Having ALL one's Eggs in one Basket, VG or FIDO?

[OldShooter]

You make valid points, and yes the protections are better than they were a couple of years ago. Nonetheless, when I use a CC, I am using the *banks* money as opposed to using a debit card which is *my* money. They may have the guarantee for your money, but I would guess they will fight for *their* money a little harder than *my* money.

However, I believe that in most or all cases, using a CC at an ATM is a "cash advance" on which you pay the rapacious interest from day one. That is why we use the debit cards. As I said, we use CCs for other purchases, meals, etc. We also carry two CCs just like we carry two debit cards. We also NEVER permit our CCs to be charged in dollars, only in the local currency. This is a common ripoff.

When we travel (internationally, anyway) we will put a small contingent of cash in an account that can be accessed by debit card. If we need it, we will use it, but will immediately report the card missing afterwards. It might seem like an odd way of dealing with cash, but it works for us. But, our last 3 international trips, we had plenty of cash and didn't have to use an ATM.

Whatever floats your boat. In our case, we don't get foreign cash before we leave because of the inconvenience and fees. We routinely hit the ATMs at our arrival airport for a few hundred bucks in local funds. We've been doing this for years and every year there are more ATMs and fewer issues. Even third world countries, like Vietnam and Myanmar this January, we do not have problems. We try to use up the foreign cash before departure because we don't want to pay exchange fees coming home and the bank will only take bills, not silver.

 

[ShokWaveRider]

Respectfully, can we please stick to the original question regarding a single brokerage for all assets. If we would like to discuss the benefits of Debit Vs Credit or visa versa, can we please do it in another thread.

Thanks.

 

[Spock]

Maybe I am paranoid. I would never have all of my money in a single institution. Never. This is coming from someone who spent the last 10 years of their career with large scale financial services clients.

Just a few of the potential reasons:
1) Hacking of account/institution. Even if they make good there can still be substantial wait time until the make good occurs.
2) Dispute with the institution.
3) IRS attaches assets at the institution.
4) Technical issues at the institution. (Yes, I know they have disaster recovery plans - however I have personally seen that they are very reluctant to actually execute those plans).

and many, many other issues that I can't even think of. All I know is that I want multiple choices when it comes to some crisis. I even have multiple stock trading accounts for that same reason.

^this.
I keep multiple accounts splattered around with ATM cards for each (and some cash in a mayonnaise jar under Funk and Wagnalls porch). Look at the banking holidays in Greece, etc where banks limited ATM withdrawals to 60euros a day in 2015 (Greece just removed that restriction earlier this year). Multiple banks with multiple ATMs = multiples of the withdrawal limits.

Think it can't happen here? Rewind to 2008 and listen to a congressman explain how close we came:

Or when Sen. Chuckie Schumer triggered a bank run of IndyMac:

https://www.cnbc.com/id/25654303


Google for yourself how US bank laws have been changed since 2008 to allow "bail-ins" using depositors money. https://www.investopedia.com/articl...716/why-bank-bailins-will-be-new-bailouts.asp


ok... I'll go back under my rock.

 

[copyright1997reloaded]

+1
I've written before how the state of PA locked my brokerage account after DF's TOD was executed targeting that account. Six long months totally out of my control, while PA reviewed his paperwork so the could collect their 4.5%. I could trade in the account just not withdraw any of the assets.

I spent my career in this industry and have had my share of DR's, not the practice kind. These were real live disasters and I still know where some dead dogs are buried.

I use Fidelity and Vanguard. Both are great choices but I'll keep them separate.


ETA: Don't forget about the market closing for a week after 911. You couldn't get to your brokerage assets then.

Yep. I was there that day, and in the weeks that followed. There are several stories I can't tell regarding issues and really bad close calls (like system backups being done on systems in the WTC while the building was burning).

 

[Brat]

Years ago I established my husband's 401k at Fidelity. When my parents sold their home I recommended Fidelity to my Mother. She met with Fidelity staff and agreed. Mother liked to see her investments (then basically CDs, Notes and Bonds) grow. Fidelity staff got to know Mother and as she became infirm I could wheel her into their office for a consult. She didn't have a lot of money but they understood how important it was to make it last.

After she passed I moved our investments to Vanguard because of their ultra-low costs. Then I discovered that low cost came at a price, rigid systems and no face to face contact. That worked well for several years. When my DH became frustrated with routine online bill paying it dawned on me that at 80+ yoa Vanguard may not work for him in the future. Back to Fidelity.

I think the custodian you choose depends on how you invest and age. A financial representative with a personal touch can be important.

Regarding the discussion of the banking crisis, my Mother used to comment "Don't keep all your money in one place." She was a wise woman who remembered the depression.

 

[pb4uski]

.... Google for yourself how US bank laws have been changed since 2008 to allow "bail-ins" using depositors money. https://www.investopedia.com/articl...716/why-bank-bailins-will-be-new-bailouts.asp


ok... I'll go back under my rock.

Bail-ins do not use depositor money and you are unnecessarily alarmist.

 

[swakyaby]

Maybe I am paranoid. I would never have all of my money in a single institution.

I also split my assets between at least 2 financial institutions. As I’ve mentioned in a different thread, I had personal experience of an investment firm suddenly locking me out of my IRA account without notice or explanation. Multiple calls and letters of documentation were ignored. After 6 months of fruitless attempts, I contacted T.RowePrice to transfer my IRA to them. They were successful, although it took 3 months of demand letters from T.RowePrice for the transfer to occur. So, 9 months of being locked out of my money. I’ll keep my life savings in at least 2 different financial institutions from now on.

Regarding being able to see all your accounts in one place, I have some accounts at Vanguard, some at Fidelity, and some at T.RowePrice. But Vanguard has a site that allows me to see all my accounts including the other institutions (with live updates) on one page. Only the assets in my bank account have to be manually updated. So I can look in my account at Vanguard at any time and see how my entire portfolio has changed depending on how the market performed the day before.

 

[ShokWaveRider]

Maybe I am paranoid. I would never have all of my money in a single institution. Never. This is coming from someone who spent the last 10 years of their career with large scale financial services clients.

This is EXACTLY why I like putting everything to be "Controlled" and presented on one Dashboard by Fidelity. You can invest in anything and everything that is NOT in one institution. CDs with Multiple financial houses and Annuities with multiple Insurance companies. All independently insured or covered by the states annuity guarantee system.

 

[Spock]

Bail-ins do not use depositor money and you are unnecessarily alarmist.

The picture you post works IF there is enough "loss absorbing debt" to absorb all the losses. From your same source with emphasis added:

The bail-in process protects depositors whenever possible and identifies ahead of time which investors will lose money in the process. Equity is wiped out first to mop up losses. Junior debt and some senior claims are next in line to be written down or converted into new equity.

From all the sites I've been able to find (which is not very many), the succession list of who gets paid puts inter-bank IOUs and derivatives ahead of depositors (unsecured creditors) From the investopedia article in my post:

As unsecured creditors, depositors and bondholders are subordinated to derivative claims. Derivatives are the investments that banks make among each other, which are supposed to be used to hedge their portfolios. However, the 25 largest banks hold more than $247 trillion in derivatives, which poses a tremendous amount of risk to the financial system. To avoid a potential calamity, the Dodd-Frank Act gives preference to derivative claims.

which suggests that there will not be enough "loss absorbing debt".


If you have more complete info from reputable sources that shows bail-ins won't hit depositors I'd like to study it... particularly if it completely spells out the Dodd Frank creditor succession list (which might be moot based on the way the creditor succession list was abandoned during the GM bankruptcy). So far all the good stuff I can find seems to be behind pay-walls. I found one at Huffington Post, but, well, its Huffington Post.
I did find one FDIC.gov pdf file (quoted in the above HuffPost reference) that does delineate between insured and uninsured depositors with uninsured depositors participating in the bail-in.

 

[UnrealizedPotential]

I currently have three brokerage accounts and will get it down to two. I did have four not too long ago but it's a pain to move money around all the time. So sometime next year I hope to have everything in two brokerage companies as this will make it easier for me.



I thought about moving everything to one brokerage account, but I don't feel comfortable with doing that.

 

[pb4uski]

.... I did find one FDIC.gov pdf file (quoted in the above HuffPost reference) that does delineate between insured and uninsured depositors with uninsured depositors participating in the bail-in.

That is good to know and makes sense. Given that there has yet to be a bail-in in a developed country where depositors have been hurt I'm not planning to worry about it ... nada.

Are bail-ins a common practice on Vulcan?

What was the source for the $247 trillion... given that the total assets of the 15 largest banks are less than $15 trillion it is very hard for me to believe the $247 trillion number... even if it is just notional (that's plausible I guess but totally irrlevant but a journalist wouldn't know that).... the total US government debt is only $22 trillion.

 

[copyright1997reloaded]

That is good to know and makes sense. Given that there has yet to be a bail-in in a developed country where depositors have been hurt I'm not planning to worry about it ... nada.

Just because it hasn't happened doesn't mean it won't happen. We haven't seen a 1932 style bank run either (well at least not since 1932), but that doesn't mean the system can't get stressed considerably more than the 2008-2009 crisis.

 

[pb4uski]

I never said it wouldn't happen... I just said that since it is such a remote possibility that I'm not planning to worry about it... nada.

 

[Ginny]

We have 85% at VG. Used them for simple IRA when I had my business. They have IRA, Roth and rollover. The rest is at Navy Fed in CDs and in our checking account. DH maintains an account at a monster mega bank with direct deposit so it does not cost us anything and it is easy to make withdrawal there.

 

[donheff]

I'm not clear on "where" Vanguard funds are. We have about half of our funds at Vanguard in VG Indexes. The other half is DW's work plans administered by Mass Mutual. There too the actual investments are VG index funds. Does the separate administrators provide some disaster protection if Vanguard itself goes down or are we effectively equivalent to having all accounts at Vanguard?

We have considered moving DW's work accounts to Schwab. They are all tax deferred so no tax hit but we don't like the idea of selling so much and then reinvesting after the transfer gap.

 

[pb4uski]

I'm not clear on "where" Vanguard funds are.....

Each mutual fund is a separate legal entity... when the fund is originated they sell shares in the legal entity to investors for cash... then then invest the cash in stocks and bonds in accordance with the funds investing guidelines and you get you proportionate share of the results. So essentially, you own shares in the mutual fund.

Vanguard is a bit unique in that the management, distribution and servicing companies are owned by the funds... for most mutual funds the management, distribution and servicing companies are for-profit companies owned by individuals or a subsidiary of another financial institution (bank or insurance company).

 

[donheff]

Each mutual fund is a separate legal entity... when the fund is originated they sell shares in the legal entity to investors for cash... then then invest the cash in stocks and bonds in accordance with the funds investing guidelines and you get you proportionate share of the results. So essentially, you own shares in the mutual fund.

Vanguard is a bit unique in that the management, distribution and servicing companies are owned by the funds... for most mutual funds the management, distribution and servicing companies are for-profit companies owned by individuals or a subsidiary of another financial institution (bank or insurance company).

I have read this and get the gist but I still am confused about "where" the funds are managed. They are all separate legal entities but are they subject to a single point of administrative failure? Are we better protected from simultaneous temporary denial of access to the all of our funds if we move half to Schwab than if we leave the Mass Mutual administered VG indexes in place?

 

[pb4uski]

It depends on the nature of the issue. Since all Vanguard funds are centrally managed, if Vanguard were to be hacked then it would affect the relevant Vanguard funds whether you own them through Vnaguard directlyor MassMu or whoever. If the nature of the problem is a temporary denial of access like someone posted with a state freezing the funds in a specific account, then other Vanguard funds with other brokers would not be affected.

 

[misshathaway]

Maybe I am paranoid. I would never have all of my money in a single institution. Never. This is coming from someone who spent the last 10 years of their career with large scale financial services clients.

Just a few of the potential reasons:
1) Hacking of account/institution. Even if they make good there can still be substantial wait time until the make good occurs.
2) Dispute with the institution.
3) IRS attaches assets at the institution.
4) Technical issues at the institution. (Yes, I know they have disaster recovery plans - however I have personally seen that they are very reluctant to actually execute those plans).

and many, many other issues that I can't even think of. All I know is that I want multiple choices when it comes to some crisis. I even have multiple stock trading accounts for that same reason.

+1 I even had 2 local bank accounts for awhile that I could walk to for cash. If an apocalypse comes, I'm ready!

 

[MRG]

It depends on the nature of the issue. Since all Vanguard funds are centrally managed, if Vanguard were to be hacked then it would affect the relevant Vanguard funds whether you own them through Vnaguard directlyor MassMu or whoever. If the nature of the problem is a temporary denial of access like someone posted with a state freezing the funds in a specific account, then other Vanguard funds with other brokers would not be affected.

+1

Its probably worth adding that on Vanguard's systems they have data indicating MM has X shares in a house account. On MM they have the data to sub-account those shares into their individual accounts. So a major outage at Vanguard or MM would be an issue in that scenario.

 

[mrfeh]

We are considering re-aligning all our retirement assets to a single institution. We currently have them spread out over 3 Credit Unions and Vanguard. I am considering Consolidating them all to Fidelity, as they also offer banking services.

Obviously it is quite a lot of money and FDIC or NCUA becomes a bit moot until one purchases insurable investments through them.

I was wondering if anyone else does this, or does the smart money supporting spreading it about for security?

Thanks in advance for you comments, opinions and advice as usual

We have accounts at both Fido and Vanguard, but 90+% of the value is at Fido. If you are an indexer, make sure you purchase their 0% ER funds.

Also, hit them up for a transfer bonus.

 

[pb4uski]

....hit them up for a transfer bonus.

Tell me more! Those PenFed CDs will be maturing soon and Fido is on the short list.

 

[Dtail]

Tell me more! Those PenFed CDs will be maturing soon and Fido is on the short list.

I don't think Fido gives transfer bonuses, but perhaps I am not up to date with this aspect.

 

[mrfeh]

Tell me more! Those PenFed CDs will be maturing soon and Fido is on the short list.

I don't have any concrete information. We ditched our FA 5 years ago and moved everything to Fido and received a $2500 bonus.

I don't know what their current bonuses are - I'd ask them directly.

 

[Rianne]

+1 I even had 2 local bank accounts for awhile that I could walk to for cash. If an apocalypse comes, I'm ready!

That thought makes me think of "It's a Wonderful Life" George Bailey walked a block to his bank. I'm not sure it matters where your bank is.

My DM had pockets of $$ all over the place. It was very confusing as her memory and facilities started to fail at 93 yrs. old. Proving who you are was an issue. There was one bank that refused any communication with us. Even as her daughter. I even went into banks with her and there was hesitation revealing any financial transactions or history. That's one reason we have a living trust that gives my trusted DB complete access to all our accounts, mainly in VG. And we have a trusted back up niece.