Fidelity as one stop shop for life?

[Lewis Clark]

Based in what you wrote, even when you have two financial institutions where you have your money, they would both be frozen too.

Perhaps. But not all of my financial institutions took action to lock my accounts based on this SSA error.

In my situation each financial institution acted in one of these ways:

a) locked my account(s) immediately
b) called another joint owner to verify the information
c) took no action at all, probably because there was no death certificate
d) stop my pension payments and medical insurance

The only one that called a joint owner was Morgan Stanley. And it wasn't even my account. I was a joint owner on my mother's account ... and they were smart enough to call my brother (the other joint owner) rather than my mother. Kudos to that person.

While most of my financial institutions took no action that time, who knows how they would respond if there was a next time? We have reduced the number of financial institutions we work with, with a goal of simplification, but we won't ever go down to just one.

I am more comfortable knowing that a single clerical error is less likely to both lock up all of my funds AND cut off all of my income at the same time.

 

[Lewis Clark]

But if you were on the deceased list, would that not affect all your accounts? So multiple accounts would not have solved the issue.

In my case, multiple accounts did minimize the impacts because not all financial institutions responded to the mistake in the same way. See Post # 101.

 

[COcheesehead]

Even with stories like this, do you need access to all your money at once? A local checking and a credit card makes these all very survivable.

 

[Lewis Clark]

Even with stories like this, do you need access to all your money at once? A local checking and a credit card makes these all very survivable.

I completely agree that few of us need access to all of our funds at once. But if all of my funds had been in one place, and that one place had locked my accounts due to a clerical error, then I would have had no access to any funds at all while at the same time all of my income had been shut off.

We survived that experience (without help from others) entirely because we had funds in more than one place and not all places were affected.

Most credit card companies would be unhappy if a cardholder failed to make at least the minimum payment for three or four months in a row. Our two card issuers were some of the institutions that struggled to fix the problem even after they told us the problem was fixed.

A local checking account, in addition to a brokerage firm, would mean funds are in more than one place. And our local checking account was one of the affected accounts that was locked up for a time.

This is one of those situations where the likelihood of occurrence is low, but the impact is potentially very high.

If some folks are happy with all their eggs in one basket, that's up to them to make that call. I won't try to talk them out of it. But every action has some risk, even if the risk is low. Having lived through it once I'm willing ... no, eager ... to take simple steps to minimize the likelihood of severe impacts if it happens again.

As for possibly missing out on some account benefits because my account is not large enough, this is a situation where I am more than happy to Blow That Dough.

To each their own. : )

 

[RetiredHappy]

Our BOA pays the bills and have $50K to $100K with them all the time. Most of our cc charges are on the BOA cc because we get good cash back (will change next April and we will reduce our money and charges there with their new tier system). Our Fidelity has most of our money and we transfer from Fidelity to BOA every couple of months or so to top it up. I don't see the need to have other accounts beyond these two.

 

[COcheesehead]

I would think as we age we’d have a greater chance of letting something fall through the cracks, managing beneficiaries, taxes, etc between multiple brokerages - self inflected wounds, rather than an obscure event.

 

[audreyh1]

I don’t understand joint accounts being locked when there is a surviving owner.

When DF died, the SSA didn’t notify anyone. I notified the financial institutions and provided death certificates. For his checking account where DB and I were both listed as joint with rights of survivorship, it was completely seamless. They switched to my SS# and I continued to use it to manage the estate.

 

[Lewis Clark]

I would think as we age we’d have a greater chance of letting something fall through the cracks, managing beneficiaries, taxes, etc between multiple brokerages - self inflected wounds, rather than an obscure event.

This is no doubt true, and I have been simplifying our portfolio as a result.

Call it PTSD from four months of financial hell, but there is a limit on how simple I want to go.

 

[Lewis Clark]

I don’t understand joint accounts being locked when there is a surviving owner.

When DF died, the SSA didn’t notify anyone. I notified the financial institutions and provided death certificates. For his checking account where DB and I were both listed as joint with rights of survivorship, it was completely seamless. They switched to my SS# and I continued to use it to manage the estate.

I don't understand it, but I experienced it.

 

[flyoverstate]

Fidelity has a LOT of coverage on their accounts. They carry excess SIPC coverage for $1 Billion per investor, plus $1.9 Million of cash awaiting investment according to Financial Security: Account Protection | Why Fidelity

LMAO. If Fidelity went under, SIPC would as well.

 

[PaulR888]

Hello F.I.R.E Team.

Hello. I have my pre tax 401k and Roth in plan conversion, Roth IRA, ESPP, BrokerageLink (currently, no investments) at Fidelity.

What I gathered so far is the best strategy is to convert VTSAX to VTI at Vanguard (Vanguard online account has this option). This will guarantee I will NOT get a tax event/fees correct? After this, create a taxable account at Fidelity and do an in-kind transfer from VTI Vanguard to taxable Fidelity account and then keep buying VTI (Again, with no taxable/fees event)?

I also read that it is not a good idea to buy a zero cost fund like FZROX in a taxable account and buying VTI ETF is the most tax efficient compared to FSKAX in a taxable account?

Do you think it’s a good strategy to have all my accounts at Fidelity for life?

What do you all experts advice me to do?

Hard to say. It depends how your needs change over time. I was with Fidelity for a long time. But as I began thinking about updating my living trust, a local estate planning attorney introduced me to the concept of a "corporate successor trustee". I interviewed several options and Fidelity was one of them. I did not like how they would handle my investments. Someone on the east coast would sell everything and reinvest how he wanted. I also interviewed other options and decided to go with BofA as my successor trustee and Merrill, their wholly owned subsidiary, to help manage my investments. So while Fidelity was fine earlier and I had no qualms about being all-in with Fidelity at the time, when my needs changed I decided to move on and now I am all-in with BoA/ Merrill. I could not be happier. I have a greal Merrill FA Team and a great BofA Trust Team. I feel I am in good hands and my niece, my sole beneficiary, should have an easy time with any inheritance.

 

[Montecfo]

First, I would not pick a brokerage "for life". I would pick one for now.

Rather than asking us, Barrons and Kiplinger each do annual rankings of borkerages. Seek those articles. I think they are not paywalled. They evaluate them on various criteria so you can choose based on your individual needs. IBD and Fatwallet have done them also.

Fidelity is typically one of the top overall, along with Schwab and E*Trade.

Vanguard does not participate.I think their brokerage is well behind the top ones in n many measures.

As far as concentration risk, you need a plan if something happens and you can't access your brokerage. That could include using more than one brokerage, having a standalone bank account, maintaining a standby HELOC, etc.

I personally do all of these.

 

[F.I.R.E User]

I have everything at Fidelity except my checking account which is at WF and have local branches here too.

HYSA at Vio Bank.

Update: Converted VTSAX to VTI at Vanguard (no tax event). Vanguard did not charge a fee. Fidelity did not either but they said they can waive it for me if I see it and request it.

Opened a single individual account which is taxable at Fidelity and the system asked for Vanguard act # to pull it so that is in progress now.

Once VTI transfers to Fidelity, should I keep buying VTI or buy their fund like FSKAK?

The comparison ER is not a big difference but what about taxes?

 

[Dtail]

Our BOA pays the bills and have $50K to $100K with them all the time. Most of our cc charges are on the BOA cc because we get good cash back (will change next April and we will reduce our money and charges there with their new tier system). Our Fidelity has most of our money and we transfer from Fidelity to BOA every couple of months or so to top it up. I don't see the need to have other accounts beyond these two.

As an aside even with the switching to lower rewards next year, if you keep 100k there then the rewards would still be greater than the typical 2% given by some competitors.

 

[RetiredHappy]

As an aside even with the switching to lower rewards next year, if you keep 100k there then the rewards would still be greater than the typical 2% given by some competitors.

It makes sense if the interest rate environment is low. It is a matter of how much the $70k would make in interest in a brokerage vs. The amount of cash back that we get. I will need to do a back of the napkin calculation next April.

 

[Dtail]

It makes sense if the interest rate environment is low. It is a matter of how much the $70k would make in interest in a brokerage vs. The amount of cash back that we get. I will need to do a back of the napkin calculation next April.

Understood. From my standpoint, I am using a 100k CD at Merrill to still make it work.

 

[F.I.R.E User]

Transfer is complete.

 

[F.I.R.E User]

Update: Fidelity did not transfer fractional share so Vanguard auto sold it and it’s in cash now. Fidelity says they will pull it on Friday which is tomorrow. I wonder why Fidelity doesn’t pull fractional shares? Also the gains were like $5 so I have pay taxes but it’s probably zero right or few cents right?

Also, Vanguard charged $100 fee as well. Fidelity did reimburse me that amount.

 

[pb4uski]

The risk of the firm going down isn't the concern. The risk is the account(s) getting hacked or Fidelity (or any other broker) getting hacked or having an incident (e.g. a persistent DDoS attack) where you are unable to access your funds for some period of time. I believe in having SOME (even 10%) of my funds in other institutions so that access to funds isn't completely cut off. In our case we have our investments split between Schwab (most) and another firm and have about 12 months of living expenses split between 2 banks (mostly in relatively high yielding savings accounts and short-term CDs). That's as complicated as I want it at my age.

I realize the probability of an adverse event where access to funds would be cut off for any period of time is very small. But it isn't zero. YMMV.

+1 but most at Schwab and an emergency HYSA at Discover Bank.

 

[pb4uski]

....Lehman bros anyone?

You don't know what you are talking about.

Lehman Bros brokerage account clients didn't lose any money. Investors in bonds, stock and structured notes issued by Lehman Bros did have massive losses.

 

[pb4uski]

I could have named many companies gone bankrupt or gov't bailout or whatever. and you can, of course, tell me why they don't matter. I can only point to the risk you decide to take and you obviously inisit there is no risk in any given company, loss of money for a period of time or it is post insured. So we disagree, although I agree it hasn't happened specifically to the folks we are dealng with...until it does. No brokerage yet has dealt with quantum encryption, Great Depression or more. You can prove it hasn;t happened, and I can prove it isnt prudent to believe it wont. Good luck to all!

Quite the word salad there. Have you ever considered politics?

 

[PaunchyPirate]

Update: Fidelity did not transfer fractional share so Vanguard auto sold it and it’s in cash now. Fidelity says they will pull it on Friday which is tomorrow. I wonder why Fidelity doesn’t pull fractional shares? Also the gains were like $5 so I have pay taxes but it’s probably zero right or few cents right?

Also, Vanguard charged $100 fee as well. Fidelity did reimburse me that amount.

Fractional shares are never transferred between brokers when this type of transfer is done. The system all the brokers use is called ACATS and it doesn't support fractional shares. It's not a Fidelity or Vanguard issue. That's just the way it's done. Fidelity will indeed sweep the cash over at some point. Hopefully Friday like they told you. But if they don't do it Friday, don't worry. It will sweep over at some point in the near future (days, not weeks).

Another common situation is that it is possible that a dividend or interest could still get paid to the Vanguard account if it was a dividend that was declared payable while you still owned the investment at Vanguard. Don't worry if this happens. It will also sweep over within a few days to a week after it is paid. Most brokers will sweep multiple times over a month or longer to ensure that all holding are pulled over. Just check your old account for a while to look for any last minute money that shows up in it.

Yes, your $5 capital gains will be taxable income to you.

 

[F.I.R.E User]

Fractional shares are never transferred between brokers when this type of transfer is done. The system all the brokers use is called ACATS and it doesn't support fractional shares. It's not a Fidelity or Vanguard issue. That's just the way it's done. Fidelity will indeed sweep the cash over at some point. Hopefully Friday like they told you. But if they don't do it Friday, don't worry. It will sweep over at some point in the near future (days, not weeks).

Another common situation is that it is possible that a dividend or interest could still get paid to the Vanguard account if it was a dividend that was declared payable while you still owned the investment at Vanguard. Don't worry if this happens. It will also sweep over within a few days to a week after it is paid. Most brokers will sweep multiple times over a month or longer to ensure that all holding are pulled over. Just check your old account for a while to look for any last minute money that shows up in it.

Yes, your $5 capital gains will be taxable income to you.

Indeed it was done last Friday. So it’s in cash now. Not sure if Fidelity will auto buy VTI or I will have to do it?

 

[PaunchyPirate]

Indeed it was done last Friday. So it’s in cash now. Not sure if Fidelity will auto buy VTI or I will have to do it?

You will need to buy whatever investment you want from these cash dribbles that come in. Or do whatever you want with it. At this point, Fidelity does not know it was originally a fractional share of something. It's just cash.

 

[F.I.R.E User]

You will need to buy whatever investment you want from these cash dribbles that come in. Or do whatever you want with it. At this point, Fidelity does not know it was originally a fractional share of something. It's just cash.

Thanks.