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Schwab Solvency
Old 10-22-2021, 04:06 PM   #1
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Schwab Solvency

My wife is the prototypical nervous nelly and skeptical of everything and everyone.


I'm thinking of moving everything we own to Schwab for simplification and she's nervous as can be about having all our eggs in one basket.


To her credit, there HAVE been huge companies that have gone under. But I think she's way over concerned.


Can anyone give me any talking points to convince her that "putting all our eggs" in the Schwab basket is ok?
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Old 10-22-2021, 04:14 PM   #2
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Charles Schwab, the founder, is still the chairman, and worth over $10 billion.

His daughter Carrie is president. A pretty stable family.

For the customers, they have Lloyd's of London insurance protecting any individual customer up to $150 million after SIPC benefits ($500K) are exhausted.

That's good enough for me.
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Old 10-22-2021, 04:42 PM   #3
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Also, customer assets are not assets on Schwab's balance sheet. Schwab is simply the custodian. Any debts or judgments against Schwab have no claim on customer assets. Worst case (nearly impossible IMO) is that if Schwab goes under, it will take days or even a week or two for our assets to be transferred to another custodian.

A mutual fund is similar; it is a custodian only and customer assets are outside any claims against the custodian.

There are those here who use two brokerages/belts and suspenders, but considering the low probability of a problem and probably low impact, the hassle of doing that doesn't seem worthwhile to us.
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Old 10-22-2021, 04:51 PM   #4
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You could mention that I have been with Schwab for 38 straight years without a hiccup and I sleep well at night. And my daughter has had an account for 18 years now. Then mention the comments above.
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Old 10-22-2021, 04:57 PM   #5
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You could mention that I have been with Schwab for 38 straight years without a hiccup and I sleep well at night. And my daughter has had an account for 18 years now. Then mention the comments above.
Over 30 years for us.
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Old 10-22-2021, 05:00 PM   #6
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Over 30 years for us.
Nice!
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Old 10-22-2021, 09:06 PM   #7
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Agree with others, but the case can be made that it could make sense to have at least some funds at a different place. Not to protect against loss, but if something did happen (cyber attack), and the funds were tied up for a few weeks, you'd still have money to carry you through.

I suppose a buffer in the checking account would be enough though. I kind of like having my major accounts split though. I recently found one brokerage offered a LOC I needed short term at a good rate, the other didn't. Pluses and minuses to each place, but if I didn't have two, I wouldn't know, other than hearsay.

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Old 10-22-2021, 09:29 PM   #8
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I am in the keep multiple accounts at multiple financial institution camp. I say that as someone who worked on the street for a number of years.

Why? As mentioned above, we are in the age of cyber attacks. Even it my account is protected (SIPC + other), s successful attack could make the recovery process take time.

Additionally, I have seen cases for various reasons why access to accounts has been cut off. For instance, I know a case where the person involved had issues remembering their password and after many resets was locked out of the account, which was then subject to a fraud investigation. This took a number of days to resolve - and in the meantime there was no web access to the account. The account had the vast majority of the persons assets, including what was needed for daily living.

I guess I am just the paranoid type - it always is a good idea to have alternatives.

OTOH, it does make end of life and managment in old age situations more complicated.
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Old 10-23-2021, 03:35 AM   #9
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Over 30 years for us.
20+ years with Schwab here.
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Old 10-23-2021, 04:04 AM   #10
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My Schwab IRA dates back to 1983 or so. I bought 17 shares of Disney on my first foray into the market.

The next day the stock “plunged” about $2/share.

When I was bemoaning my sudden loss, my CPA boss drily quipped, “it’s a good thing there are no tall buildings around here!”
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Old 10-23-2021, 04:21 AM   #11
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It's likely we'll stay with a split between Vanguard, Schwab and two banks. In a few years three smaller accounts will be eliminated from the list as part of consolidation.

Staying with two major instititutions is not due to nervousness. In fact the Schwab portion will grow due to enhanced services. But this is how the situation has evolved, Vanguard was first, then came Schwab about 10 years ago.
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Old 10-23-2021, 05:42 AM   #12
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Schwab is in no danger of going under and even if they did customer money is segregated from corporate money as another poster pointed out. Any cash you have is Schwab accounts is insured by the SIPC. I've been a customer there for 38 years so I'm not particularly worried.


However, I still diversify my assets. I have an account with a second brokerage firm and we have our bank money split between two banks. The duplication isn't because I'm afraid I will lose my money at Schwab. It's because in case of a liquidity problem at one institution I will still have access to funds at another. If there is a systemic liquidity problem then we are all screwed.



Frankly, if Schwab goes down there are others that will go down faster and harder before it does. I wouldn't worry too much about it.
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Old 10-23-2021, 08:47 AM   #13
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My understanding is that the big problem a person may have if the financial house goes bust is the delay in getting to your money. Assets may not be available for transactions while the feds/courts/whoever is transferring them to another custodian.

For example, suppose you plan to sell your Apple shares to buy your new mansion. But you have reason to believe that Apple is going to $1 a share in a month or two so you decide to sell immediately. You might not be able to sell it at today's price until the share transfer is complete. Others can correct me if I am wrong about this. Will that happen? Unlikely, but...
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Old 10-23-2021, 09:17 AM   #14
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Over 30 years for us.
29 Years for my wife and me. Never a problem, no worries about solvency. Great service and products. Wouldn't change.

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Old 10-23-2021, 09:41 AM   #15
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OP,

Have you reviewed Schwab’s annual report? All the financial info required for publicly traded companies is there it seems.
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Old 10-23-2021, 09:51 AM   #16
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I suppose a buffer in the checking account would be enough though.

-ERD50
That’s how I do it. A hiccup at a major brokerage is going to be short term and can be self-insured with some cash as you say.
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Old 10-23-2021, 10:24 AM   #17
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I think it’s reasonable to have some form of plan B to smooth out any issues related to access, fraud, convenience, etc.

What large companies have “gone under” resulting in the loss of funds held in custody?
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Old 10-23-2021, 11:02 AM   #18
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Quote:
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You could mention that I have been with Schwab for 38 straight years without a hiccup and I sleep well at night. And my daughter has had an account for 18 years now. Then mention the comments above.
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Over 30 years for us.
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Originally Posted by Bryan Barnfellow View Post
29 Years for my wife and me. Never a problem, no worries about solvency. Great service and products. Wouldn't change. BB
Bunch of youngsters... ~41 years for me at Schwab...

Of course back then, I had accounts with several other brokerage firms (Schwab, Waterhouse, Merrill Lynch and Morgan Stanly) In the last ten years I've consolidated all to Schwab... I've had a few problems over the years but all were minor and quickly resolved... The worst problem I've had is sometimes the account execs they assign can be real "dorks"... But, just one call to their boss (or customer services) and they will "immediately" switch you to another. (rinse and repeat until you get one you like)

Another example, earlier this year, I was making a trade (I trade a lot) and their system was really slow due to high volumes... I "estimated" the delay in order execution cost me $500... I sent a note to my account exec, he sent it on to his boss, his boss called me and credited my account with the extra $500...

Best customer services in the business (IMO)... I don't worry about them holding securities for me but I often have a lot of cash just sitting there... Not sure what would happen to the cash if they collapsed.
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Old 10-23-2021, 11:32 AM   #19
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... You might not be able to sell it at today's price until the share transfer is complete. Others can correct me if I am wrong about this. Will that happen? Unlikely, but...
I think you're right. Not a big deal for us as we do almost no trading.

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... I don't worry about them holding securities for me but I often have a lot of cash just sitting there... Not sure what would happen to the cash if they collapsed.
Well, one of the revenue-raisers they instituted because of the fee wars is that the accounts' cash now sweeps to Schwab Bank at something like 30bps. They tout the FDIC insurance as a benefit from this change.
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Old 10-23-2021, 11:37 AM   #20
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Well, one of the revenue-raisers they instituted because of the fee wars is that the accounts' cash now sweeps to Schwab Bank at something like 30bps. They tout the FDIC insurance as a benefit from this change.
I hope that's right, but I assume that's just good for the first 250K? Often I have 4 times+ that in cash at Schwab... Maybe I should move some to other firm(s) that are similarly insured.

Similar issue where I have my 401k too with a lot more than that, and it's all in fixed income... However I'm getting almost 4% on that money and I'm reluctant to mess with it.
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