Splitting Monies between multiple investment houses

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nesdog
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Splitting Monies between multiple investment houses

Post by nesdog » Fri Jul 13, 2018 5:34 pm

Courtesy of several jobs over the past 30 years, we have 401k's split between a bunch of MF companies. These include Fido, VG, Metropolitan, OneAmerica and more.

We'd like to consolidate as we are hitting retirement in a year, however we have some discomfort with moving everything into our Fidelity and VG accounts. Is it overkill to move others to Schwab, leaving us with three main investment sites? Thinking in terms of safety, etc. Talking about 7 figure totals so like to spread the risk. (though I'm not exactly sure what the risk is....going out of business?)

Thanks....

delamer
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Re: Splitting Monies between multiple investment houses

Post by delamer » Fri Jul 13, 2018 5:47 pm

I wouldn’t worry about the companies going out of business.

I do think that it is possible that a company could be hacked or have a system failure that would prevent you from accessing your accounts for a limited period of time.

For that reason, it makes sense to have assets at a couple different companies so you always have access to some of your funds.

Doctor Rhythm
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Re: Splitting Monies between multiple investment houses

Post by Doctor Rhythm » Fri Jul 13, 2018 6:25 pm

Fido, Schwab and VG are all solid companies - and you could consolidate into any single one of them or spread the wealth amongst them. For not particularly good reasons, we have accounts with all three.

gostars
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Re: Splitting Monies between multiple investment houses

Post by gostars » Sat Jul 14, 2018 4:50 am

I wouldn't have problems consolidating at any of the big brokerages (Vanguard, Fidelity, Schwab, TD Ameritrade, Merrill Edge, E-Trade, etc.). First, it's extremely unlikely that any major brokerage goes out of business, and brokerages like Vanguard and Fidelity that aren't owned by some big bank with crazy liabilities are even further isolated than bank-owned operations like TDA or M-E. Second, the SEC requires that brokerages separate customer assets from their own, so customer assets are safe even if the brokerage goes out of business. Third, it's very likely that the customer base of any failing brokerage would be worth a good amount of money to someone else, so even if someone were to fail they'd probably get bought out and everyone and everything transferred over. Fourth, even if one was get shut down entirely with no buyer, the SEC and FINRA have plans in place to help transition customers an assets to a new brokerage.

There is the potential for security issues temporarily shutting down access to a particular brokerage; if something happens at the worst possible time and you need money fast, then that's where your emergency fund can do its thing. If you're planning to keep both Vanguard and Fidelity, then you've probably got bigger problems if both of them were to become unavailable at the same time, and a third brokerage probably wouldn't help.

student
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Re: Splitting Monies between multiple investment houses

Post by student » Sat Jul 14, 2018 4:57 am

I like having multiple places in case of fraud and it takes time to sort it out. On the other hand, this action does complicates life. I have a recent thread about a bounced check due to a mistake because of multiple accounts.

MikeG62
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Re: Splitting Monies between multiple investment houses

Post by MikeG62 » Sat Jul 14, 2018 11:00 am

student wrote:
Sat Jul 14, 2018 4:57 am
I like having multiple places in case of fraud and it takes time to sort it out. On the other hand, this action does complicates life. I have a recent thread about a bounced check due to a mistake because of multiple accounts.
nesdog wrote:
Fri Jul 13, 2018 5:34 pm
Courtesy of several jobs over the past 30 years, we have 401k's split between a bunch of MF companies. These include Fido, VG, Metropolitan, OneAmerica and more.

We'd like to consolidate as we are hitting retirement in a year, however we have some discomfort with moving everything into our Fidelity and VG accounts. Is it overkill to move others to Schwab, leaving us with three main investment sites? Thinking in terms of safety, etc. Talking about 7 figure totals so like to spread the risk. (though I'm not exactly sure what the risk is....going out of business?)

Thanks....
Several threads exist on this topic. Here is one recent example.

viewtopic.php?f=1&t=247211&p=3890345&hi ... p#p3890345

Personally, in my view you are overthinking this and unnecessarily creating headaches for yourself by maintaining accounts at multiple brokers for the reason you state. After all, you run a greater risk of getting killed every day while driving in your car (maybe you should quit your job and work from home to mitigate against that risk) than someone hacking into a large broker and your not being able to access your funds for a long enough period of time that this causes real problems for you.

I would choose one large reputable broker and consolidate the money there. FWIW, I use Fidelity and have a significant 7-figure balance with them. I lose zero sleep at night worrying about the issue you raised.
Last edited by MikeG62 on Sat Jul 14, 2018 3:51 pm, edited 1 time in total.
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ruralavalon
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Re: Splitting Monies between multiple investment houses

Post by ruralavalon » Sat Jul 14, 2018 11:06 am

nesdog wrote:
Fri Jul 13, 2018 5:34 pm
Courtesy of several jobs over the past 30 years, we have 401k's split between a bunch of MF companies. These include Fido, VG, Metropolitan, OneAmerica and more.

We'd like to consolidate as we are hitting retirement in a year, however we have some discomfort with moving everything into our Fidelity and VG accounts. Is it overkill to move others to Schwab, leaving us with three main investment sites? Thinking in terms of safety, etc. Talking about 7 figure totals so like to spread the risk. (though I'm not exactly sure what the risk is....going out of business?)

Thanks....
I think consolidating "a bunch of" 401ks is a good idea. I would not be concerned about consolidating to just one provider.

We have one provider, Vanguard, for our 7 figure accounts (my rollover IRA, 2 Roth IRAs and joint taxable account).

When you hit age 70.5 and have to take Required Minimum Distributions, having one tax-deferred account at one location will be very helpful and most convenient.
Last edited by ruralavalon on Sat Jul 14, 2018 11:12 am, edited 1 time in total.
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pkcrafter
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Re: Splitting Monies between multiple investment houses

Post by pkcrafter » Sat Jul 14, 2018 11:12 am

An article on this topic from Mel Lindaur.

https://www.bogleheads.org/wiki/Vanguar ... t_broke.3F


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

student
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Re: Splitting Monies between multiple investment houses

Post by student » Sat Jul 14, 2018 2:54 pm

MikeG62 wrote:
Sat Jul 14, 2018 11:00 am
student wrote:
Sat Jul 14, 2018 4:57 am
I like having multiple places in case of fraud and it takes time to sort it out. On the other hand, this action does complicates life. I have a recent thread about a bounced check due to a mistake because of multiple accounts.
Several threads exist on this topic. Here is one recent example.

viewtopic.php?f=1&t=247211&p=3890345&hi ... p#p3890345

Personally, in my view you are overthinking this and unnecessarily creating headaches for yourself by maintaining accounts at multiple brokers for the reason you state. After all, you run a greater risk of getting killed every day while driving in your car (maybe you should quit your job and work from home to mitigate against that risk) than someone hacking into a large broker and your not being able to access your funds for a long enough period of time that this causes real problems for you.

I would choose one large reputable broker and consolidate the money there. FWIW, I use Fidelity and have a significant 7-figure balance with them. I lose zero sleep at night worrying about the issue you raised.
I understand your reasoning and I may consolidate one day depending on my mental ability when I am old. It is effort vs security, and it is just one's opinion. However, I do not feel that your job analogy is not good. I can open an account easily but I cannot find another job that is equivalent to my current one easily. However, I do put emphasis on safety features over styling when I look for a new car.

megabad
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Re: Splitting Monies between multiple investment houses

Post by megabad » Sat Jul 14, 2018 3:19 pm

I always find discussions like this funny. In my mind, having both Vanguard and Fidelity "default" on their "obligations" would be nearly the monetary equivalent of the United States defaulting on its debt. Somehow, people still invest in United States debt and feel reasonably safe about it. I guess I understand the two investment house logic because websites can always go down for a day (even this is a long shot), but boy having three is preparing for certain disaster. If both Vanguard and Fidelity go under, I would want to be more prepared for the impending zombie apocalypse than ensuring my IRA was still ok.

livesoft
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Re: Splitting Monies between multiple investment houses

Post by livesoft » Sat Jul 14, 2018 3:25 pm

We have investments spread out to a few financial institutions. It is pretty trivial to do. We have it set up this way:

1. One place for almost ALL transactions. All rebalancing is done in this account, so while it does not need to have the same asset allocation as the overall portfolio, it should probably have a fund for each asset class that you will have.

2. The other places get no transactions, except perhaps automatic dividend reinvestment or the very occasional sell and movement of the money to checking. Since you will be retired, there should be almost no reason to add money to one of these "set-and-forget" places. These other accounts also do not need to have the same asset allocation. For instance, one could be all bond funds, another all small-cap international, another US equity funds with smidgeon of bonds.

3. One should be able to transfer assets without fees to another place to pick up a "new money" bonus every once in a while. For example, transfer 1000 shares of VBR to Fidelity for a year and then a year later transfer the same 1000 shares to TDAmeritrade, and then a little while later ....

4. The asset allocation of the total portfolio is what you want to know about. See viewtopic.php?t=150267 for some ideas to see how one might view the big picture on one's asset allocation across multiple accounts.
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Kinkelly
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Re: Splitting Monies between multiple investment houses

Post by Kinkelly » Sat Jul 14, 2018 3:33 pm

I have accounts at 2 brokerage houses because each have agreements with fund companies that Can make it better for small investors. Example: At Schwab it takes $100,000 to purchase Baird and Pimco Institutional shares. At Vanguard you can get the same Institutional shares for $25,000. Then Schwab will have better deals with other companies. Try and cut expenses where ever possible.

MikeG62
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Re: Splitting Monies between multiple investment houses

Post by MikeG62 » Sun Jul 15, 2018 7:13 am

student wrote:
Sat Jul 14, 2018 2:54 pm
MikeG62 wrote:
Sat Jul 14, 2018 11:00 am
student wrote:
Sat Jul 14, 2018 4:57 am
I like having multiple places in case of fraud and it takes time to sort it out. On the other hand, this action does complicates life. I have a recent thread about a bounced check due to a mistake because of multiple accounts.
Several threads exist on this topic. Here is one recent example.

viewtopic.php?f=1&t=247211&p=3890345&hi ... p#p3890345

Personally, in my view you are overthinking this and unnecessarily creating headaches for yourself by maintaining accounts at multiple brokers for the reason you state. After all, you run a greater risk of getting killed every day while driving in your car (maybe you should quit your job and work from home to mitigate against that risk) than someone hacking into a large broker and your not being able to access your funds for a long enough period of time that this causes real problems for you.

I would choose one large reputable broker and consolidate the money there. FWIW, I use Fidelity and have a significant 7-figure balance with them. I lose zero sleep at night worrying about the issue you raised.
I understand your reasoning and I may consolidate one day depending on my mental ability when I am old. It is effort vs security, and it is just one's opinion. However, I do not feel that your job analogy is not good. I can open an account easily but I cannot find another job that is equivalent to my current one easily. However, I do put emphasis on safety features over styling when I look for a new car.
My apologies Student, I thought you were the OP.

My car/job analogy was simply to point out that there are some small risks that cannot reasonably be managed away. For that reason we ought not to worry about them.
Real Knowledge Comes Only From Experience

student
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Re: Splitting Monies between multiple investment houses

Post by student » Sun Jul 15, 2018 7:32 am

MikeG62 wrote:
Sun Jul 15, 2018 7:13 am
student wrote:
Sat Jul 14, 2018 2:54 pm
MikeG62 wrote:
Sat Jul 14, 2018 11:00 am
student wrote:
Sat Jul 14, 2018 4:57 am
I like having multiple places in case of fraud and it takes time to sort it out. On the other hand, this action does complicates life. I have a recent thread about a bounced check due to a mistake because of multiple accounts.
Several threads exist on this topic. Here is one recent example.

viewtopic.php?f=1&t=247211&p=3890345&hi ... p#p3890345

Personally, in my view you are overthinking this and unnecessarily creating headaches for yourself by maintaining accounts at multiple brokers for the reason you state. After all, you run a greater risk of getting killed every day while driving in your car (maybe you should quit your job and work from home to mitigate against that risk) than someone hacking into a large broker and your not being able to access your funds for a long enough period of time that this causes real problems for you.

I would choose one large reputable broker and consolidate the money there. FWIW, I use Fidelity and have a significant 7-figure balance with them. I lose zero sleep at night worrying about the issue you raised.
I understand your reasoning and I may consolidate one day depending on my mental ability when I am old. It is effort vs security, and it is just one's opinion. However, I do not feel that your job analogy is not good. I can open an account easily but I cannot find another job that is equivalent to my current one easily. However, I do put emphasis on safety features over styling when I look for a new car.
My apologies Student, I thought you were the OP.

My car/job analogy was simply to point out that there are some small risks that cannot reasonably be managed away. For that reason we ought not to worry about them.
No problem.

Dandy
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Re: Splitting Monies between multiple investment houses

Post by Dandy » Sun Jul 15, 2018 9:05 am

After being retired awhile you might find having too many places that hold your money to be more of an issue than it would be now. I would suggest having all of an individual's accounts that require RMDs to be housed in one firm. That will make RMDs a bit easier since most firms will calculate the RMD for you and you will have all of those assets with one firm.

I consolidated all investments in one firm but have a banks and a credit union holding some of my fixed income assets.

Marylander1
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Re: Splitting Monies between multiple investment houses

Post by Marylander1 » Sun Jul 15, 2018 10:05 am

MikeG62 wrote:
Sat Jul 14, 2018 11:00 am
Personally, in my view you are overthinking this and unnecessarily creating headaches for yourself by maintaining accounts at multiple brokers for the reason you state. After all, you run a greater risk of getting killed every day while driving in your car (maybe you should quit your job and work from home to mitigate against that risk) than someone hacking into a large broker and your not being able to access your funds for a long enough period of time that this causes real problems for you.
Past performance is not indicative of future results. Look at the trends: the risk of dying in a car crash keeps going down*, but the scale of cyber problems is growing fast.
  • At the turn of the millennium, Microsoft's Melissa worm was about as bad as it got. (Those were the days.)
  • A few years ago, breaches of passwords at Yahoo and Ebay were the big news.
  • Last year, Equifax divulged extremely personal information on half the US population. This is considered routine enough that no criminal charges were filed (except 1 for insider trading), their business as a whole is largely unimpacted, and regulation changes are negligible.
  • For tomorrow, militaries around the world are preparing for offensive cyberwarfare. Colossal budgets are now dedicated to attacking information technology. Business leaders rate IT attacks as the risk most likely to intensify in 2018**, above terror attacks, asset bubbles, and fiscal crisis.
Diversification among institutions certainly won't guarantee safety, but seems a cheap, basic defense. I won't put more than 50% of my assets, or 50% of my emergency fund, in the trust of a single firm.

Marylander1
* Deaths per million vehicle miles traveled and deaths per million people at https://en.wikipedia.org/wiki/Motor_veh ... deaths.png
**World Economic Forum Global Risks Report 2018 at https://www.weforum.org/agenda/2018/01/ ... risk-ready

MikeG62
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Location: New Jersey

Re: Splitting Monies between multiple investment houses

Post by MikeG62 » Sun Jul 15, 2018 11:38 am

Marylander1 wrote:
Sun Jul 15, 2018 10:05 am
MikeG62 wrote:
Sat Jul 14, 2018 11:00 am
Personally, in my view you are overthinking this and unnecessarily creating headaches for yourself by maintaining accounts at multiple brokers for the reason you state. After all, you run a greater risk of getting killed every day while driving in your car (maybe you should quit your job and work from home to mitigate against that risk) than someone hacking into a large broker and your not being able to access your funds for a long enough period of time that this causes real problems for you.
Past performance is not indicative of future results. Look at the trends: the risk of dying in a car crash keeps going down*, but the scale of cyber problems is growing fast.
  • At the turn of the millennium, Microsoft's Melissa worm was about as bad as it got. (Those were the days.)
  • A few years ago, breaches of passwords at Yahoo and Ebay were the big news.
  • Last year, Equifax divulged extremely personal information on half the US population. This is considered routine enough that no criminal charges were filed (except 1 for insider trading), their business as a whole is largely unimpacted, and regulation changes are negligible.
  • For tomorrow, militaries around the world are preparing for offensive cyberwarfare. Colossal budgets are now dedicated to attacking information technology. Business leaders rate IT attacks as the risk most likely to intensify in 2018**, above terror attacks, asset bubbles, and fiscal crisis.
Diversification among institutions certainly won't guarantee safety, but seems a cheap, basic defense. I won't put more than 50% of my assets, or 50% of my emergency fund, in the trust of a single firm.

Marylander1
* Deaths per million vehicle miles traveled and deaths per million people at https://en.wikipedia.org/wiki/Motor_veh ... deaths.png
**World Economic Forum Global Risks Report 2018 at https://www.weforum.org/agenda/2018/01/ ... risk-ready
There is no doubt that the risk of cyber attacks is growing. However, you are placing no reliance on the very robust disaster recover systems (including redundant backup systems) in place at firms the size of Fidelity or Vanguard.

For example read the document at this link:

supplier.fidelity.com/fsmweb/Fidelity_BCP_Overview.doc

From one section of that word document:

"Site and System Outage

Fidelity also has an extensive disaster recovery plan that is reviewed and updated regularly. We test both application- and site-outage recovery plans annually to ensure that all back-up systems and necessary equipment are available and functioning correctly. Parameters required in our testing program include documented objectives and procedures, written test plans and results, business validation of results, and resolution of any action items that are identified during the tests.

Fidelity maintains a combination of hot, warm and cold alternate site seating for all critical functions across all production regions..."


Here is one from Vanguard:

http://www.vanguard.com/pdf/s509.pdf?2210035511

And a quote from one section of that document:

Data security and recovery

"Data security is, of course, a top priority. To mitigate computer virus attacks and other acts of cyberterrorism, we have implemented controls monitored by a dedicated team of information security specialists. We also maintain a network of redundant systems, off-site data storage, and off-site tape vaults to ensure that all source data are recoverable in a disaster."

These firms have institutional MM funds with minimum's investments of $10 million. Wouldn't you expect the institutions utilizing these funds to have vetted very thoroughly the robustness of these disaster recovery plans? I do.
Real Knowledge Comes Only From Experience

delamer
Posts: 5813
Joined: Tue Feb 08, 2011 6:13 pm

Re: Splitting Monies between multiple investment houses

Post by delamer » Sun Jul 15, 2018 1:46 pm

MikeG62 wrote:
Sun Jul 15, 2018 11:38 am
Marylander1 wrote:
Sun Jul 15, 2018 10:05 am
MikeG62 wrote:
Sat Jul 14, 2018 11:00 am
Personally, in my view you are overthinking this and unnecessarily creating headaches for yourself by maintaining accounts at multiple brokers for the reason you state. After all, you run a greater risk of getting killed every day while driving in your car (maybe you should quit your job and work from home to mitigate against that risk) than someone hacking into a large broker and your not being able to access your funds for a long enough period of time that this causes real problems for you.
Past performance is not indicative of future results. Look at the trends: the risk of dying in a car crash keeps going down*, but the scale of cyber problems is growing fast.
  • At the turn of the millennium, Microsoft's Melissa worm was about as bad as it got. (Those were the days.)
  • A few years ago, breaches of passwords at Yahoo and Ebay were the big news.
  • Last year, Equifax divulged extremely personal information on half the US population. This is considered routine enough that no criminal charges were filed (except 1 for insider trading), their business as a whole is largely unimpacted, and regulation changes are negligible.
  • For tomorrow, militaries around the world are preparing for offensive cyberwarfare. Colossal budgets are now dedicated to attacking information technology. Business leaders rate IT attacks as the risk most likely to intensify in 2018**, above terror attacks, asset bubbles, and fiscal crisis.
Diversification among institutions certainly won't guarantee safety, but seems a cheap, basic defense. I won't put more than 50% of my assets, or 50% of my emergency fund, in the trust of a single firm.

Marylander1
* Deaths per million vehicle miles traveled and deaths per million people at https://en.wikipedia.org/wiki/Motor_veh ... deaths.png
**World Economic Forum Global Risks Report 2018 at https://www.weforum.org/agenda/2018/01/ ... risk-ready
There is no doubt that the risk of cyber attacks is growing. However, you are placing no reliance on the very robust disaster recover systems (including redundant backup systems) in place at firms the size of Fidelity or Vanguard.

For example read the document at this link:

supplier.fidelity.com/fsmweb/Fidelity_BCP_Overview.doc

From one section of that word document:

"Site and System Outage

Fidelity also has an extensive disaster recovery plan that is reviewed and updated regularly. We test both application- and site-outage recovery plans annually to ensure that all back-up systems and necessary equipment are available and functioning correctly. Parameters required in our testing program include documented objectives and procedures, written test plans and results, business validation of results, and resolution of any action items that are identified during the tests.

Fidelity maintains a combination of hot, warm and cold alternate site seating for all critical functions across all production regions..."


Here is one from Vanguard:

http://www.vanguard.com/pdf/s509.pdf?2210035511

And a quote from one section of that document:

Data security and recovery

"Data security is, of course, a top priority. To mitigate computer virus attacks and other acts of cyberterrorism, we have implemented controls monitored by a dedicated team of information security specialists. We also maintain a network of redundant systems, off-site data storage, and off-site tape vaults to ensure that all source data are recoverable in a disaster."

These firms have institutional MM funds with minimum's investments of $10 million. Wouldn't you expect the institutions utilizing these funds to have vetted very thoroughly the robustness of these disaster recovery plans? I do.
“Very robust” does not mean impenetrable.

I agree with Marylander1 that holding assets at a couple different institutions is “a cheap, basic defense.”

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