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Brokerage - Dead Money

bobert456
  |     |   187 posts since 2022

I hate to go against the grain of all the political stuff, but this has to do with keeping your money working for you.

At the brokerages, there is the CASH balance, and the potential for a money sweep. By that, I mean at Fidelity, when I sell something or have CD interest paid to the account, those funds go into CASH. It then gets sweep automatically into my designated cash sweep product, something like a MMF. I usually use FDRXX which currently pays just under 5%.

My account at TD Ameritrade just got moved into Schwab. Schwab does not allow for MMF product for a cash sweep. As a result, all money that settles into the account gets (basically) zero interest, until I manually move it (purchase) SWVXX. This is a pain to stay on top of it.

SOOooooo - if you also have a Schwab account, please help and complain. If they do not fix this, my account will end up migrating out somewhere that allows for automatic sweeps into a liquid account that pays interest.

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txFish1
  |     |   479 posts since 2023
bobert456 By all means keep posting about finances/money as it is a breath of fresh air to see something other than all the Trump/Biden bashing.

I have had an account at Fidelity and Schwab and simply for the reason you mention above I just recently closed out my Schwab account. If I remember correctly the Schwab Cash account was earning somewhere around .5% and I found myself several times a month having to go in and buy the MMF. Last summer I went out of town for 10 days and had a large brokered CD come due at Schwab and it sat there earning next to nothing until I got back and moved it to the MMF. I dont know about you but I like to earn every penny I can on my fixed income investments. I talked to my assigned rep at my local branch about it but he did not seem to think it will change anytime in the near future. Yes the Fidelity Core account in my Brokerage account is SPAXX and is earning 4.98% last time I checked and starting later this month even the Fidelity Cash Management Account which has a FDIC insured sweep paying 2.72% is supposed to add another Core option (SPAXX) that will pay the current 4.98% 
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Marfa
  |     |   68 posts since 2022
Vanguard sweeps my interest automatically into my federal money market account. It’s at 5.26% and has been steady for months.
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me1004
  |     |   1,381 posts since 2010
MIne at Vanguard is swept to my alternate money market fund, the Cash Reserves Federal Money Market, which is gatting 5.29% 7-day SEC yield as of today. 

But I would not recommend Vanguard anymore. It is not the Vanguard that Bogle built, it now seems to be money grubbing, making for a big navigation to avoid more fees, the CSRs no longer seem to be very knowledgeable, they used to seem impressiveley knowledgeable. The Website is a terrible design, things that should be together are far apart, tabs away, too often functions do not work. 

They used to ACH money to my back account overnight, now it takes 2-3 days, actually three to arrive at my outside account, but not to worry, they make sure to take it out of my account immediately adn then wait a couple days to put it into the ACH. Oh,if you ahve enough with them, you can send by fedderala wire instead -- but with Vanguard, that takes as long as they take with the ACH, wiring it will not get it there same day! (And they tell me they don't do that, they blame the ACH -- that is 100% false -- I actualy found at their Website it saying that they absolutely do, dealy at least one day, but possibly two -- but in practice, I now never get it in less than three days, meaning they held it for two days as they say the might do, even if I put in the order in the morning. They used to send it to the ACH same day, it would always be in my credit union account the next morning. Now they alwasy wait two days, before putting it in the ACH -- they take the float, and deny that they delay at all).

Vanguard is now hostile and incompetent, unlike when Bogle was in charge. I would not recommend them.
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me1004
  |     |   1,381 posts since 2010
I see Allan Sloan has written an article pretty much going along with my complaints about Vanguard as it now is. He is complaining very much about various newer fees, pointing out this is not the the Vanguard everyone came to love, not the Vanguard that Bogle built, this is a greedy, grabbing vulture (my term) bleeding investors. He says he is closing his retirement account at Vanguard and moving it to Schwab:

https://finance.yahoo.com/news/unhappy-customer-why-i-finally-took-my-business-from-vanguard-to-charles-schwab-180758503.html
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111
  |     |   672 posts since 2019
My TD Ameritrade brokerage account was also converted to Schwab a few months ago. (I also have brokerage accounts with Fidelity and Vanguard for several years.) After it became Schwab I decided to keep the account since Schwab has a local office near me and the others don't. I figured there might be some circumstances where the ability to make an in-person deposit or withdrawal might come in handy.

Anyway, my Schwab and Fidelity settlement accounts work pretty much like the commenters above have mentioned. In my Vanguard account, an MMMF itself (VMFXX), is itself the default settlement fund. Vanguard also provides another option, a non-MMMF cash settlement fund that is FDIC-insured, and I think it pays something like 3.x or 4% where VMFXX pays 5.28%.

I also doubt Schwab will change, because the other two have had their better options for some time now, with no apparent effect on Schwab.

Of course with Schwab if you're away from home you could always log in with a laptop and move the funds to SWVXX. I don't know if they also provide a mobile (cellphone) app to do this. I always prefer to do financial transactions via either my desktop or laptop PC, because I know and trust the security more. Also, one time I was stuck with no PC so I called my Schwab guy and asked him to move funds from settlement cash fund to SWVXX, and he did so with no fees. I don't know if they all will do this on a no-fee basis or not.
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txFish1
  |     |   479 posts since 2023
111. I am like you I do all of my online banking from home. When I was gone last summer for 10 days we were on a small island a long ways from home so I just did not feel comfortable logging in at the hotel. One of my friends uses the Vanguard Cash+ that he told me is FDIC insured and I thought he said was paying 4.5% but not 100% sure
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Kirkland
  |     |   377 posts since 2014
Yes correct. At Vanguard, you can keep your brokered cd interest in a Vanguard Cash plus account (FDIC insured) currently paying around 4.5%, rather than the money market settlement fund, paying around 5.26%-5.28%.
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betaguy
  |     |   181 posts since 2022
Fidelity allows you to cancel a CD order prior to settlement (most of the time).
Vanguard doesn't have this option.
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Kirkland
  |     |   377 posts since 2014
Vanguard does allow you to cancel a CD order for a period of time, which could be days, depending on when you first placed the order. ( I have cancelled an accepted order) Vanguard shows your order as accepted until about 30 minutes prior to Vanguard "closing" the "order period". Vanguard closes the order period and executes your order, shortly before pulling the cd's.
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Kirkland
  |     |   377 posts since 2014
It is dead money if you are at Schwab brokerage. I did a partial transfer (no fees to do it) of a majority of my brokered cd's from Schwab to Vanguard. It is wonderful not having to worry about manually moving interest and auto earning at minimum 5.28% (settlement fund) the day the interest comes in, not days, or weekend later, not until after you get around to transferring it into a Schwab MMF with higher expense ratio fees/ and lower MMF interest rate than Vanguard. It's a no-brainer to hold brokered cd's at Vanguard. Schwab settlement fund is only paying you only .45% interest, Vanguard 5.28%. As far as brokered cd's available to purchase, Schwab has far more options, far more supply, far more choice of cd's available than Vanguard. Schwab also posts them earlier than Vanguard and keeps them later. Schwab's brokered cd website is far more user friendly and easy to navigate and you never get kicked off. Vanguard's pop up window and poor design and display of brokered cd's is pretty bad. Vanguard needs to hire some talent to fix their brokered cd's website.  I will continue to hold some brokered cd's at Schwab and I hold my stocks at Schwab. Unlike brokered cd's, stocks are marginable securities , and so I think it is about 60%, which allows me to have the option to purchase a brokered cd at Schwab without keeping any cash at Schwab. I just have to be sure to transfer the cash into Schwab the day before settlement (so I incur no margin interest fees). The few brokered cd's I left at Schwab, I transfer out all the cd interest to CIT savings account (FDIC insured) earning 4.88% compounded daily.
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MAKNYC
  |     |   324 posts since 2015
Schwab is even worse than you probably realize. And I say this, having my personal account there since 1986 and dealing with them institutionally as well. When they eliminated sweep funds for the last of us that were grandfathered (in 2018), their entire business model became predicated on the cheap funding of Schwab Bank. In addition to the extra work involved in monitoring and placing trades for purchased money funds, you are still being scammed. Schwabs money funds settle T+1. Even if you notice cash in your account and place a MMF trade, it won’t settle until the following business day. Hence Schwab gets use of the money for that period. By comparison Fidelity MMF, both purchased and sweep, settle same day (T+0), so no lost days. And here’s the kicker with Schwab…you will notice that many transactions (dividends, interest, reorgs) don’t post into your account until…..4:00-5:00p EST. You think that’s a coincidence? Div hits @ 4:10p, you notice it at 4:11p, you place trade for purchased MMF, but now it doesn’t get executed until following day. Viola….Schwab has use of that money for an extra day (or weekend) in addition to the T+1. A Treasury matures in your IRA (non margin account) their system won’t let you enter an order to purchase the MMF the day before because there is no cash or borrowing capability in the account. So most people will let the security mature….when the funds hit they can then enter the MMF purchase, but Schwab now gets use of the money for 1-4 days. You can call them up to place the trade the day prior to settlement, but it’s a time consuming process and not all reps will override their system.

And the most recent Schwab scam adjustment…..when you place a buy order, their system automatically deducts the notional value from your cash balance at that moment in time. That means your cash balance is wrong until settlement date. So you could actually have cash sitting there earning nothing but Schwab doesn’t disclose it to you. In a non-margin account, their system won’t allow you to purchase MMF even though the cash is sitting there until settlement date. For example….you have $5k in your IRA MMF. You place an order to buy $1000 worth of some stock….again, this is an order…not an execution. The following day you receive a $100 dividend into your account. It will not show up in your cash balance, and the system would not allow you to purchase the MMF with it. This is a Schwab specific process that they started about a year ago, and again I suspect it was intended to maximize cheap funds for Schwab.
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bobert456
  |     |   187 posts since 2022
It is up to YOU to manage your funds. And if you are retired with your nest egg generating your income, we are not talking insignificant amounts for the "time value of money" of idle cash.

Reminds me of a salesman at a financial seminar trying to sell his DIY stock picking system and complaining that brokers do not really manage your money ( an incentive for you to DIY and buy his system ) .... he asked the leading question to the audience:

"Who watches your money more intensively than you do ....?? "

- An older man in the front raised hand sheepishly to answer the question .......
- - "MY WIFE ?"
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chipcollector
  |     |   111 posts since 2010
They could care less. E*Trade does the same thing. With 5% prevailing interest rates this is a real money marker for these firms. Fidelity certainly has its faults but, to its credit, they post interest when it is due and they sweep cash into interest earning vehicles. E*Trade and Schwab make money off NOT sweeping cash and by DELAYING the posting of interest and dividends. Complaining will do you no good
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John19
  |     |   397 posts since 2022
When I buy ETF on Schwab with $0 funds and just put in a transfer the same day from Bread Financial it clears and never charges me margin. But I guess I lose a day of interest from Bread? Try getting MMF off Wells Fargo lol it takes like three days.
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samiam_68
  |     |   5 posts since 2023
I've been a Schwab customer for decades and have been complaining for years about lack of automatic sweep funds. Seems to be falling on deaf ears. I do periodically pester them about matching account bonuses at other institutions before moving large amounts into my accounts, and they frequently match those bonuses and throw some cash my way.

I also have accounts with Fidelity, and the 4.95% auto sweep is nice, but they never match any bonuses. So, a couple of days interest here and there vs a few hundred dollars in bonuses here and there, Seems to even out for me.

I do have to say, Fidelity website and app are absolute disasters whereas Schwab online portals are far superior in every way.

So, as they say, po-TAY-to - po-TAH-to, chose what you think is best for you, or chose several and actively move things around to maximize earnings.
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111
  |     |   672 posts since 2019
And, speaking of Schwab (from today, 6/11/24) - 
- https://content.schwab.com/Service/nologin.html
- https://www.thinkadvisor.com/2024/06/11/schwab-customers-face-login-problems/

Seems to have been going on for much of the day! I know I can't get on.
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