All my eggs in one basket (brokerage)?

[Lorenzo]

Newbie question of the day:

Should I have any concerns about holding my entire nest egg with one financial services firm, which in my case is Schwab? I do have a high-interest savings and a checking account elsewhere. I can't imagine Schwab going belly up or experiencing some kind of catastrophe or hacking that prevents clients from accessing their accounts for any significant amount of time, but I suppose nothing is impossible.

 

[imbatman]

Just my take, but I wouldn't be too worried if you are with one of the big boys like Schwab....IMO we are the big risk, not the holding company itself. I am more worried of someone calling in and impersonating me and transferring my funds or hacking their systems....and in these cases, I think the big companies are probably investing more in training and security. Hope you have MFA on your logon at least too.

 

[freedomatlast]

I'm not trusting enough to let any one single company know the full extent of my investible assets.

 

[GrayHare]

If you have 3+ years of expenses accessible elsewhere, you should be OK, but I'd still not put all my eggs in one place. It took close to 2 years for one of the "big boys" to restore my access to an account.

 

[Surewhitey]

We've always had 2-4 finance companies. Currently, FIDO, Vanguard, Etrade and Marcus. Then there is TreasuryDirect & a couple HSAs.

We typically keep shy of $500k in any place.

 

[Aerides]

I'm not trusting enough to let any one single company know the full extent of my investible assets.

But they don't have to know if they have all of it or just a sliver.

 

[frayne]

Good question. Personally I like spreading my eggs around to three different baskets, one basket strictly a T-IRA, the second, an after tax brokerage account and third, local B&M bank. Three different institutions and it also helps keep things simple when it comes to tax form time.

 

[Al18]

FYI here’s a quote from Schwab’s securities page:
“ Protected up to US$600 million
The combined total of our SIPC coverage and our "excess SIPC" coverage means Schwab provides protection up to an aggregate of US$600 million, limited to a combined return of US$150 million per customer, up to US$1.15 million of which may be in cash. This protection becomes available in the event SIPC limits are exhausted.” Link https://international.schwab.com/account-protection#:~:text=We%27re%20a%20member%20of,%24250%2C000%20for%20claims%20for%20cash).

 

[audreyh1]

We normally would only have one brokerage account, we currently have a much smaller second brokerage account. But we also have bank checking and high yield savings account at two separate banks so that provides alternative institutions if there was some temporary interruption at the brokerage. Not concerned about more than temporary.

 

[tizod]

Forget the protection, maybe not an issue as I think it's "safe" from, say bankruptcy. But what about a cyber attack? Some other lockup of the internal system? I also think this risk is growing fast, and AI might make it grow faster...
I'd spread the money to make the odds of two brokerages having a tech issue at the same time much lower. It just makes sense, no matter how much money is in play. I haven't done it yet, but it might also justify having some portion in bitcoin (my choice over gold) or hard assets like gold. IMHO

 

[rodi]

I don't have an issue with having all my investable stuff in one place... but I don't have that... The vast majority (80%) is at Schwab. I've got the 529 stuff at vanguard, and DH has two accounts at Vanguard (his IRA and an account holding funds he received in an inheritance). I have a small IRA at Fidelity as well as our HSA accounts. And of course treasury direct.

When I get closer to RMDs I'll move all the IRA stuff to one place, probably Schwab. 529s are going away soon. (Kids are in college now, any leftovers will be turned over to them.) HSAs will be spent down...

 

[gauss]

FYI here’s a quote from Schwab’s securities page:
“ Protected up to US$600 million
The combined total of our SIPC coverage and our "excess SIPC" coverage means Schwab provides protection up to an aggregate of US$600 million, limited to a combined return of US$150 million per customer, up to US$1.15 million of which may be in cash. This protection becomes available in the event SIPC limits are exhausted.” Link https://international.schwab.com/account-protection#:~:text=We%27re%20a%20member%20of,%24250%2C000%20for%20claims%20for%20cash).

PSA: I would be very skeptical in interpreting the "up to US 150 million per customer" coverage mentioned above.

With over US$7 Trillion dollars in assets (from the linked page), the US$600 million aggregate figure would likely be reached much sooner. If the US $7 Trillion were uniformly distributed over all accounts, I think the per account figure would be less than $13,000 (if I did the math right).

-gauss

 

[Car-Guy]

Not worried about Schwab especially since I keep the majority of my funds there in brokered CD's. I had my funds spread out in as many as 7 or 8 financial institutions ~10 years ago but I have consolidated down to three now for simplicity. That's working for me.

 

[MarieIG]

I am not worried about Schwab going belly up, but I currently have three brokerages: TD Ameritrade (soon to be migrated to Schwab), Vanguard, and most recently Fidelity. Each has their own pros and cons.

 

[GenXguy]

I have over half of mine at Vanguard, a big chunk in Lincoln Financial (retirement account), and smaller chunks at Fidelity, Treasurydirect, and a few banks.

 

[LateToFIRE]

I am not worried about Schwab going belly up, but I currently have three brokerages: TD Ameritrade (soon to be migrated to Schwab), Vanguard, and most recently Fidelity. Each has their own pros and cons.

Can you elaborate on the pros and cons?

 

[mrfeh]

Newbie question of the day:

Should I have any concerns about holding my entire nest egg with one financial services firm, which in my case is Schwab?

No.

 

[Al18]

PSA: I would be very skeptical in interpreting the "up to US 150 million per customer" coverage mentioned above.

With over US$7 Trillion dollars in assets (from the linked page), the US$600 million aggregate figure would likely be reached much sooner. If the US $7 Trillion were uniformly distributed over all accounts, I think the per account figure would be less than $13,000 (if I did the math right).

-gauss

The wording is strange - I didn’t write it. Elsewhere on the same page Schwab mentions SIPC coverage at $500,000 per per customer, which includes $250,000 in cash.

 

[jollystomper]

But we also have bank checking and high yield savings account at two separate banks so that provides alternative institutions if there was some temporary interruption at the brokerage. Not concerned about more than temporary.

Forget the protection, maybe not an issue as I think it's "safe" from, say bankruptcy. But what about a cyber attack? Some other lockup of the internal system? I also think this risk is growing fast, and AI might make it grow faster...
I'd spread the money to make the odds of two brokerages having a tech issue at the same time much lower.

I agree with these sentiments. It is the temporary lockout event that can make things much more a pain if you have everything at one location. From my career work helping clients design highly availability IT infrastructures, I think it is good not to have all ones eggs in ones basket, and do this with our financial assets.

 

[Sunset]

We don't have everything at 1 place, to risky for various reasons.

Just recently in the news, a children's hospital was hacked and their IT system became useless for over a week. It's still not back where it was.
The hacker group claimed they sold the data stolen for $4.3M

I figure banks and brokerages are much juicier targets and someday something will happen, so I want to have access to $$ for however many months it takes to fix the issues.

 

[Lewis Clark]

I will NEVER have all of my financial eggs in one basket. In addition to the reasons already mentioned, this is an experience that happened to me in January 2022.

The Social Security Admnistration made an error and reported to the world that I had died. Some financial institutions ignored the report and waited for more information while others locked my accounts. Some of the locked accounts were joint with my wife. Of the ones that locked my accounts, it ALWAYS took a series of phone calls to restore my normal access. One phone call was never enough. In fact, three phone calls were never enough even when I contacted them before they acted on the reported death. It took about four months for me to get it all fixed.

I will never be in a situation where one entity has control over all of my financial assets. The likelihood of an error like what happened to me, or any other problem, may be small. But the consequences could be enormous when it does.

 

[DrRoy]

We have about 2/3 at Fido, and the rest in my 401K at Merrill.

 

[foxfirev5]

2 Brokerages - Fido & VG.

2 Banks - B&M and Online

2 Treasury Direct Accounts

Not complicated at all.

 

[Surewhitey]

Can you elaborate on the pros and cons?

I agree that all have pros/cons. For me, some pros are
Etrade is my hub & the one I use for transfers and trading. Con is it's been less friendly for deposits & rates, although it's improving.

Vanguard is low cost, but less user friendly

Fido is my favorite child and nothing to say negatively. They're the best in my world.

Marcus, just something DW wanted to do. Just another bank, imo.

TreasuryDirect served as a I-bonds and treasury introduction to me for the past couple years. Hate the website. I'm spoiled with Fido's app & website.

 

[Badger]

I just feel a little more comfortable with our money spread in a few different places but not so many as to make it inconvenient to monitor. T-IRA and it's dividends in one brokerage account, stocks in another with CDs from various banks, and checking/savings in a third.
I don't know if there is any way to completely protect the money from hackers/AI.