Brokered CDs - Different brokers?

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dm200
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Brokered CDs - Different brokers?

Post by dm200 » Mon Mar 21, 2016 10:45 am

I manage (part time) an organization that currently has a lot in Vanguard Brokered CDs. This works very well for us in many respects.

Within the "Brokered CD" (FDIC Insured) world, it is my understanding and belief that the CDs available from Vanguard are the same (or nearly the same) terms, rates, Banks, etc. as from other brokers (such as Fidelity, for example). For those who have knowledge or experience of brokered CDs from other brokers, am I correct?

The reason I am asking this is that another person in the organization (who has ZERO knowledge about any of this) thinks that, several times a year, I should do some kind of extensive "analysis" of other brokers, etc. [Note that he does not want to do any work, just give me a bunch of work to do that I think is a complete waste of time!]

skepticalobserver
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Re: Brokered CDs - Different brokers?

Post by skepticalobserver » Mon Mar 21, 2016 1:20 pm

If you check Fidelity, Schwab and Vanguard you'll see the same banks, rates, etc offered on their new issue CD inventories. Today I was speaking with a TD rep who used to work at Goldman wholesaling CDs to various brokers, confirming that every broker gets pretty much the same product. I suppose each broker can "price" individual issues differently ( reflecting different rates), but the differences would be marginal.

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dm200
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Re: Brokered CDs - Different brokers?

Post by dm200 » Mon Mar 21, 2016 1:35 pm

skepticalobserver wrote:If you check Fidelity, Schwab and Vanguard you'll see the same banks, rates, etc offered on their new issue CD inventories. Today I was speaking with a TD rep who used to work at Goldman wholesaling CDs to various brokers, confirming that every broker gets pretty much the same product. I suppose each broker can "price" individual issues differently ( reflecting different rates), but the differences would be marginal.
Thanks. That is my belief, but we have this "troublemaker" that seems to just want to make my life more difficult about something he knows squat about - and is unwilling to do any research.

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Kevin M
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Re: Brokered CDs - Different brokers?

Post by Kevin M » Mon Mar 21, 2016 2:00 pm

When I have checked in the past, Vanguard sometimes has had slightly better CD deals than Fidelity. It's easy enough to do a spot check now and then to see. I'll check now ...

Just looking at their overview pages (new issue only) I see the same 1.80% rate for a 5-year CD, and for a 10-year CD I see a slightly higher rate of 2.40% at Fidelity vs. the 2.35% rate at Vanguard. I also see the exact same rates for 2-year and 3-year CDs. So as of now, essentially the same rates for new issue CDs.

With a quick check of secondary 5-year CDs, I also see comparable rates. Does your policy allow purchase of secondary CDs, and if so, at a premium (i.e., partially not FDIC insured)? As other forum members have shared, better deals sometimes are available in the secondary market, but of course this requires more time, quantities are often limited, you might have to pay a premium (non-insured), etc.

I used to buy lots of individual bonds and brokered CDs at Schwab, and worked directly with one broker who would call me when a deal came along that he thought I'd be interested in. If you are open to secondary markets and do enough volume, it's possible that you could offload some of the searching to a broker. It's been a long time since I did this though.

Of course where you now (and often) can get better CD rates is directly at banks and credit unions, but I believe you've already explained in other posts why this is not a feasible option for your particular situation.

I think if I were in your situation I'd consider showing the troublemaker the CD rate overviews at two or three brokers, and perhaps suggest that he or she do a bit of research him/herself to help you determine if there is a broker that consistently offers better rates. Of course there also is a tradeoff between the the value of the additional time you could invest in this and the slightly higher rates you might be able to find somewhere else. I doubt the differences are going to be large enough to make it worth the extra time you'd have to invest.

Kevin
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Wagnerjb
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Re: Brokered CDs - Different brokers?

Post by Wagnerjb » Mon Mar 21, 2016 3:07 pm

I have accounts at both Vanguard and Fidelity and last summer I invested a fair amount into brokered CDs, some through Vanguard and some through Fidelity. As I was investing the funds (over about a month), I was watching both Fidelity and Vanguard websites for the brokered CDs. I would often find the same instrument on both sites, with essentially identical pricing.

Best wishes.
Andy

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Re: Brokered CDs - Different brokers?

Post by Longdog » Mon Mar 21, 2016 3:37 pm

It's pretty much the same inventory at the same rates across all discount brokers. There are a small number of bond trading platforms that many brokers subscribe to, and you'll see the same fixed income investments (CDs, corporate bonds, municipal bonds) across the various brokers. Brokers who specialize in fixed income securities might very well have their own unique offerings.
Steve

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Re: Brokered CDs - Different brokers?

Post by jimkinny » Tue Mar 22, 2016 7:53 am

I am no expert having used only Vanguard brokerage to buy CDs. I guess I just assumed that competitive pressures and Vanguard's ownership structure were safeguards enough. I do spend a few minutes checking out direct CD rates, but that is just a going through the motion.

I would verify that whatever broker you use, that the CDs you buy are FDIC insured.

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Re: Brokered CDs - Different brokers?

Post by Kevin M » Tue Mar 22, 2016 4:46 pm

jimkinny wrote: I would verify that whatever broker you use, that the CDs you buy are FDIC insured.
I have never seen a non-FDIC-insured CD sold by a broker. Would be interested to hear if anyone else has.

Kevin
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stlutz
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Re: Brokered CDs - Different brokers?

Post by stlutz » Tue Mar 22, 2016 7:54 pm

You can just register at Fidelity (no need to open an account) and compare their offerings vs. Vanguard at any time.

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Re: Brokered CDs - Different brokers?

Post by Geologist » Tue Mar 22, 2016 8:02 pm

Longdog wrote:It's pretty much the same inventory at the same rates across all discount brokers. There are a small number of bond trading platforms that many brokers subscribe to, and you'll see the same fixed income investments (CDs, corporate bonds, municipal bonds) across the various brokers. Brokers who specialize in fixed income securities might very well have their own unique offerings.
I had the impression that Vanguard used Bonddesk (or whatever this platform is called these days), so the offerings at Vanguard would match those of whoever else uses Bonddesk.

Therefore, I basically agree with Longdog.

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Re: Brokered CDs - Different brokers?

Post by junesen » Sat Jan 20, 2018 12:59 pm

I have been researching this lately and I've come to the conclusion that Fidelity is the place to buy brokered CDs. I only have access to Vanguard, Fidelity, and TD Ameritrade so there might be some better brokers out there.

The reason I am thinking Fidelity is:
1. They have the lowest fee ($1). Vanguard is $2 unless you have $500,000 invested in Vanguard. TD Ameritrade builds their fee into the price of the secondary broker CDs and the couple I have sampled amount to about $10.
2. They have the best inventory of secondary issues. This is mostly anecdotal evidence, but I just did a search of CDs at Vanguard and Fidelity for issues maturing in 2023 with 2.6 YTM or better. I found 96 issues at Fidelity, and only 8 at Vanguard. The best YTM at Vanguard is 2.708, I see 20 issues at Fidelity that is better than 2.708, the best being 2.798.

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Re: Brokered CDs - Different brokers?

Post by dm200 » Sat Jan 20, 2018 2:12 pm

Kevin M wrote:
Tue Mar 22, 2016 4:46 pm
jimkinny wrote: I would verify that whatever broker you use, that the CDs you buy are FDIC insured.
I have never seen a non-FDIC-insured CD sold by a broker. Would be interested to hear if anyone else has.
Kevin
No, I have never seen offerings at Vanguard from non FDIC insured banks. It is, however, up to the buyer to make sure to stay within the FDIC limit to have full insurance. CDs purchased at a premium (secondary marker) only have coverage on the face amount. While almost all different named issuers have separate FDIC coverage, a small number have the same coverage for multiple different names. Vanguard can tell you if you call.

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Re: Brokered CDs - Different brokers?

Post by Kevin M » Sat Jan 20, 2018 3:28 pm

dm200 wrote:
Sat Jan 20, 2018 2:12 pm
Kevin M wrote:
Tue Mar 22, 2016 4:46 pm
jimkinny wrote: I would verify that whatever broker you use, that the CDs you buy are FDIC insured.
I have never seen a non-FDIC-insured CD sold by a broker. Would be interested to hear if anyone else has.
Kevin
No, I have never seen offerings at Vanguard from non FDIC insured banks. It is, however, up to the buyer to make sure to stay within the FDIC limit to have full insurance. CDs purchased at a premium (secondary marker) only have coverage on the face amount. While almost all different named issuers have separate FDIC coverage, a small number have the same coverage for multiple different names. Vanguard can tell you if you call.
All good points. However, I don't think you have to call regarding different names and FDIC coverage. An FDIC# is displayed for each issue, so if you see two different issuer names with same FDIC#, then your holdings at them would be aggregated for FDIC-insurance purposes.

Example: Searching on 5-year secondary CDs at Vanguard, I see issuers "American Express Bank, Fsb", and "American Express Fed Svgs Bk Ctf Dep Program Book Entry", both with FDIC#35328. So slightly different names, but same FDIC#. Not the best example, since the names are very similar, but I think good enough to make the point. Another example is "GE Capital Retail Bank Draper UT" and "Ge Money Bank", both with FDIC#27314.

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Re: Brokered CDs - Different brokers?

Post by Kevin M » Sat Jan 20, 2018 3:37 pm

junesen wrote:
Sat Jan 20, 2018 12:59 pm
I have been researching this lately and I've come to the conclusion that Fidelity is the place to buy brokered CDs. I only have access to Vanguard, Fidelity, and TD Ameritrade so there might be some better brokers out there.

The reason I am thinking Fidelity is:
1. They have the lowest fee ($1). Vanguard is $2 unless you have $500,000 invested in Vanguard. TD Ameritrade builds their fee into the price of the secondary broker CDs and the couple I have sampled amount to about $10.
2. They have the best inventory of secondary issues. This is mostly anecdotal evidence, but I just did a search of CDs at Vanguard and Fidelity for issues maturing in 2023 with 2.6 YTM or better. I found 96 issues at Fidelity, and only 8 at Vanguard. The best YTM at Vanguard is 2.708, I see 20 issues at Fidelity that is better than 2.708, the best being 2.798.
In the past, I've sometimes seen better CD deals at Vanguard, but the $1 commission for secondaries for everyone at Fidelity can make it generally better for those without at least Voyager Select status at Vanguard.

I've been buying individual Munis lately, and have found that Fidelity generally has better prices/yields, but sometimes Vanguard has exactly the same price, and once or twice I've seen a better price at Vanguard. So I've been doing my main searching at Fidelity, but usually check the CUSIP at Vanguard too. I bought a couple on Friday where the price at Fidelity was ridiculously better than at Vanguard.

Another advantage of Fidelity is that they have better fixed-income analysis tools. They have a tool that shows you all of your individual fixed income holdings with various analytics, which you can export to a spreadsheet if you want, and you can import external holdings by CUSIP to be included in the analysis. I haven't found anything similar at Vanguard.

Kevin
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Re: Brokered CDs - Different brokers?

Post by junesen » Mon Jan 22, 2018 9:47 am

junesen wrote:
Sat Jan 20, 2018 12:59 pm
2. They have the best inventory of secondary issues. This is mostly anecdotal evidence, but I just did a search of CDs at Vanguard and Fidelity for issues maturing in 2023 with 2.6 YTM or better. I found 96 issues at Fidelity, and only 8 at Vanguard. The best YTM at Vanguard is 2.708, I see 20 issues at Fidelity that is better than 2.708, the best being 2.798.
I just did the search again at Fidelity and Vanguard. Fidelity came up with 101 issues and Vanguard came up with 90 issues. So maybe the
reason I came up with so few previously at Vanguard was because the market was closed (although it would be nice to look at the full market when it is closed).

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Re: Brokered CDs - Different brokers?

Post by dm200 » Mon Jan 22, 2018 9:54 am

All good points. However, I don't think you have to call regarding different names and FDIC coverage. An FDIC# is displayed for each issue, so if you see two different issuer names with same FDIC#, then your holdings at them would be aggregated for FDIC-insurance purposes.

Example: Searching on 5-year secondary CDs at Vanguard, I see issuers "American Express Bank, Fsb", and "American Express Fed Svgs Bk Ctf Dep Program Book Entry", both with FDIC#35328. So slightly different names, but same FDIC#. Not the best example, since the names are very similar, but I think good enough to make the point. Another example is "GE Capital Retail Bank Draper UT" and "Ge Money Bank", both with FDIC#27314.
I do not have the issue now, but there was a case (names with 'Bank of India') where the FDIC numbers were different (as were the names slightly) BUT there was only one FDIC coverage for both.

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