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Brokerage Diversification

Posted: Mon Nov 05, 2018 10:56 am
by ThisDinosaur
I dont want all my eggs in one basket, but most of my liquidity is at vanguard right now. Essentially no trading costs for ETFs and mutual funds, which is how I invest.

What online broker should I open a new account with? Do any others offer no-commission trading of low cost funds?

Re: Brokerage Diversification

Posted: Mon Nov 05, 2018 11:06 am
by jacob
A quick google reveals: https://www.nerdwallet.com/blog/investi ... investors/

I suppose if you don't care about "full service" services (like research, routing, advanced orders, etc.) and just want to buy and hold a bunch of ETFs with the occasional rebalance, then any of the free options would work. Broker accounts are FDIC insured to some level(?). If your worries go beyond that, then you have to look into how solid these companies really are. This is not something I have bothered with. This does not mean you shouldn't.

Re: Brokerage Diversification

Posted: Mon Nov 05, 2018 11:28 am
by Chris
ThisDinosaur wrote:
Mon Nov 05, 2018 10:56 am
Do any others offer no-commission trading of low cost funds?
All the biggies (ETrade, Ameritrade, Fidelity, Schwab) offer commission-free ETFs. Of course, you would need to factor-in the expense ratio of those ETFs when deciding where to put your money. The expense ratios aren't awful, but for significant amounts of money over longer periods of time, the commission cost (< $7) is immaterial.

Re: Brokerage Diversification

Posted: Mon Nov 05, 2018 11:53 am
by unemployable
jacob wrote:
Mon Nov 05, 2018 11:06 am
Broker accounts are FDIC insured to some level(?). If your worries go beyond that, then you have to look into how solid these companies really are. This is not something I have bothered with. This does not mean you shouldn't.

SIPC, not FDIC. You're protected from the brokerage firm going under, but not from market losses. I'm not sure how cash balances would work, for example if they're swept into a bank account (as TD Ameritrade does) those probably have separate FDIC protection.

If a broker goes under it is extremely likely the Feds will step in and orchestrate a takeover by a larger, more solvent broker, as happened with Bear, Lehman and Merrill, and also happened on the banking side with Wachovia and WaMu.

Re the original question, if you're looking to move in excess of $100k, check out Schwab. If you're near a larger city they will probably have a physical office nearby, which may be nice to have, for example if you frequently deposit checks. If these are longer-term investments, such as retirement accounts I would look into investing directly with the mutual fund company (more reliable good customer service, maybe lower fees).

I would stay with Vanguard if leaving means you'd have less than $500k with them -- in fact I'd consolidate everything into Vanguard if doing so would put you over that amount.

Re: Brokerage Diversification

Posted: Tue Nov 06, 2018 10:56 am
by arcyallen
I think spreading your accounts to different firms, aside from different research opinions, is generally not beneficial. The firm itself isn't the risk - it's the investments. If you're self managing, it complicates managing accounts a bit. If it's full service firms then it's a train wreck for advising - one hand won't know what the other is doing.

Re: Brokerage Diversification

Posted: Tue Nov 06, 2018 1:12 pm
by The Old Man
What is the risk that you are trying to mitigate? Brokerage firms are insured by SIPC. Some firms take out additional insurance in addition to that provided by SIPC. You only need to consider brokerage failure if your balances exceed the insurance limit.
https://investor.vanguard.com/investing ... protection

Re: Brokerage Diversification

Posted: Thu Nov 21, 2019 8:59 am
by jennypenny
With Schwab buying TD Ameritrade, it's getting harder to spread your money around.

Is Schwab ok? I have an account at TD that I assume will get moved.

Re: Brokerage Diversification

Posted: Thu Nov 21, 2019 9:07 am
by 2Birds1Stone
I have my investments with Vanguard, Fidelity, Schwab, and Ally Bank.

Federal insurance is good, but in a pinch it's not something I would want to rely on for 100% of my nest egg.

Re: Brokerage Diversification

Posted: Thu Nov 21, 2019 9:15 am
by Jason
I have found Fidelity has, by far, the best over the phone customer service. I could see this as being a huge benefit when I begin withdrawing. Someone from Schwab did call me after I opened an account. He was a nice guy and I could see having waffles with him. ETRADE has the worse over the phone service. Bunch of financial bros. I only have small holdings in Schwab. But I will say, I do not like their website. They have a useless rating system that pops up. There are Fidelity offices in my area, although I despise their investment advice and will never go in one again. That's the problem with the investment retail offices, they are not investments offices, they are sales offices, essentially the brokerage equivalent of car dealerships. I like the Vanguard website because of its portfolio progress page although I found their customer service to be cold. Ameriprise has a totally different business model - their offices are franchises so it depends on who your local contact is. I would stay away from them. Highest fees. Although I like their total portfolio page on their website which I use for tracking all my accounts.

I do not think there is any issue being with multiple brokerage firms. Although I don't see a problem only using one. If I was forced to choose one, I would most likely go with Fidelity, slightly ahead of Vanguard.

Re: Brokerage Diversification

Posted: Thu Nov 21, 2019 11:11 am
by unemployable
jennypenny wrote:
Thu Nov 21, 2019 8:59 am
With Schwab buying TD Ameritrade, it's getting harder to spread your money around.

Is Schwab ok? I have an account at TD that I assume will get moved.
As a TD ameritrade "client" whose account still has an old Waterhouse login number, this thrills me. I'd stay put as long as they turn everything into Schwab.

I'm still waiting for Vanguard to go to zero commissions on stock trades like everyone else, otherwise now I can ditch them and have everything at Schwab.

Re: Brokerage Diversification

Posted: Thu Nov 21, 2019 12:35 pm
by Mister Imperceptible
I have an old Roth IRA with Fidelity and they were giving me a hard time about adding permissions to buy options, so I rolled my SEP IRA from Vanguard to TD Ameritrade after Vanguard also denied permission to trade options.

Recently opened a Solo 401(k) and Roth 401(k) with E-Trade because Schwab said they will not act as custodians for a Roth 401(k), and after this acquisition/consolidation I am glad to be diversified.

The diversification benefit is probably only as good as the $500k SIPC insurance, if something so drastic happens that it takes down a whole brokerage and that insurance does not protect you, in all likelihood that something will take out all of the brokerages.

Re: Brokerage Diversification

Posted: Mon Nov 25, 2019 2:46 pm
by George the original one
Fresh from today's email:

"We're excited to announce that Charles Schwab and TD Ameritrade have reached an agreement for Schwab to acquire TD Ameritrade.

The combined company will retain the Schwab name, and will reflect the best that each legacy firm has to offer, including leading trading and wealth management platforms, investor education, award-winning service, and banking.* This should bring clients like you an outstanding investing experience.

For now, the transaction is subject to customary closing conditions and is expected to close in the second half of 2020. During that time, there should be no impact to your account or how you work with TD Ameritrade."

Re: Brokerage Diversification

Posted: Fri Dec 06, 2019 10:08 am
by fiby41
Thanks to the establishment of the Securities Investor Protection Corporation, or SIPC, in 1970, investors are generally assured of recovering their full account values if their brokerage firm becomes insolvent. SIPC is a government-mandated consortium of brokers; all the members agree to pool their assets to cover losses incurred by the customers of any firm that becomes insolvent.
This was in the footnote to pg 268 of The Intelligent Investor and this thread came to mind. The title of the section is Dealing with brokerage houses if someone wants to look for it. Also made me wonder what are the fail-safes in my country
https://www.adigitalblogger.com/trading ... ust-india/

Re: Brokerage Diversification

Posted: Fri Dec 06, 2019 10:23 am
by Chris
fiby41 wrote:
Fri Dec 06, 2019 10:08 am
Thanks to the establishment of the Securities Investor Protection Corporation, or SIPC, in 1970, investors are generally assured of recovering their full account values if their brokerage firm becomes insolvent.
...up to $500k.

Re: Brokerage Diversification

Posted: Fri Dec 06, 2019 10:31 am
by Bankai
Or £85k

Re: Brokerage Diversification

Posted: Fri Jan 03, 2020 12:38 pm
by Jason
unemployable wrote:
Thu Nov 21, 2019 11:11 am
I'm still waiting for Vanguard to go to zero commissions on stock trades like everyone else, otherwise now I can ditch them and have everything at Schwab.
Waiting over.

Re: Brokerage Diversification

Posted: Mon Feb 08, 2021 12:27 pm
by Alphaville
Bumping this up to ask for recommendations for new broker.

my explanation from another thread
Alphaville wrote:
Mon Feb 08, 2021 10:53 am
my experiments with robinhood are over due to the toy style interface, not from any gme stories. i made a little money with them but could have equally lost it.

nevertheless seeing btc spike this morning made me regret missing out right now. but lack of tools make people lose money.

anybody got a recommendation for a broker? would like 24h forex trade and decent crypto speculation tools.

been looking at interactive brokers which offers low forex spread and what looks like free algos (never used algos previously).

who here likes their brokerage? im looking to day or swing trade, not invest...

not ready for options yet but at some point would like the option :D

figured this post belongs here more? sorta? anyway...

Re: Brokerage Diversification

Posted: Mon Feb 08, 2021 3:12 pm
by chicago81
I really liked Interactive Brokers, and used them for years.

If you trade on margin, NOBODY beats IB's rates. It's not even close.

That said, I've become a lot more "passive" lately with my investments, so I don't need all the shiny toys that IB/TWS offers.

My employer 401k is at Fidelity, and my HSA is at Fidelity (simply because, just about every other HSA custodian is pretty terrible.)

I wanted to consolidate my assets at one reputable place (contrary to the main point of this thread about "diversifying brokers") just for the sake of simplifying my life, and simplifying things for my spouse if I were to meet an early/untimely demise.

So Fidelity wins for me right now, by default. I've consolidated just about everything at Fidelity (401k, HSA, Rollover IRA, Roth IRA, Individual Brokerage account, hell, even checking and credit card now too!) I'm pretty happy with it.

Re: Brokerage Diversification

Posted: Mon Feb 08, 2021 4:18 pm
by Alphaville
chicago81 wrote:
Mon Feb 08, 2021 3:12 pm
I really liked Interactive Brokers, and used them for years.

If you trade on margin, NOBODY beats IB's rates. It's not even close.

That said, I've become a lot more "passive" lately with my investments, so I don't need all the shiny toys that IB/TWS offers.

[…]

So Fidelity wins for me right now, by default. I've consolidated just about everything at Fidelity (401k, HSA, Rollover IRA, Roth IRA, Individual Brokerage account, hell, even checking and credit card now too!) I'm pretty happy with it.
thanks! that's great info.

with futures i'm forced to trade on margin, and i could use the shiny toys. i'll look into ib then.

as for passive investments, there's a pension in the horizon, and i have no say over it, so... it's as passive as it gets.

but if we start other investments (eg a roth) i'll look into fidelity, which has the benefit of a brick & mortar presence, yeah... makes sense to seek safety for the long term/large amounts.

Re: Brokerage Diversification

Posted: Sat Feb 13, 2021 8:41 am
by Lucky C
With Interactive Brokers you can go from a Lite zero-commission account to a Pro account that charges a low commission rate on every share you trade. While a small or long term investor would stick with Lite, a large or short term trader would probably want to go with Pro despite the commission you would be charged on every single share.

One reason is that with Pro, you get a lot of fancy execution algorithms that you don't have access to with Lite. If you were getting in/out of a major ETF or Dow30 stock it wouldn't matter, but if you had $100k+ to trade in a small cap with big spreads, you can use a VWAP (volume weighted average price) order to spread your order out through the day (or multiple days) so that you get close to the average price automatically without fretting over setting and micro-managing limit orders. If you traded a lot of small stocks, it would make sense to pay something like 0.1% commission (will vary based on share price) to reduce your slippage by 0.2% (will vary based on liquidity). I don't know if Pro would make sense for me yet, but I'm going to start keeping track of spreads and order execution to see.

The other main reason is that margin rates are lower with IBKR Pro, so if you plan to use margin for a while that's the way to go. I'm not planning to use margin but I still have a margin account so that I can "change my mind" with trades. With a cash account, if you sell something and immediately buy something with the unsettled sale funds (if you don't have spare cash in the account), you need to wait a couple business days until the funds settle from the first sale before you could sell the new purchase again, otherwise you're free riding. Hopefully I will not have to buy and then sell the next day very often, but if I ever do, it will be kosher with a margin account.