Brook2
Recycles dryer sheets
Ok I know this forum tends to slip up and be snarky- but be nice because I’m a beginner at CDs and have questions I can't find answers to on searches. I'm also ER, so I think it's better to ask here than other forums.
I'm trying to understand (beyond a surface level) the concept of brokered CD’s.
When I buy a brokered CD from Vanguard, my understanding is that a bank sold Vanguard a bunch of their CDs as a package, and VG is distributing them out for us to buy.
But once VG sells us an individual CD from a bank, why isn’t our primary relationship with the bank, and not Vanguard ?
Goofy analogy/example, when you buy a used car from a guy, the ownership is turned over to you. Therefore you can get it worked on at any garage or resell it if you want. You don’t have to go back to the guy you bought it from (Vanguard) to make the arrangements.
Why doesn’t the bank pay us directly? Are they paying Vanguard first and then Vanguard pays us? Does the bank just send VG a fat check and they have to figure out who gets what and when (like a bookkeeper)?That doesn’t feel like you actually bought a CD from a bank. It feels like you bought the guy AND the car together.
My understanding is you can't go the bank you bought it from through VG and ask them about your specific CD you bought - nor can you make arrangements with the bank to extend it or return it early. Perhaps they don't even have any record with your name on file.
I'm not asking for personal financial advice of what to do, or the best way to invest in cds- I'm just trying to understand the structure of how things work with brokered Cds.
With mutual funds, I understand why VG is the middle man because they are buying a ton of funds and mixing a soup together, but when it comes to an individual CD (car), I don't understand why I have to go back to the guy (VG) if I want to make my own arrangements/communication with the bank (mechanic) directly.
I'm trying to understand (beyond a surface level) the concept of brokered CD’s.
When I buy a brokered CD from Vanguard, my understanding is that a bank sold Vanguard a bunch of their CDs as a package, and VG is distributing them out for us to buy.
But once VG sells us an individual CD from a bank, why isn’t our primary relationship with the bank, and not Vanguard ?
Goofy analogy/example, when you buy a used car from a guy, the ownership is turned over to you. Therefore you can get it worked on at any garage or resell it if you want. You don’t have to go back to the guy you bought it from (Vanguard) to make the arrangements.
Why doesn’t the bank pay us directly? Are they paying Vanguard first and then Vanguard pays us? Does the bank just send VG a fat check and they have to figure out who gets what and when (like a bookkeeper)?That doesn’t feel like you actually bought a CD from a bank. It feels like you bought the guy AND the car together.
My understanding is you can't go the bank you bought it from through VG and ask them about your specific CD you bought - nor can you make arrangements with the bank to extend it or return it early. Perhaps they don't even have any record with your name on file.
I'm not asking for personal financial advice of what to do, or the best way to invest in cds- I'm just trying to understand the structure of how things work with brokered Cds.
With mutual funds, I understand why VG is the middle man because they are buying a ton of funds and mixing a soup together, but when it comes to an individual CD (car), I don't understand why I have to go back to the guy (VG) if I want to make my own arrangements/communication with the bank (mechanic) directly.
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