Bogleheads

[indexfundfan]

Just read this on FWF. Wells Fargo brokerage is changing the cash sweep option.

https://www.wellsfargo.com/investing/cashsweep/

Bottomline: the return in uninvested cash drops.
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[stratton]

[Blackhawkzone]

big deal...dont keep any cash there if possible. reinvest dividends and ach cash to/from the brokerage acct.

[stebul]

And the bait and switch begins ..... Sorry to be skeptical but this is why I didn't rush to convert my funds to ETFs then transfer to Wells Fargo. There is no free lunch.

[alexander]

You can also use a 3rd party bank for cash balances, so if you have a high-yield checking account (like USAA asset management brokerage), they'll just ACH funds to/from it as necessary. You can use those funds for settlement too.

[Blackhawkzone]

[paulob]

I moved assets from Fidelity to open my WF account.

I have made 14 fund trades which could have cost me $975 at FIDO (I sold a FIDO fund which would have been NTF there as well). Actually, it would have cost less than that at FIDO as two funds were not available for purchase, one was closed to new investors and a third I could not meet FIDO's minimum.

I also made 8 stock/ETF trades that would have cost $87.60 at FIDO.

My cash balance is $5.70 today. The month-end balances from the last two months was $106.18 and $5.24. The annual lost interest on invested cash with a lower rate is recouped in one fund trade and possibly one stock trade.

I suggest that you run your own numbers to determine if there are savings to be achieved. So far I have saved $1,062.60 over FIDO's commission rate.
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Paul

[livesoft]

Shouldn't be a problem for most of us.

First, we should not be traders, so we shouldn't have much cash in the cash-sweep account to begin with.

Second, our non-cash balances should be high enough to still get high rates.

Third, one can buy a money market fund with the cash in the cash-sweep account for no fee. It's not sweep since it is done manually. I do this with my TDAmeritrade account to get higher interest rate than the sweep account which I keep at $0.

Fourth, ACH transfer to Vanguard Prime MM fund is trivial.

But even if WF goes back to the $2.95 trades that they had when we opened the account more than a year ago, that's still less expensive than anything out there. Also the checking account is one of the best out there as well.

[paulob]

[oneleaf]

What was the yield before?

[livesoft]

[livesoft]

[sterjs]

How does BIL (SPDR Lehman 1-3 Month T-Bill ETF) compare to money market funds?

[MossySF]

Pretty much all the discount brokerage firms end up paying nothing for sweep cash. I remember when I first started with e-trade, they swept to money markets paying ok rates. Then after 6 months, they switched my account to something that paid out about 0.5% or so. Went from getting $15 of interest to $1.50.

Learned my lesson then. Now I buy stuff to keep my spare cash earning interest. With E-Trade, I bought an ultra-short term bond fund that was available under their NTF program. With WF, I buy BIL to do the same.

[Blackhawkzone]

[stebul]

[SoonerSunDevil]

Simply use a third party bank for your "extra" cash. Every dollar that I have in my investment accounts is invested in something, be it mutual funds, ETFs, etc. I don't keep cash in a brokerage account and neither should most people.

I keep a very low balance in my checking account and manually "sweep" the rest to GMAC bank, which has a 5.30% APR and free check writing.

John

[Blackhawkzone]

[prius04]

[oneleaf]

[livesoft]

[prius04]

[pointyhairedboss]

[stebul]

[oneleaf]

[MossySF]

[DaveTH]

Another possibility is to use the Schwab YieldPlus (SWYPX) fund for cash reserves. It's an ultra-short bond fund that is available as NTF so you won't need to waste any of your 100 free trades. The current 30-day SEC yield is 5.39%

Dave

[stratton]

[livesoft]

[DaveTH]

Ticker symbol BIL displays as "invalid" when I tried to execute a trade. So that is not an option at this time.

[indexfundfan]

[livesoft]

I looked at BIL through Level II quote today. There were no bids and no asks other than program traders. The bid/ask spread was 1 cent when I looked and 2900 shares had exchanged hands. Because of trading volume (i.e. liquidity) I would not use this ETF for the extra $10 it might give me. The settlement would be T+3 as well, while with a money market mutualf fund it would be T+1.

Bottom line: not worth it to me.

[Wellesley]

who've suggested that WF has unfortunately changed the rules of the game shortly after a major attempt to procure new accounts. Their money money change does not simply reflect the normal ups and downs of interest rates: this is a different ball game altogether.

Some posters have advanced alternatives which might shore up the yield on uninvested funds, and indeed ETFs and short-term bond funds can be purchased which may be a somewhat practical answer for various individuals. But the suggestion by several posters regarding the purchase of 'outside' money market funds (e.g., VMMXX) for taxable or tax-advantaged brokerage accounts, while a great idea, is not in my estimation possible. I simply believe such a trade cannot be effected.

Regards,

Harry

[livesoft]

[prius04]

Not sure but I think Wellesley means you can't place an order to buy VMMXX directly via WellsTrade; you would need to transfer funds to VG first.

I know ET, for example, offers dozens of VG funds but VMMXX isn't one of them.

[livesoft]

[indexfundfan]

I haven't tried this but under the "Alternatives to Sweep Features" section from the link in the first post, it states:

Invest cash balances in a position-traded money market mutual fund. Should you decide to do this, please note the following:

* Cash balances in your account will not be swept automatically into the fund you select
* Shares will not be automatically redeemed to cover settlement activity or debit balances in your account
* You must instruct Wells Fargo Investments to make each investment in or withdrawal from the fund, or the uninvested cash balances in your brokerage account will be swept into the Wells Fargo Cash Sweep
* Most money market mutual funds can be purchased and sold without a transaction fee; however, a minimum purchase amount and an ongoing balance requirement may apply
* Money market mutual funds settle the next business day or later

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[Wellesley]

on how to purchase VMMXX with cash sitting in an IRA at WF, for instance.

Regards,

Harry

[livesoft]

[DaveTH]

I just added some new money to my Wells Fargo brokerage account today and it automatically got added to my Treasury Plus money market account rather than the sweep account. Did I just get lucky or is the new process not in place yet?

Dave

[indexfundfan]

[DaveTH]

[livesoft]

[Xephen]

For the tax free sweep option, their policy says that you get to keep it if you signed up before the change.

[660ky612]

How about switching to BOA Investment Inc. ? (Minimum USD 25,000 asset to qualify) Visit
bankofamericaDOTcom_investing_indexDOTcfm (I am not yet qualified to post link!)
30 free trades per month! High-Yield CD at 5.1% APY!

660ky612 from Hong Kong

[660ky612]

[BuddyHall]

I bought VMSXX tax-exempt MM fund directly through my Wellstrade account this past February '07. 7-day tax-exempt yield is currenntly 3.62% according to Yahoo Finance. Equivalent taxable yield is 5.40%

Based on this trade, I would expect I could choose purchase the taxable equivalent MMF (VMMXX) if i wished.

There was no fee to purchase VMSXX through Wellstrade.

[livesoft]

I will make a PREDICTION: In the future, WF will not include mutual fund trades in the "free trade" deal. You will still get NTF funds for no commish, but I see them charging for transaction fee funds in the future. Or raising their minimum for that back to $250,000.

[Bounca]

I would make similar predictions (annual fees, etc.). I think as they expand, they will not be able to keep this amazing deal long term. Firstrade did it, WF likely will follow suit.

I debated with myself the WF deal in reading all the threads. I looked at other brokers too. In the end I moved my old 401k straight to Fidelity. It was managed through Fido anyway from my previous employer so over the phone and online the process took 3 business days. They liquidated some funds that were not Fido and swept it to Fidelity’s cash reserves MM fund. That's the default sweep. They also did a risk assessment and retirement goal questionnaire over the phone and sent a personalized mutual fund portfolio recommendation. I don’t believe I will go with their recommendations, but it was nice that they did that. The whole operation with the two gentlemen over the phone was a seamless transition.

Just an FYI , there is a deal with Fidelity where if you move an account over you get 6 months/60 commission free trades. After that I’ll be paying $10.95. $11 a trade is not free, I realize that, but it will be for occasional rebalancing only.

[pointyhairedboss]

I agree this current free lunch deal will end, but it won't be anytime soon and it the resultant change will likely be competitive.

- The promotion just started earlier this year.

- The promotion you offer attract customers attracted to that type. If you change the promotion to an uncompetitive offer, you'll simply chase your customers away. ETrade, to my surprise, is still honoring the old Brownco $5 fund pricing. Firstrade, a company that reversed their free fund trade promotion, is still only charging $10 per fund trade.

Fidelity brokerage service is expensive. I don't know how they attract such loyal customers. The $11 trade is only for stocks. Non NTF fund purchases cost $75. Yikes! Even if Wells Trade ends their deal, I doubt the fee will reach $20 let alone $75.