Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

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Gus Chiggins
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Joined: Thu Apr 16, 2015 8:35 am

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by Gus Chiggins »

SpaethCo wrote: Sat May 01, 2021 3:20 am
Gus Chiggins wrote: Fri Apr 30, 2021 9:15 pm Our taxable accounts all hold well above $25,000 in fixed income, so we simply move $25,000 in fixed income allocation from Fidelity to our Platinum CashPlus account. We’ve now guaranteed ourselves a 3.8% tax equivalent yield, something we can’t come close to beating with any other current fixed income options within our risk appetite for fixed income (e.g. CA intermediate munis in taxable). The only ongoing activity is transferring one spouse’s paychecks out to Fidelity once a month, as the paychecks are needed to meet the $5,000 monthly direct deposit requirement. But Platinum CashPlus is just a pass through, so no substantive change to our finances.
The only things I'd point out is this value proposition only holds in today's rate environment, and this setup forces you to treat this money almost like it's an undefined duration CD.
  1. If prevailing rates on safe investments jump up to something like 4%, logically you need to move cash out of this account. At that point you're back to paying the $45/mo ($540/year) for this setup. Under those conditions would you still find value in the CashPlus account considering you're back within $10 of just paying the $550 annual fee again?
  2. This is less like a bond fund and more like a CD, because the return starts to fade rapidly as soon as your average daily balance drops to $24,999.99 or below and you start incurring the $45/mo fee.
I agree that the value all depends on the fixed income options available, which is why I noted this in my post. But in reality, short term fixed income returns haven’t come anywhere close to 4% in a decade and are nowhere close right now. Who knows what the future holds but, as I’ve already noted, we’d re-evaluate at that point. Either way, though, we’d never pay the monthly account fee; we’d just close the Platinum CashPlus account, pay the AmEx annual fee and continue getting the free authorized user.

I also agree that this setup essentially behaves like a CD (or other deposit accounts). That’s the beauty of it. A 3.8% one year $25,000 CD. Can’t get anywhere close to that today. Because we don’t care if our fixed income is in CDs, treasuries or munis, we’re solely focused on finding fixed income options that preserve capital and provide the best tax efficient return possible, and all the aforementioned options meet this standard for us. This option just happens to allow us to get the best risk free return available to us in this market with very little effort, effectively lowering our risk and improving our return (i.e. a nearly proverbial free lunch).
afan
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Joined: Sun Jul 25, 2010 4:01 pm

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by afan »

For the part that MS manages, will they let you park it in a Vanguard index fund, charge you their fee, but otherwise leave it alone? Or are you stuck with high cost funds, individual securities, transaction costs and tax complications from the trading?

For those who manage to use the $200 airline incidentals credits on something other than airline incidentals from a single airline, how do you do that?

Same questions for the other credits? Buy something from Saks, return it, and get a credit that they can use to reduce the bill?

Is the $550 "engagement bonus" annual? Or does one need to unwind this after a year?
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
SpaethCo
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Joined: Thu Jan 14, 2016 12:58 am
Location: Minneapolis

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by SpaethCo »

afan wrote: Sat May 01, 2021 11:06 am For the part that MS manages, will they let you park it in a Vanguard index fund, charge you their fee, but otherwise leave it alone? Or are you stuck with high cost funds, individual securities, transaction costs and tax complications from the trading?
You get zero control beyond answering 3 questions:
1) Risk: Conservative, Moderate, Aggressive
2) Investment model: Preserve wealth to Opportunistic Growth
3) Portfolio construction: Outperform market, Socially Responsible, Low cost

For reference, Aggressive / Opportunistic Growth / Low cost yielded this for me:

25% SPLG
2% ITOT
5% SPMD
6% IJR
30% IEFA
10% IEMG
6% MINT
16% AGG
afan wrote: Sat May 01, 2021 11:06 amIs the $550 "engagement bonus" annual? Or does one need to unwind this after a year?
It's annual under the current program.
Snezz1e
Posts: 56
Joined: Wed Mar 14, 2012 11:48 am

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by Snezz1e »

afan wrote: Sat May 01, 2021 11:06 am For the part that MS manages, will they let you park it in a Vanguard index fund, charge you their fee, but otherwise leave it alone? Or are you stuck with high cost funds, individual securities, transaction costs and tax complications from the trading?

For those who manage to use the $200 airline incidentals credits on something other than airline incidentals from a single airline, how do you do that?

Same questions for the other credits? Buy something from Saks, return it, and get a credit that they can use to reduce the bill?

Is the $550 "engagement bonus" annual? Or does one need to unwind this after a year?
For airline incidentals there are forums out there with people listing their experience on what does and does not trigger the reimbursement. You use to be able to buy Southwest Gift cards. Now I think it's flights that are $90 or less will trigger the reimbursement. So people will buy a cheap one way flight and get get a refund in the form of southwest voucher good for a year from date of booking.

For credits I think if you get a full refund they will take the credits back. I only have experience with AMEX offers and refunds. For offers like $100 off XXX if you only get a partial refund even if it takes you under XXX you still keep the credit. A full refund though resulted in a clawback. No guarantees if this will stay same in future.
afan
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Joined: Sun Jul 25, 2010 4:01 pm

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by afan »

The hourly rate of return on figuring out and implementing these schemes seems quite low
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
SpaethCo
Posts: 315
Joined: Thu Jan 14, 2016 12:58 am
Location: Minneapolis

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by SpaethCo »

afan wrote: Sun May 02, 2021 9:01 am The hourly rate of return on figuring out and implementing these schemes seems quite low
Indeed. For this deal, some of the possibly overlooked time/effort items include:
  • Another set of 1099s to keep track of every year (1099-B, 1099-DIV, 1099-INT)
  • Another small set of investments to track as part of your portfolio (luckily only $5k-ish worth, but still with more activity than my self-managed account)
  • The completely manual process of having to call to talk to the advisor service pool and exchange signed forms for every account change
  • Having to re-structure cash flow to meet the $5k/mo deposit requirement
Individually they're minor annoyances, but these things start to add up.

This doesn't make this a bad deal, but it's definitely not as good of a deal as it appears at first unless you don't assign any value to your time.
dcdcdc724
Posts: 8
Joined: Tue Nov 06, 2018 3:09 am

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by dcdcdc724 »

SpaethCo wrote: Sat May 01, 2021 3:20 am
Gus Chiggins wrote: Fri Apr 30, 2021 9:15 pm Our taxable accounts all hold well above $25,000 in fixed income, so we simply move $25,000 in fixed income allocation from Fidelity to our Platinum CashPlus account. We’ve now guaranteed ourselves a 3.8% tax equivalent yield, something we can’t come close to beating with any other current fixed income options within our risk appetite for fixed income (e.g. CA intermediate munis in taxable). The only ongoing activity is transferring one spouse’s paychecks out to Fidelity once a month, as the paychecks are needed to meet the $5,000 monthly direct deposit requirement. But Platinum CashPlus is just a pass through, so no substantive change to our finances.
The only things I'd point out is this value proposition only holds in today's rate environment, and this setup forces you to treat this money almost like it's an undefined duration CD.
  1. If prevailing rates on safe investments jump up to something like 4%, logically you need to move cash out of this account. At that point you're back to paying the $45/mo ($540/year) for this setup. Under those conditions would you still find value in the CashPlus account considering you're back within $10 of just paying the $550 annual fee again?
  2. This is less like a bond fund and more like a CD, because the return starts to fade rapidly as soon as your average daily balance drops to $24,999.99 or below and you start incurring the $45/mo fee.
When I plunged into this setup last year, I saw the favorable return math like you put together in your post and I saw the typical "seems like a lot of hoops" responses as being the most common negative comment. I don't want to sound overly negative on things, but I am posting from a perspective of "these are things I really wish people had pointed out" when I first started researching this.

Again to break down the 2 parts:

Benefit: MS Amex Platinum with 1 complimentary AU, $0.01 MR cash-out rate, all the perks of the card
Cost: $5000 in Access Investing to establish the relationship. You can do this online without ever talking to anyone, completely automated setup. The only limit is that any withdrawal can't take your account below $5k. If the withdrawal would take your account below $5k, or if market conditions have resulted in your balance falling below $5k and you want to take money out, your only option is a complete account closure.

Going just this far gets you the absolute best part of engaging with MS to get a Platinum card - the free AU card is a $175 savings that no other variant of the Platinum card offers.

Then comes part 2 where you sign up for the CashPlus Platinum account:

Benefit: $550 Engagement bonus to offset the Amex annual fee
Cost: $45/mo CashPlus account fee, which can be waived by maintaining $25k and depositing $5k/mo.

Things I didn't know going in to the second part:
  • It's very clear Morgan Stanley didn't plan on Access Investing being a significant gateway to people opening up CashPlus accounts. It's a manual process, you have talk to a rep who desperately wants to transfer you to your assigned advisor to handle this activity -- but as an Access Investing client you don't have one so now they have to handle this call. If an advisor opens this account they get a commission, if the backup call center folks help out an advisor's client they can get a kickback commission, but when you as an Access Investing client call to do this they get nothing. This is why some agents will give out bad information like saying "Oh, this account requires a $50k deposit to open" or other things like that.
  • Common activities like establishing a TOD for the account again require calling in, finding someone who will take pity on you enough to help, and then more Docusign forms back and forth.
  • Getting your accounts linked to waive the $45/mo fee will require multiple calls. It's apparently a pain to set this up manually in the system, and normal MS client accounts auto-link based on common SSN, address, and advisor. You are again at the mercy of someone taking pity on you to fix a problem that is uncommon enough in the MS client space that they're most likely going to have to put you on hold so they can research the relevant knowledge articles to figure out how to do. (That is assuming you get someone who cares enough to want to take extra time to help)
Once it's all setup, things are much smoother. The CashPlus account team seems easy enough to work with for banking functions, so at least that support is less concerning than the process of getting this all setup.

There are other minor quirks like you can only get transaction notifications for the debit card, but not other checks, ACH transfers, or deposits on the account. Basically the only account alerts you can setup are balance alerts and no cash available.

I wouldn't say I regret signing up, but all things considered this really isn't the deal it seemed like either. If I ignore the time I put into sorting out the account setup I still come out financially ahead, but by a pretty slim margin. I value the Mastercard debit card more than the Fidelity VISA debit card, and the 3-bureau credit monitoring is pretty decent. For those factors alone it's still worth it for me -- but again these are slim margin gains.
I just opened my Access Investing account the other day, I have not yet moved money but have linked external accts. I plan to call in the morning to try and open the Cashplus account, hopefully I am not given a run around.
afan
Posts: 5761
Joined: Sun Jul 25, 2010 4:01 pm

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by afan »

I suppose this is worth it for a second group of people, besides those whose travel and spending patterns perfectly match the deal.
People who play the credit card bonus and optimization game as a hobby have a large playing field with this card. If that is entertainment, rather than an annoyance, then the 3 accounts, moving money around every month, letting MS actively manage $5,000, etc. may be worth it or even part of the game.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
student
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Joined: Fri Apr 03, 2015 6:58 am

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by student »

dcdcdc724 wrote: Tue May 04, 2021 12:34 am I just opened my Access Investing account the other day, I have not yet moved money but have linked external accts. I plan to call in the morning to try and open the Cashplus account, hopefully I am not given a run around.
Please do give us updates. Thanks.
Jags4186
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Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by Jags4186 »

I’ve had this setup now for 8 months. It was time consuming to get everything set up. That said, now that it is in motion, it is quite simple to manage. I transferred $30,000 of cash from my emergency fund to Morgan Stanley split $25k/$5k. In those 8 months, my 30,000 has grown to $31,266. I also received the $550 (which is tax free!) engagement bonus and the 65k MR points (60k bonus + 5k for spend) as well as all the ancillary credits.

The $5000 deposit is the easiest part. Morgan Stanley has excellent ACH capabilities. If you initiate a withdrawal from an external account for $5000 and then a push for $5000 back to the same account (must do it in that order) then your funding account will give and receive the funds same day. In other words, you never will be short $5k in your funding account. I suppose if you don’t worry about the $5k not missing from an account you could automate this, but I prefer not having to worry about $5k constantly floating around.

Of course, the market could have gone the other way, I could have $28,734 instead of $31,266 today. But it has worked out to be much better than leaving the money in a 0.5% high yield savings account. Plus I have a fancy schmancy Platinum card.
afan
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Joined: Sun Jul 25, 2010 4:01 pm

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by afan »

Jags4186 wrote: Tue May 04, 2021 8:01 am I’ve had this setup now for 8 months. It was time consuming to get everything set up. That said, now that it is in motion, it is quite simple to manage. I transferred $30,000 of cash from my emergency fund to Morgan Stanley split $25k/$5k. In those 8 months, my 30,000 has grown to $31,266. I also received the $550 (which is tax free!) engagement bonus and the 65k MR points (60k bonus + 5k for spend) as well as all the ancillary credits.

The $5000 deposit is the easiest part. Morgan Stanley has excellent ACH capabilities. If you initiate a withdrawal from an external account for $5000 and then a push for $5000 back to the same account (must do it in that order) then your funding account will give and receive the funds same day. In other words, you never will be short $5k in your funding account. I suppose if you don’t worry about the $5k not missing from an account you could automate this, but I prefer not having to worry about $5k constantly floating around.

Of course, the market could have gone the other way, I could have $28,734 instead of $31,266 today. But it has worked out to be much better than leaving the money in a 0.5% high yield savings account. Plus I have a fancy schmancy Platinum card.
Interesting. I would set up the $5,000 part to be automatic. Having to do a transaction every month by hand would be firmly classified as "annoying" for me.
I have had other standard monthly transactions coming from our checking account forever and they are no hassle at all. Even if automatic, the requirement to do the transactions each month would be annoying. Pointless.

I wonder why MS set it up this way. Too many hoops to jump through. I don't see how having $5,000 sitting in the investment account generates enough revenue to make it worthwhile for MS. I don't see how $5,000 in monthly deposits does them any good. Complicated from their perspective as well.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
SpaethCo
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Location: Minneapolis

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by SpaethCo »

afan wrote: Tue May 04, 2021 8:47 am I wonder why MS set it up this way. Too many hoops to jump through.
That's kind of the point, to create lots of opportunities for you to screw up and for them to make money.
afan wrote: Tue May 04, 2021 8:47 amI don't see how having $5,000 sitting in the investment account generates enough revenue to make it worthwhile for MS.
The Access Investing account is sort of thrown in as a qualifying account, it's not the setup for which this was targeted. Straight out of the CashPlus Disclosure statement:
...Eligible investment accounts include, but are not limited to, a AAA Account, Self Directed Brokerage Account, Morgan Stanley Access Investing Account, or a discretionary/non-discretionary Advisory Account or program through Morgan Stanley's Advisory Program. Retirement Plan accounts, including IRAs, are currently not eligible.
So Access Investing qualifies, but not with an IRA account where you wouldn't have to care about trading frequency and taxes and you'd be less likely to withdrawal funds triggering an account closure. (An IRA account would be a qualifying relationship to get the Amex card alone though)

But look at the features they highlight on the main CashPlus page like "Insufficient Fund Coverage" -- then look at the disclosure. The tiers for fund coverage are 0-$1m AUM, $1m-$5m AUM, and if you have $5+m AUM they'll cover your insufficient funds up to $10k!

That's a pretty decent picture of who they're targeting with this account. It's not the folks just depositing the minimum balance into their Access Investing accounts.
afan wrote: Tue May 04, 2021 8:47 amII don't see how $5,000 in monthly deposits does them any good. Complicated from their perspective as well.
The driver behind changing Premier Cash Management ($1+m AUM or $100k in debit card transactions to waive fees and get the engagement bonus) to the CashPlus program was to increase the deposits for Morgan Stanley Private Bank. They started running into problems chasing lucrative loan deals because they didn't have the deposit backing to meet the demand. There have been a bunch of article about it like this one: https://www.advisorhub.com/morgan-stanl ... -capacity/ An interesting side note is that none of the Premier Cash Management accounts were grandfathered in to receive the bonus. You have 8 or 9 figures of AUM with MS? You now don't get your $550 bonus unless you convert to a CashPlus account and park $25k in cash.

Setting the $5k in monthly deposits hurdle plays into human psychology. A lot of people will keep a little more buffer than $25k in the account knowing they have to move $5k each month, or their balance will fall below the $25k threshold and Morgan Stanley gets the opportunity to pocket $45 in fees that month. Either way, Morgan Stanley wins.
afan
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Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by afan »

Lot's of great information. Thanks.

If a self directed brokerage account "counts" then one could drop $5,000 worth of an ETF in there, avoid the MS active management, and meet the qualification. Sounds way better than the Access account.

I suppose one might keep more than $25,000 in there to be safe. But maybe only $30,000, so you still qualify if there is a delay in a monthly transfer. If it is done automatically, I could not see a point in keeping more than that.
Above someone noted that the difference between what they earn on a cash deposit and what they can collect on loans could be larger in normal times.
A large part of the appeal is that one gives up little to park money at MS in a checking account. If interest on a checking account were 3%, then $25,000 parked there at zero would cost more than the annual fee on the card.

I suspect the ultimate goal is to such people into the MS system and try to sell them other higher margins products once they are there. A hardcore boglehead who dropped in exactly $5,000 in an ETF, $30,000 in the checking account, set up a $5,000 transfer in on the 5th of each month and the same amount out on the 7th would eventually be tagged as a lost cause. Maybe dropped from the program?

For those who would use most of the benefits of the card anyway, getting it at a discount compared to simply going direct to AMEX could be worth it.

Whether it is better than getting $200 from Schwab with no strings attached would depend on how you would deploy the $30,000 (access plus checking account) at Schwab. If you would get 1.2% annual return more by having it invested at Schwab than by keeping at least $25,000 of it in cash at MS, then Schwab would be the better option.
Note that this comparison of MS to Schwab applies no matter how much one might get out of the card in benefits. Just looking at the cost of using MS.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
hachiko
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Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by hachiko »

One representative told me the minimum deposit to open a non access investing Brokerage account is 50k. But those still have annual fees as well - $50-$150. With access the fee is basically $20/yr. However, you of course don't get to choose your own investments so there's some cost there. I'm not smart enough to know what that cost is.

Also, I agree with your other post. If you have no interest (hehe) in playing the game, I agree with your point about whether or not the amex platinum is worth it. For me, personally, I enjoy playing the games, and since I've been following the game since I was 18 (when playing the game was a LOT more lucrative - before the points guy and all of them showed up), the marginal time it takes to implement new things/ changes is worth it. To start from scratch now probably isn't worth it.
Snezz1e
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Joined: Wed Mar 14, 2012 11:48 am

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by Snezz1e »

If the requirements is too much of a hassle then just pay the $45/monthly fee which is what I'm doing.

After you get the card just close the access investing and pay taxes on any minor gains you have.

For me the AMEX Platinum is fully worth the $550 annual fee. All I'm doing is switching from regular Platinum to the MS Platinum. With $45/month fee it is only $540/year and I get a free authorized user.

It is still better than regular platinum even if you place no value in any of the CashPlus account benefits (I think it has some value added benefits such as free credit monitoring/wires). The only hassle in this scenario is opening the access investing account and funding it with $5k for a short period.

One thing I'm curious about is if we have to maintain some kind of MS relationship to keep AMEX card open. The way the $550 engagement bonus works according to the documents is they give you a one time credit within 3 months if you don't meet all requirements and quicker if you do. So I could potentially just pay $45 for 3 months and then close the account after getting the one time credit making the card cost only $135 for the first year. Then it's $550 for future years with a free authorized user. If they require some kind of relationship then I guess I could keep the $5k investing account open. I also wonder if they have safeguards in place to prevent you from reopening the cash plus account the following year for the bonus and then closing it again.
SpaethCo
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Location: Minneapolis

Re: Thinking about parking $30k with Morgan Stanley for a free Amex Plat Card

Post by SpaethCo »

Snezz1e wrote: Tue May 04, 2021 1:02 pm One thing I'm curious about is if we have to maintain some kind of MS relationship to keep AMEX card open.
You do.

https://www.doctorofcredit.com/american ... ont-panic/
Snezz1e wrote: Tue May 04, 2021 1:02 pmI also wonder if they have safeguards in place to prevent you from reopening the cash plus account the following year for the bonus and then closing it again.
Page 8 of the account disclosure probably covers this.
Abuse and Excessive Use
Morgan Stanley reserves the right to revoke any account features and/or close your CashPlus Account(s) for usage that we, in our discression, deem to be abusive or excessive. Example of such behavior include, but are not limited to:

- Excessive ATM fees as a result of multiple, small withdrawals in a 24 hour period;
- Excessive foreign exchange conversions; or
- Using the CashPlus Account in a manner other than its intended use.
If they're taking the time to point out a few bucks worth of ATM fees in a 24 hour period is enough to shut down your account, I think it's safe to say trying to hit their profitability by a few hundred bucks is going to be an issue.
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