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Should You Divide Your Assets Among Multiple Brokerages?

Saturday, March 16, 2013 - 7:35 AM
From the WSJ
New research by a leading investment lawyer questions whether assets held in custody are 100% secure if a bank goes bust, and other doubts about custody are cropping up. But by taking a few simple steps, you should be able keep your money safe.

Read more (may need to use Google News to view - search for "steer clear")
4
Ken TuminKen Tumin5,442 posts since
Nov 29, 2009
Rep Points: 123,754
1. Saturday, March 16, 2013 - 7:54 AM
I don't need to read the article because common sense told me what to do years ago.  I was just asked this week why I don't just combine all my DP's IRAs with one brokerage by another one which wants all the business.  First of all, I wanted the security that if anything happened to one of them, I had another to fall back on.  Secondly, since I only use CDs in his IRAs, I get a better choice by having two brokerages to select from.  Recently one did not have the CD I wanted but the other did so I was able to get what I needed.  It is not always a matter of getting a higher rate ( since neither has a good rate at this time) but making sure I don't overdo on certain CDs from the same bank for insurance purposes.  With brokerages, one must monitor their own CDs since they don't do this for the customer. 

I find there are many reasons to have two brokerages but I would not want to and do not have more than two.  I would be curious as to what reasons the WSJ gives for or against this issue but I can't access the article.
4
paoli2paoli21,149 posts since
Aug 10, 2011
Rep Points: 5,128
2. Saturday, March 16, 2013 - 12:22 PM
Dear Mr Tumin,

I too cannot access the article, but the reason to have multiple brokerages is rather practical - what does the broker offer to the trader?  Different brokerages have different strengths and weaknesses, so a single trader may prefer one broker for a type of securities and another for a different types of securities.

e.g.

1) E*Trade does not allow access to any new issue Structured Notes/CD. Obviously for someone wanting these, E*Trade is not an acceptable choice.

2) Trading Platform offered by Vanguard is somewhat antiquated, so for a savvy trader Vanguard might not be a good choice.

3) Vanguard and Interactive Brokers do not "adjust" open limit orders on ex-dividend dates!  This might be a major drawback for a trader who is trading regularly the dividend paying securities.

4) Recently Fidelity implemented a short-term trading fees (effective after July 31, 2013) for their "Commission-Free" ETFs, so for the trader who performs trading within days/weeks this might be a drawback.

5) Shwab allows open limit orders to be effective only for 60 days.  A shortcoming for a trader who is interested in having a longer term plan as far as his/her open orders are concerned.

... I can go on and point out some of the strengths of brokers, ... but these example of drawbacks should be sufficient to make the point that even before we consider scenario of the brokerage going-under, there perhaps is plenty to consider in terms of what exactly the trader wants from the broker. 

So ... a trader might decide that for his/her Stock trading ABC is the preferred broker, for his/her ETF trading BCD is the preferred broker, for his/her Annuity trading CDE is the the preferred broker, for his/her Mutual Fund trading DEF is the the preferred broker, and so on ...


Yours Truly,
- Anonymous
1
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
3. Saturday, March 16, 2013 - 8:37 PM
1
ShorebreakShorebreak2,381 posts since
Apr 6, 2010
Rep Points: 12,717
4. Sunday, March 17, 2013 - 8:19 AM
Shorebreak:  I don't know about others but I can't get to the info from your link.  It shows a photo about it on the page but says you have to be a subscriber to read.  It won't even open up the "preview" for me.  Too bad.  I would have liked to read it.  Maybe you can give us a synopsis of what it reports.
1
paoli2paoli21,149 posts since
Aug 10, 2011
Rep Points: 5,128
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