My friend does not trust one brokerage Firm?

[Boulous]

Hi Friends,
I had a heated discussion with my friend about investing, she is a very conservative investor and worries about having her money with one firm,
she split her investments between Vanguard and Fidelity index funds? Do my friend's worries make any sense?

Boulous

[vineviz]

Do my friend's worries make any sense?

No, but it’s likely a relatively harmless superstition.

[cheese_breath]

Agree it's harmless. But if it makes OP's friend feel any better, there have been threads here asking whether one should diversify across multiple brokerages.

[livesoft]

For folks who have ever had their money "locked up" by a glitch or other failure, then multiple firms can make sense. That doesn't mean their assets are not safe, but that they cannot just get to them sometimes.

For folks who have never had their money "locked up" by a glitch or other failure, then I think they just haven't lived long enough to experience the joys of that.

Also folks who have only used one firm in their life really don't know how some firms do things better and some firms do things worse. They only the one firm they are using.

[retired@50]

Can you elaborate on her actual concerns?

Is it related to potential theft of her money, or is it more like she's worried about the website being down for an extended period?

Regards,

[Pomegranate]

Hi Friends,
I had a heated discussion with my friend about investing, she is a very conservative investor and worries about having her money with one firm,
she split her investments between Vanguard and Fidelity index funds? Do my friend's worries make any sense?

Boulous

Yup I do the same. Use 3 different brokerages at the moment

[dbr]

In the case of Vanguard vs Fidelity it makes no sense. In fact, if someone does not trust a company like one of those, one should not have any money at that company.

I really do believe it is a reasonable precaution not to have all of one's financial resources at one single establishment in case things become frozen or otherwise disrupted due to an IT glitch, or a fraud or hacking issue. But it doesn't take a lot to provide the needed backup to cover.

You can probably find a thread on this forum somewhere from the person who posted that Vanguard does not have his account information anymore because he does not exist. I don't think that was a figment of my imagination. If it didn't happen, it could. I have heard of things that strange.

[pkcrafter]

Using two investment companies is OK, especially if they are Vanguard and Fidelity. On the other hand, here is an article on what happens if a fund company fails--

https://www.bogleheads.org/wiki/Vanguard_safety

Paul

[sailaway]

For folks who have ever had their money "locked up" by a glitch or other failure, then multiple firms can make sense. That doesn't mean their assets are not safe, but that they cannot just get to them sometimes.

For folks who have never had their money "locked up" by a glitch or other failure, then I think they just haven't lived long enough to experience the joys of that.

Also folks who have only used one firm in their life really don't know how some firms do things better and some firms do things worse. They only the one firm they are using.

I have more frequently has this problem due to local issues (is, cut communication lines) than institutional issues.

We have split up our funds for more mundane reasons, though, so I have no issue with doing so.

[retiredjg]

Hi Friends,
I had a heated discussion with my friend about investing, she is a very conservative investor and worries about having her money with one firm,
she split her investments between Vanguard and Fidelity index funds? Do my friend's worries make any sense?

Boulous

In terms of fraud, I don't think so. Maybe I'm naive, but no. I really don't think so.

In terms of some kind of electrical, mechanical, weather related, earthquake related, terrorist attack related, disease quarantine related temporary glitch....yeah, maybe. It could happen.

I think something like that would be remedied pretty quickly so I don't have a lot of concern over this issue myself. It is usually not important for me to accomplish a transaction within a very short time frame.

Having said that, many very reasonable people would split their investments because of concerns over these kinds of disruptions.

A heated discussion over this issue seems a little intolerant of others' opinions to me. This is a decision over which reasonable people could differ.

[Fallible]

Hi Friends,
I had a heated discussion with my friend about investing, she is a very conservative investor and worries about having her money with one firm,
she split her investments between Vanguard and Fidelity index funds? Do my friend's worries make any sense?
Boulous

Was the discussion about her splitting between Vanguard and Fidelity or also about her being conservative generally? Also, without knowing what her worries are with one firm, it's hard to say whether they make sense. Any chance she can express her worries herself here? It also would help to know your concerns about splitting firms.

[Trader Joe]

Hi Friends,
I had a heated discussion with my friend about investing, she is a very conservative investor and worries about having her money with one firm,
she split her investments between Vanguard and Fidelity index funds? Do my friend's worries make any sense?

Boulous

Yes, your friend sounds like she is very practical and very, very smart.

[McGilicutty]

I don't know of any stock brokerages that have stole customers' money but Bear Stearns did go bankrupt years ago. I think their customers got all their money back, but I'm not sure.

There was at least one commodity brokerage that outright stole customers' money:

MF Global declared bankruptcy on October 31, 2011, and the company was liquidated beginning in November 2011.[3] The trustee liquidating the company said that the losses incurred by customers of MF Global stood at $1.6 billion at April 2012.[4][5] In January 2013, a judge approved a settlement that would return 93 percent of customers' investments, with the prospect of additional payouts from the company's general estate.[6][7] In December 2014, MF Global Holdings settled a U.S. government lawsuit, agreeing to pay $1.2 billion in restitution and a $100 million fine for customer losses tied to the company's 2011 collapse.[8]

https://en.wikipedia.org/wiki/MF_Global

Personally, I don't see any harm in splitting money between different brokerages. Stuff happens.

[Grt2bOutdoors]

Hi Friends,
I had a heated discussion with my friend about investing, she is a very conservative investor and worries about having her money with one firm,
she split her investments between Vanguard and Fidelity index funds? Do my friend's worries make any sense?

Boulous

Yes, your friend sounds like she is very practical and very, very smart.

I agree - she's just following a Business Continuity Plan but on a personal level. Does the OP know why companies have BCP's? It's to prevent their entire operations from coming to a screeching halt when they can't get access to cash, people, buildings, etc.

This is why holding investments, bank accounts, credit cards, cash at multiple firms is a good idea. But hey, concentrate your assets in just one location, then go read the threads on the forum about service providers NOT picking up the phone, and the websites NOT responding and the internet not working, yada, yada.

[ruralavalon]

Hi Friends,
I had a heated discussion with my friend about investing, she is a very conservative investor and worries about having her money with one firm,
she split her investments between Vanguard and Fidelity index funds? Do my friend's worries make any sense?

Boulous

I don't see a need to use both Vanguard and Fidelity for investing, but see little harm in that.

I personally prefer to have all investing accounts at one fund firm, just for the convenience.

We use a bank branch near our home for all banking functions, like checking account and debit cards.

[Cam894]

Sounds smart to me. Being locked out of money is no fun.

[TomatoTomahto]

Sounds smart to me. Being locked out of money is no fun.

Yeah. I have mUltiple credit cards, multiple brokerages, and multiple bank accounts for the same reason. Some identity glitch, or password/security glitch, or CC fraud can make life a real pita for a few weeks. No reason.

[Rowan Oak]

Hi Friends,
I had a heated discussion with my friend about investing, she is a very conservative investor and worries about having her money with one firm,
she split her investments between Vanguard and Fidelity index funds? Do my friend's worries make any sense?

Boulous

For the investments at Vanguard each fund is "a separate investment company (and part owner of the Vanguard Group, rather than the other way around). Thus, having all of your investments in several Vanguard funds is tantamount to having your investments spread among a variety of baskets, each independent of the other. So, put your fears to rest; your investments are safe at Vanguard."

Vanguard safety

[mpsz]

I think this is pretty reasonable. I use two brokerages, and have a taxable account at each. My IRAs and HSA are spread between these two but I don't have any duplicate accounts here.

For me, it's because of errors or fraud.

I've been locked out of brokerage A because they repeatedly sent invalid 2FA codes to my phone. Brokerage B locked my account because I deposited a check that was larger than usual. Banks have repossessed the wrong house numerous times, kicking families out and selling their irreplaceable belongings. Some banks have had multi-day outages of their online systems. Tellers fat-finger deposits and your $50,000 just became $5,000. Someone with the same name as you walks into a bank, displays their ID, and the teller accesses your account instead.

So it's a cheap (free) insurance policy in my view to have things at two brokerages. I trust I'd be made whole eventually in all of these cases, but if I need to access money now, I don't want to wait.

[1789]

No i would not spend time with having multiple accounts and also with having multiple funds on those accounts!

[UpperNwGuy]

I have accounts at Vanguard, Fidelity, and Schwab. Having accounts at multiple brokerage firms is no big deal. I also do my banking at more than one financial institution.

[TimeRunner]

Does your friend trust one government?

Is this thread actionable?

[BroIceCream]

It could be a generational concern, or some discomfort with investing in general. I have aged parents who lived during the Depression, and are concerned that banks will only insure deposits up to the FDIC limits (~250K). As a result, they have their savings accounts split across 3 different banks.
Me...I'm comfortable with all mine at Fidelity.

[mhalley]

I have my money split among the big three, but not because I don’t trust the brokerages. I don’t believe that any of them is 100% hack proof so I hedge my bets. I realize if My account did get hacked the chance of losing the money permanently is quite low, but that along with my aa helps me sleep better at night.

[Grt2bOutdoors]

Hi Friends,
I had a heated discussion with my friend about investing, she is a very conservative investor and worries about having her money with one firm,
she split her investments between Vanguard and Fidelity index funds? Do my friend's worries make any sense?

Boulous

For the investments at Vanguard each fund is "a separate investment company (and part owner of the Vanguard Group, rather than the other way around). Thus, having all of your investments in several Vanguard funds is tantamount to having your investments spread among a variety of baskets, each independent of the other. So, put your fears to rest; your investments are safe at Vanguard."

Vanguard safety

All accessible through one common platform. The the theory of safety is relative, when the platform stops working and you can’t access your account - no one will care about independent baskets, they’ll be thinking about how not to become a basketcase while trying to access their funds from an inoperable site!