All my eggs in one basket (brokerage)?

[F.I.R.E User]

I have everything at Fidelity and just taxable at Vanguard.

 

[523HRR]

Always thought it was important to have assets diversified across multiple brokerages: currently Fido, Schwab, TD Ameritrade (oops...Schwab), Vanguard. Occasionally can play one against the other and provides some comfort in case one brokerage has a big problem.

 

[meleana]

We have one major company. And just two banks. One on line and one physical.

I’m into simplicity.

 

[Lorenzo]

Thanks to all for your replies so far. Here's a question. Is it easier to do Roth conversions from a tIRA at the same brokerage (in my case Schwab)? Or could I establish the new Roth accounts at a different brokerage from Schwab? I'm a newbie, only starting to learn about Roth conversions.

 

[meleana]

Thanks to all for your replies so far. Here's a question. Is it easier to do Roth conversions from a tIRA at the same brokerage (in my case Schwab)? Or could I establish the new Roth accounts at a different brokerage from Schwab? I'm a newbie, only starting to learn about Roth conversions.

It's easier at the same company because essentially they just convert what you already have in your investments in the Traditional IRA into the same investments in a Roth unless you state otherwise.

 

[LateToFIRE]

I'm tired of having our investment funds spread all over the place, crave simplicity, and am in the process of consolidating everything into one of the majors, except for cash bank accounts where we keep 2 years expenses. So, if for some crazy reason could not access investment funds, would not be SOL. Discussed the cyber-risk with new [no-fee] advisor - opinion was that good old fashioned outside fraud/scam was a much greater risk - of course they pay him to say that buy I tend to agree. As we age, I think simplicity will be more of a benefit than a curse - easier to keep track of, quicker to notice something wrong, single point of contact/escalation, less confusing, both DW and I have access to same info.

 

[Onda]

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.

You can set a verbal password with Schwab, and unless you tell them the password, they will not talk to you. You can have RSA secureID key for online logins with Schwab.

Fidelity does not care about supporting verbal password. (too much work for them?) I would be OK with having all money with Schwab, but not with Fidelity.

 

[audreyh1]

Probably because Fidelity also does voice ID.

 

[PatrickA5]

Have 95% of investments at Fidelity. Small checking account at B&M bank that is used to pay all bills. I have enough available credit on multiple credit cards to cover expenses for months if I were to be locked out of Fidelity. Of course, I wouldn't be able to pay off the credit cards if I lost all access to my funds, but I'm not going to lose sleep over it. I'm big into simplicity as I get older.

 

[marko]

OK. So, highly unlikely, but "what if" Fido, T Rowe or Vanguard were to pull a Lehman. What happens to the funds we own?

With stock, somewhere there's a 'piece of paper' (digital, otherwise) that says I own X shares. With a fund, how does that work?

Back in 2008 I asked this of Fido and was told not to worry because something like 'each fund is essentially it's own 'company' and would stand alone' ... or something like that.

 

[audreyh1]

OK. So, highly unlikely, but "what if" Fido, T Rowe or Vanguard were to pull a Lehman. What happens to the funds we own?

With stock, somewhere there's a 'piece of paper' (digital, otherwise) that says I own X shares. With a fund, how does that work?

Back in 2008 I asked this of Fido and was told not to worry because something like 'each fund is essentially it's own 'company' and would stand alone' ... or something like that.

Your brokerage account contains a bunch of securities - the account is simply a holder. Mutual funds, treasuries, bonds, CDs, stocks are all securities. Each mutual fund including Fidelity mutual funds hold securities independently from Fidelity or any other fund company. These securities are not owned by Fidelity and not available to Fidelity for anything.

I hope you keep recent statements as a backup. I keep electronic ones.

But in general it’s just a matter of time to sort things out.

FWIW Fidelity being a privately owned company- hard for it to “pull a Lehman” notwithstanding some other failure mode.

 

[marko]

Your brokerage account contains a bunch of securities - the account is simply a holder. Mutual funds, treasuries, bonds, CDs, stocks are all securities. Each mutual fund including Fidelity mutual funds hold securities independently from Fidelity or any other fund company. These securities are not owned by Fidelity and not available to Fidelity for anything.

I hope you keep recent statements as a backup. I keep electronic ones.

But in general it’s just a matter of time to sort things out.

FWIW Fidelity being a privately owned company- hard for it to “pull a Lehman” notwithstanding some other failure mode.

Thanks. Makes sense. But, again, highly unlikely, if Fido et al did go south for any number of reasons, how would one get their money back? Who you gonna call?

 

[audreyh1]

Thanks. Makes sense. But, again, highly unlikely, if Fido et al did go south for any number of reasons, how would one get their money back? Who you gonna call?

It doesn’t matter if Fido goes down. Your securities will still exist - they didn’t go poof. You will still own them. Account records will still exist. At this point SIPC would step in to help with the unwinding. So have your own recent record handy.

https://www.finra.org/investors/ins...cease,of protection safeguard investor assets.

https://www.uscourts.gov/services-f... brokerage firm,the failed firm is liquidated.

 

[Sunset]

Probably because Fidelity also does voice ID.

I really worry that AI faked voices can now fool voice ID.

 

[audreyh1]

I really worry that AI faked voices can now fool voice ID.

That could be a challenge if someone regularly records your voice. I’m sure Fidelity is thinking of it. They seem to have multiple layers of authentication.

 

[Lorenzo]

It doesn’t matter if Fido goes down. Your securities will still exist - they didn’t go poof. You will still own them. Account records will still exist. At this point SIPC would step in to help with the unwinding. So have your own recent record handy.

https://www.finra.org/investors/ins...cease,of protection safeguard investor assets.

https://www.uscourts.gov/services-f... brokerage firm,the failed firm is liquidated.

The concern might be that these things may take time to sort out. If you're relying on receiving a regular stream of income from a brokerage firm, and suddenly you can't access that, you need a backup. I think that's where having assets spread among two or more firms might come into play. Maybe nothing more complicated than keeping a few months of cash in a savings account at a bank.

 

[RetiredHappy]

We have about a year's cash in our bank, the rest in a brokerage. Even if there is a system access problem with the brokerage for a day or two, we can still pay our bills.

 

[audreyh1]

We always have at least one year of cash in one or more bank savings accounts or bank CDs.

 

[pb4uski]

OK. So, highly unlikely, but "what if" Fido, T Rowe or Vanguard were to pull a Lehman. What happens to the funds we own?

With stock, somewhere there's a 'piece of paper' (digital, otherwise) that says I own X shares. With a fund, how does that work?

Back in 2008 I asked this of Fido and was told not to worry because something like 'each fund is essentially it's own 'company' and would stand alone' ... or something like that.

Even with Lehman, it was Lehman's stockholders and debtholders that got screwed, not Lehman's customers. From Perplexity:

Based on the search results, it appears that Lehman Brothers' customers did not lose significant amounts of money when the bank collapsed in 2008. The key points are:

• Legally, customer assets had to be segregated from the broker's own accounts, so customer money was protected.
• The Securities Investor Protection Corporation (SIPC) announced on the day of Lehman's bankruptcy that all customer property was accounted for and no SIPC action was needed.
• Lehman's brokerage business was quickly sold to Barclays, and about $92 billion in client assets representing 110,000 retail accounts were transferred to Barclays.
• While institutional accounts took more time to resolve, the trustee liquidating Lehman's brokerage eventually announced that all brokerage customers would get their money back in full.
• In total, over $106 billion was distributed to satisfy the 111,000 customer claims, with secured, priority, and administrative creditors also receiving 100% distributions.

So in summary, the search results indicate that Lehman Brothers' customers were largely able to recover their assets and did not suffer major losses when the bank collapsed. The customer accounts were protected by regulations and the SIPC stepped in to ensure an orderly resolution.

 

[Maidensong]

Just finished reading the entire thread on Death and Money and the OP's recommendation to simplify by consolidating your assets as you age is spot on IMO. Our IRA & brokerage accounts are with one provider. We do have funds in three separate banks (savings, CDs and checking), but this is due to having rental properties being held under different entities and we need to keep them separate for now. The plan is to eventually have just two banks--one for personal and one for all the rentals as we merge those in time.

We keep what we call our "Doomsday Book" where we keep all titles, wills, POAs and other important docs in one place so the kids will know where to look for assets when the time comes. We try to update this every couple of years.

I don't see a problem with having a trusted financial advisor know about your assets or keeping them with one company. We pay for Lifelock each month so feel confident that no one can access our stuff without triggering an alert.

 

[Sunset]

That could be a challenge if someone regularly records your voice. I’m sure Fidelity is thinking of it. They seem to have multiple layers of authentication.

With the AI thing, they don't need to record all the words, just a few sentences of your speech.
Then AI can speak new words and answer questions that sound just like the person would answer. So it sounds normal and smooth, not like the old days of patching together sound bites from a person saying words, which often sounds bizarre.

 

[pacergal]

We have IRAs and investment account with one brokerage.
Our pension and SS go to one major bank and one credit union checking and savings accounts.
We consolidated and simplified a few years ago.