Fidelity isn't trying to pull the wool over anyone's eyes with their Cash Management Account. I've had a Fidelity brokerage account and a Fidelity CMA account for several years. Each account has a different number, different checks, different ATM/debit cards, and slightly different features.
Fidelity isn't trying to deceive anyone as Robinhood did. Not even close. Robinhood was trying to lure people with an extraordinarily high 3% on deposits, calling it a checking/savings account, and saying it would be covered by SIPC. The article in your link explains it pretty well.
I use my CMA strictly as a checking/online bill pay account. I don't hold any investments in it. All cash is distributed among the program banks, as
audreyh1 describes.
SIPC coverage vs. FDIC coverage isn't tied to the type of account, but the type of investments that are in the account, whether it's the regular brokerage or the CMA. Brokered CDs are FDIC insured. Securities are covered by SIPC. Core cash in the CMA is FDIC insured.
The regular brokerage account doesn't have online bill pay. The CMA does.
For anyone who is interested, here is a link at Fidelity that describes the account:
https://www.fidelity.com/cash-management/overview
From the page:
"3. The Cash Balance in the Fidelity Cash Management Account is swept to an FDIC-insured interest bearing account at a Program Bank. The deposit at the Program Bank is not covered by SIPC. The deposit is eligible for FDIC insurance subject to FDIC insurance coverage limits. All assets of the account holder at the depository institution will generally be counted toward the aggregate limit. For more information about FDIC insurance coverage, please visit the FDIC website at FDIC.gov or call 877-ASK-FDIC. As referenced in the FDIC-Insured Deposit Sweep Disclosure Document for the Fidelity Cash Management Account, customers are responsible for monitoring their total assets at the Program Bank to determine the extent of available FDIC insurance. All FDIC insurance coverage is in accordance with FDIC rules. Go to Fidelity.com/FCMACoreBanks to see a list of eligible Program Banks, and the FDIC Disclosure Document."
Here is a link to the
complete FAQs:
https://www.fidelity.com/cash-management/faqs-cash-management-account#
Functionally, it's not much different between having a Schwab brokerage account and a Schwab checking account, which I also have. One exception is that Schwab actually has a bank and doesn't rely on program banks to provide the same checking and online bill pay services. And you can't purchase CDs or securities in a Schwab checking account, whereas you can in a Fidelity CMA. (Why Fidelity allows this, I'm not sure, but I can see how it causes confusion.)
Spock, nothing that you are posting from Fidelity's website suggests that they're trying to deceive customers about the protection afforded by their CMA. I'm a happy customer of both Fidelity and Schwab and would be hard-pressed to recommend one over the other. People who are being adversely affected by this are looking for alternatives and facts. One bad apple (Robinhood) doesn't spoil the whole bunch.