Essential insights to keep in mind
Having a slew of brokerage accounts is technically limitless — though the more you own, the trickier your financial juggling act becomes. But spreading your investments across different platforms might actually slash your fees and snag you better margin loan deals compared to sticking with just one.
If a single brokerage falls short on perks you crave — say, juicy interest on idle cash, stellar research tools, or juicy sign-up bonuses — then diversifying your accounts lets you cherry-pick the very best from each provider.
Blurring lines: Banks versus brokerages
The distinction between banks and brokerages is getting fuzzier than ever. Giant financial players like Bank of America mix banking and brokerage services, but their customer support might be just okay. Meanwhile, another firm may boast an intuitive trading platform yet skimp on discounts for mutual fund trading. Varied features like these make owning multiple brokerage accounts a smart move to tailor your investing experience.
How many brokerage accounts are ideal?
One account means fewer headaches — fewer logins to remember, tax forms to manage, and beneficiaries to designate. Keeping everything consolidated cuts down on the risk of missing something important, making your investing journey smoother and more straightforward.
5 compelling reasons to diversify your brokerage holdings
Let’s dive into why spreading your assets across multiple accounts might just pay off handsomely.
1. Slashing your costs
Competition among brokers runs fierce, especially on fees. The 2019 move by Interactive Brokers and Charles Schwab to roll out zero-commission stock and ETF trades sparked a domino effect industry-wide. With commission fees out of the picture, investors can zero in on other costs where brokers still differentiate themselves.
Top-notch customer support and research perks
Some brokerages, including Charles Schwab, stand out for quick access to real humans on the phone — no endless website digging required. They consistently rank high in client satisfaction, sharing in-depth proprietary research, earnings forecasts, and a trove of educational content on retirement, investing tactics, college funding, and personal finance.
Access to margin loans with competitive rates
Margin lending lets you borrow against your brokerage account equity, essentially overdrawing your account and incurring interest on the borrowed chunk. One broker stands tall here: Interactive Brokers, a heavy hitter known for ultra-low margin rates that track the Federal Reserve’s benchmark, topping out at around 1.5% above the federal funds rate. Most competitors charge much heftier fees in comparison.
What’s more, as the Fed hikes or cuts rates, Interactive Brokers adjusts margin costs in tandem — and bigger loans actually come with lower rates. While margin trading suits experienced investors aiming to amplify returns, it also serves as a quick-access emergency loan, though with the usual caveat: borrowing ups your risk.
4. Earning interest on your idle cash
Some brokerages and robo-advisors offer appealing interest rates on cash holdings, generally fluctuating with Fed rate moves to become some of the most rewarding spots to park your money short-term without exposure to stock market swings. This makes them a go-to if you want to grow your cash stash efficiently.
Compared to traditional banks doling out meager returns on savings accounts (even as interest rates climb), these high-interest cash management accounts shine. Plus, many let you spend directly from the account and toss in free debit cards — making your money easily accessible for everyday needs.
5. Sweet bonuses and promotional offers
Opening accounts with different brokers can bring you extra perks — think cash bonuses for bringing your assets over. The bigger your deposit, the juicier the reward, sometimes reaching into the thousands. Even modest funders can score bonuses, with some promos asking for as little as $50 or $100, so sniffing out these deals is definitely worth your time.
Quick fact
According to data, brokerage account bonuses totaled over $500 million industry-wide in recent years, with some firms offering sign-up incentives reaching up to $2,000 for new investors who meet funding thresholds.
When to consider opening another brokerage account
Deciding whether to have multiple brokerage accounts boils down to personal preference and investment goals. Here are some questions to mull over:
- Do you prefer all your eggs in one basket? Some folks value simplicity and want everything under one roof, while others don’t mind the extra task of juggling several accounts.
- Are there unique services that two different brokers provide? Maybe one excels in options trading while the other offers unbeatable mutual fund deals — splitting your assets accordingly can maximize your advantages.
Frequently Asked Questions
Is there a cap on the number of brokerage accounts you can hold?
There’s no official limit to how many brokerage accounts you can open. That said, SIPC protection typically covers up to $500,000 per person per broker, making it sensible to diversify across firms to spread out risk.
Can investments be transferred between brokerages?
Most common assets—stocks, bonds, ETFs—can usually be moved from one brokerage to another. However, some mutual funds or specialized products might not be transferable if the receiving broker doesn’t offer them.
Would consolidating accounts be a good move?
If you favor simplicity, want to streamline your portfolio, or prefer to track all your holdings in one dashboard, merging your accounts might make sense.
Final thoughts
The escalating rivalry among brokerage firms is a huge win for investors. Are you leveraging it fully, or still sticking to just a single investment account?
Each broker brings unique strengths to the table, and by spreading your holdings across multiple platforms, you can handpick what suits your strategy best — trimming costs, boosting benefits, and ultimately crafting a more rewarding investment journey.