that could be up to 3m.

FWIW: I'm primarily @ Schwab in SCHB, SCHF, CDs but do have apx 1% cash at USAA

[MRG]

Quote:

Originally Posted by swakyaby I too will not go completely to one. I had an experience nearly 20 years ago that probably very few here have had, but it has made an impression on me that I think about every time I consider consolidating my accounts at just one major financial company. I had a retirement account at Dreyfus Bank of NY that I stopped contributing to and would receive quarterly statements for about 3 years or so. Then I noticed the statements stopped coming. To make a long story short, this financial institution froze my account, and refused to send me any information or access this account, even though I followed all their instructions to un-freeze my account by sending documentation, notarized letters, and more. I have no idea why as they refused to divulge any information. After 6 months of fruitless phone calls and letters, I involved a 3rd party who eventually compelled the financial institution to transfer my funds after 89 more days. So now I am retired. I have no pension, only my savings and investments to live on. The thought of one institution holding all my investments and possibly withholding my funds from me for that length of time without explanation leads me to split my assets: Vanguard 60%, Fidelity 30%, TRowePrice (the aforementioned 3rd party) 10%.

+1

When my DF passed there was a TOD for my brokerage account. He lived in a state with an inheritance tax and the state locked my account! I had no access to any of my money and the state took 6 months to clear his simple estate.

There's many ways an account can be locked and you're the person who is out.

[johkar]

Quote:

Originally Posted by gayl https://www.schwab.com/public/schwab...rotection.html covers me. Brokerage, Roth, Ira all regarded as separate accounts so that covers 1.5m. All CDs under FDIC so carve that out. If you've both got accounts there that could be up to 3m. FWIW: I'm primarily @ Schwab in SCHB, SCHF, CDs but do have apx 1% cash at USAA

Thanks gayl, I had not seen this info before at the Schwab site. Interesting perspectives from everyone, will give me lots to consider when it is time to roll my 401k.

[CardsFan]

Quote:

Originally Posted by MRG When my DF passed there was a TOD for my brokerage account. He lived in a state with an inheritance tax and the state locked my account! I had no access to any of my money and the state took 6 months to clear his simple estate. There's many ways an account can be locked and you're the person who is out.

Are you saying that you had DF as TOD on your account, and the state locked YOUR account upon his death?

That just makes no sense. Not doubting you, just amazed at the dumb things that can happen.

[MRG]

Quote:

Originally Posted by CardsFan Are you saying that you had DF as TOD on your account, and the state locked YOUR account upon his death? That just makes no sense. Not doubting you, just amazed at the dumb things that can happen.

Edit:

My account was the target of DF's TOD. When he passed the state of PA locked my account. That seems obvious in hindsight but it caught us by surprise. It should have been caught in planning but was missed.

The state of PA was going to ensure they received their taxes from DF's estate. My account was worth 3X of his estate, let alone the 10% taxes owed. The state of PA locked my ability to withdraw any of my funds in that account despite them being far in excess of DF's estate or tax liability.

The even more interesting thing is I was allowed to trade the account. Could have written naked puts all day long and emptied the account.

[gayl]

Quote:

Originally Posted by MRG The state of PA was going to ensure they received their taxes from DF's estate.

This is troublesome. Was it a joint account? Why could they attach your separate account just bc you would inherit? Got to admit that I'm a little naive. Always thought that TOD meant it passed onto beneficiary and as long as it is under federal estate limit it's in the clear. (Glad I'm in California not PA)

[CardsFan]

Quote:

Originally Posted by MRG Edit: My account was the target of DF's TOD. When he passed the state of PA locked my account. That seems obvious in hindsight but it caught us by surprise. It should have been caught in planning but was missed. The state of PA was going to ensure they received their taxes from DF's estate. My account was worth 3X of his estate, let alone the 10% taxes owed. The state of PA locked my ability to withdraw any of my funds in that account despite them being far in excess of DF's estate or tax liability. The even more interesting thing is I was allowed to trade the account. Could have written naked puts all day long and emptied the account.

OK. With the edit it makes a little more sense. So, if you had not made the transfer to your account, but left the inherited account as a stand alone, they only would have frozen THAT account, correct?

Still kind of defeats the purpose of TOD, but I guess states are realizing that if everything TOD's, then there is no money in the estate to pay taxes.

[MRG]

Quote:

Originally Posted by CardsFan OK. With the edit it makes a little more sense. So, if you had not made the transfer to your account, but left the inherited account as a stand alone, they only would have frozen THAT account, correct? Still kind of defeats the purpose of TOD, but I guess states are realizing that if everything TOD's, then there is no money in the estate to pay taxes.

Right it was because the funds were mixed. Wouldn't have been a problem had someone, anyone told us about it ahead of time. After the TOD was executed there was no undoing it.

Kinda the point, there are actions that can happen out of your control that can cause your account to be unavailable. Remember post 9/11 the market was closed for a week. Funds were not pricing and no redemptions were made.

[copyright1997reloaded]

Quote:

Originally Posted by gayl https://www.schwab.com/public/schwab...rotection.html covers me. Brokerage, Roth, Ira all regarded as separate accounts so that covers 1.5m. All CDs under FDIC so carve that out. If you've both got accounts there that could be up to 3m. FWIW: I'm primarily @ Schwab in SCHB, SCHF, CDs but do have apx 1% cash at USAA

These protections only protect some ways your assets can be encumbered. As other posters have indicated, there are other situations that can arise where you don't have timely access to your funds.

On 9/11, BONY (Bank of New York) lost their entire ATM network, which wasn't restored until 9/19. There were also major issues in terms of settlement. I worked in the financial district at that time and I can tell you a major institution was within 48 hours of losing all Internet banking due to a lack of fuel to run their back up generators for a production data center in lower Manhattan.

Even with DR (disaster recovery) sites and DR plans, most institutions are very very fearful of executing the plan. I was on a critical situation phone call with a financial institution who was fifteen minutes away from missing a Federal Reserve cutoff time due to a system problem that had gone on for hours - they were afraid to go to DR because they had no faith that there wouldn't be other problems. (Which makes it very interesting given how much money is spent to have adequate DR capabilities.)

It is interesting the the I/T folks, who have lived this during their careers (like me), would never keep all of their funds in a single institution. You never want to be completely out of the water due to a single point of failure.