What Happens to Our Investments if Schwab, Fidelity or Vanguard Collapse?

With the recent banking crisis, I've received a lot of emails asking me two related questions. First, what would happen to our investments at a broker if that broker failed. Second, what would happen to an ETF or mutual fund if the company behind the fund failed?
We cover both of these questions in today's video.
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Schwab Balance Sheet: content.schwab.com/web/retail...
What if Vanguard went bankrupt: investor.vanguard.com/investo...
FINRA: www.finra.org/investors/alert...
Fidelity Safeguarding accounts: www.fidelity.com/why-fidelity...
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#broker #bankruptcy #robberger
ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
AFFILIATE DISCLOSURE: Some of the links on this channel are affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase and/or subscribe. However, I only recommend products or services that (1) I believe in and (2) would recommend to my own mom.

[@AmithKaury]

We can only hope that doesn't happen. I do have a 3 fund portfolio consisting of 33% S&P, 33% Total stock, and 33% international. I feel a need to focus on complete growth so I went 100% stocks, but does the SP500 and TSM overlap too much to make sense holding both? However I’ve been in the red for a month now. I work hard for my money, so investing is making me a nervous sad wreck. I don’t know if I should sell everything, sit and just wait but watching my portfolio dwindle away is such an eye -sore.

[@donovantobs]

There are many other interesting stocks in many industries that you might follow. You don't have to act on every forecast, so I'll suggest that you work with a financial advisor who can help you choose the best times to purchase and sell the shares or ETFs you want to acquire.

[@kurtKking]

I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.

[@MickyGlover]

How can I reach this advisers of yours? because I'm seeking for a more effective investment approach on my savings?

[@MickyGlover]

Thank you for sharing. I just scheduled a phone call with her. She seems proficient considering her résumé.

[@timothyvezeau2890]

Careful with “recommendations” from a “stranger”.

[@CatherineWilson8]

The removal of the Glass-Steagall Act in the late 1990s, which contributed to the dramatic failure of large banks during the financial crisis of 2007-2008, was a very unwise decision. Dodd-Frank and this Act both need to be reinstated immediately in order to avert another catastrophe. If nothing is done to fix the current issue, what happened with SVB is merely the beginning of what will occur.

[@user-uk6bs6ej4z]

I'm hoping it doesn't happen anytime soon. I'm betting for stock market crash. I suspect a Great Depression Crash before the end of the year. Flash Crash might happen. people playing the market will get wiped out in one day. Like Zero hour stock options.

[@thejohnbeck]

DoddFrank helped create 2008 gfc. The DF act doesn't have the teeth of the Glass Steagall act

[@tomlxyz]

Currently we have a different growing problem: non banks getting involved into giving out loans while not having the regulations of banks

[@Captain_Jack514]

@@thejohnbeckDoddFrank act was signed in 2010. That doesn’t make any sense.

[@sunnohh]

@@tomlxyzwelcome to 30 years ago

[@oneiljerry9460]

Well said Rob, Protecting your capital is much more important than making money. Basically because if you lose your capital, making money is much harder. ''Missing the train'' vs. ''losing your money''. There are a lot of trains, but if your money is gone, it's over.

[@alexyoung3126]

Wall Street pitched so-called quality stocks with high profitability and low debt, as a kind of insurance against whatever the economy might throw at you. Quality stocks have underperformed the S&P500 this year, My $200k portfolio is down by approximately 20 %, any recommendations to scale up my returns on investment

[@joesphcu8975]

Nobody knows anything You need to create your own process, manage risk and stick to the plan, through thick or thin While also continuously learning from mistakes and improving.

[@rickhammond2473]

Invest in Tesla and you can sleep in peace.

[@warphace]

@@alexyoung3126 Isnt it frustrating watching all these junk companies that never made money and never will out perform quality, roblox, unity, affirm you name all garbage outperforming.

[@jameslarosa2396]

@@lawerencemiller9720 Let me guess. You're an investment pro.

[@Announcement2024]

Understanding personal finances and investing will most likely lead to greater financial independence. By being knowledgeable about money and investing, individuals can make informed decisions about how to save, spend, and invest their money.

[@richardm654]

If Vanguard or Fidelity goes under, we have much bigger problems than anyone can imagine. The fear created from the largest brokers going under would cause a massive crash in everything. Even the Fed and Treasury couldn't contain the fallout.

[@amanzella6508]

What would SKF do?

[@edmhie1]

Fidelity has a cash account that is insured in millions. That's why I parked my money for the meantime while the market is in turmoil in Cash account.

[@allanwelsh7620]

Agree. If Vanguard or Fidelity go down. The whole US economy might be shaking.

[@onehitpick9758]

@A.J. It's just numbers on a computer somewhere. Real wealth is health, knowledge, an the ability to help one another make it through.

[@ivanvarykino8202]

Totally agree. Why are we even talking about this? It didn't happen in 2008. What indicators suggest it could happen now?

[@lincolnbutler8051]

Thank you very much for preparing this video. I was one of the people who asked you to do this. Kind regards Lincoln

[@bencheung2407]

Excellent information! You just clear up the cloud in my head in the past week on my concerns on the assets at the brokerage accounts due to the recent banking fallout. Thank-you!!!

[@wowbagger3505]

Happened on this by accident, but it is information I was seeking and things are pretty much as I thought. Thanks for the reinforcement. I am definitely subscribed from here on out! Thank-you!

[@MonteRosa849]

Thank you very much Mr. Berger for unpacking a very complex matter and explaining it in simple, understandable terms. 🎯

[@brekkenhughes8703]

It's always a pleasure to have you here as a mentor, i learn a lot from your videos, and it has helped me in decision making, particularly in the financial sector.

[@jarthurpaxton9223]

Excellent. Couldn't have been better done. Clear, concise, and substantiated by documentation.

[@ericmcdonald7313]

Well said. I am a 30+ year RIA of my own firm and have been answering this question over the past week. Appreciate your description.

[@howardroberts8058]

Excellent and straightforward explanation of the differences between brokerage firms and banks. Very much needed, thanks Rob

[@michaellamont2605]

My dad was a Broker. I'm happy with crypto. His limp gains weren't even keeping up with inflation

[@csg6262]

Great video and explanation. My employees were just asking me about this today. You did a much better job explaining it than I did. It's almost like my phone was listening. Hmmm...

[@maxplank4083]

Excellent video. You are the fist person to explore this subject. These questions are becoming increasingly more important in an increasingly risky financial world. The majority of us do not really know how safe our money is.

[@BuceGar]

As someone with a brokerage account at Charles Schwab, this was excellent information, thanks for making this video.

[@EricMcDowellegm]

Thanks so much for this video! I have funds in Schwab and Fidelity so your words were reassuring. New subscriber! Glad I found you. 😊

[@CynthiaArmstrong7]

Sir, your channel is a Godsend. I have been so worried about my money in my checking account at Schwab. I had no idea it was insured. This is a great relief. I am happy to subscribe. Thank you.

[@bdietz2]

Congratulations - you are a great teacher and your explanations in this video were simple, direct, and easy to understand. Anyone can make things sound complex, but it takes work to explain something in clear, simple terms. (BTW I'm in my 70s and remember reading about the basics of investing when by grandmother was buying stocks and I was in high school. What I learned then has always been helpful. I'll subscribe to your channel.)

[@user-kl1zw3su1j]

Excellent explanation of the difference between brokerage firms and banks and how they work. Important for all investors to know.

[@disch972]

Thanks Rob! You're more informative than all the talking heads I listened to this week!

[@117775EM]

Excellent overview Rob. This is precisely the type of information needed several weeks ago so that depositors would not have behaved out of fear and moved deposits from SVB. Any banking system, especially our with rules, regulation and oversight (some may say were asleep) requires confidence in order to remain a solid institution.

[@joythought]

The majority of deposits in SVB were not protected by FDIC insurance and the valley is a tiny community connected on Twitter so this kind of inevitable if there was anything that spooked them they all had the responsibility to grab their money and run for the hills.

[@sek10128]

Very good, simple, and easy to understand summary. Nice job. Thanks for confirming what I "thought" I knew.

[@randygrebel1539]

Great Saturday morning viewing. Thanks for the detail and the clear voice of our current state of affairs in regards to banks and financial institutions. I'll carry forward my research based on your education. Again, great informative video and I look forward to more.

[@freeroamer9146]

Interesting as well as reassuring! Good to know there are checks and balances in place to protect investors. 👍

[@briandarnell1809]

Thanks for the timely information. My wife was just asking about all the money we have with Fidelity and you saved me a ton of research time.

[@janesmith506]

Thanks for answering these questions. I never thought of asking them, but it's good to know the answers.

[@MrHardrock]

ok!!!!! found you here!!!! Glad to see you back on your own channel. Great info today!!!! Totally slipped my mine that CS is publicly traded just like a normal bank or company.

[@DYI]

Very good job explaining. You might want to point out that one of the biggest crimes FTX did was mixing client's money with with their own investments.

[@hugoglenn9741]

We’re they really a registered brokerage or just a bunch of off-shore con men carnys

[@MrSnazzy682]

Ftx was run by a bunch of incompetent college kids imo

[@schnoonsdad]

A very helpful & lucid explanation. I would add two thoughts. When considering the potential for worst case situations, on the order of "what if Schwab or Fidelity goes under?", I would suggest that if things got that bad we all have bigger, more dire problems to face than what is our money is worth (like literal blood in the streets). Possible, but highly improbable. I also would mention a sort of market risk that comes with some investment vehicles and that played out during the 2008 debacle. That would be that there is a delay, sometimes significant, before you can get your money back. The old maxim about not putting all the eggs in one basket becomes especially apropos if you are likely to funds for expenses, or are disposed to taking advantage of marked down asset prices such as we saw in 2009.

[@drrwatcher]

Thank you for answering a question that has long been on my mind.

[@arbiter3297]

Highly instructive and clearly presented. Thanks Rob!

[@michaelevans5328]

Super helpful. Thanks for cutting through the noise and making a complicated subject understandable. Although I think my money is relatively safe at a bank or brokerage, I do worry about temporarily losing access to my money due to solvency issues, hacking, cyber attacks, fraud, or a simple misunderstanding. So perhaps maintaining cash accounts at multiple financial institutions would be a good idea.

[@joseCalderon1976]

You also have to have a few thousand dollars in cash somewhere accessible just in case the banks run out of cash all of a sudden

[@bobbyd6680]

​@@joseCalderon1976 Except it is becoming a cashless society.

[@Gaarasanhao]

Great information. Thank you. Depending on the brokerage firm, the sweep account that holds idle cash in a brokerage account could be a bank account which would fall under the FDIC rule limits. After the 2008 financial crisis which caused some money markets funds to fall below $1, brokerage firms started to buy banks to link to their brokerage products.

[@melissanative1799]

MY THOUGHTS AS WELL! IF THE COMPANY (BANK) THAT ACTUALLY HOLDS THE MONEY FOR YOUR INVESTMENT FAILS, THEN WHAT?? YOUR MONEY IS IN SOME BANK RIGHT? BANKS ARE NOT SAFE AND I HEAR THAT OUR BANK ACCOUNTS COULD GO TO ZERO! THE GOVERNMENT WILL ONLY BAIL OUT WOKE BANKS. AND THEY WILL PROBABLY TAKE THE OPPORTUNITY TO INTRODUCE CBDC AND FORCE YOU TO TAKE THAT INSTEAD.

[@indigoindignation]

Thank you, thank you! I've been searching for the answer to this question for years! Finally I can breathe easier.

[@agrahazl]

great vid! This is a question I've had for awhile to the point of even holding cash from broker deposit because of not knowing. Excellent job.

[@fij7963]

Thanks for the clear explanation Rob! Along the lines & probably for another video, I would love to hear (& learn) from your take on protection on "annuities" against these institutional failures.

[@melissanative1799]

YES, I CAN'T BELIEVE NOBODY IS TALKING ABOUT THEM.

[@noneyabeeswax3200]

Thanks for the video,this has been my line of thought for over a year now. Many of the banks(if not all)are clearly insolvent and the only possible safe place is in my brokerage. I’ve slowly drained my banks dry and all of my savings are in my brokers sweep accounts at this time. Your video has given me more confirmation

[@fizzinichizie2416]

What coins are you holding? You shouldn’t break half talk of all of your savings just to ” invest”,what trade do you do mostly and what exchange or DEX do you use ?

[@tyfighter1776]

I had this question as well and asked a financial advisor during one of my annual sessions. They told me that when it has happened in the past, they will likely get bought out by a different company, your accounts would get automatically transferred to the new company, and you would keep all of your positions. I had the same question about FDIC, last time it happened on a large scale, everyone got their FDIC deposits within 1 business day. Now if Vanguard or Fidelity go under, then I think the only bank big enough to buy them would probably be JPM or the Fed.

[@robertmallett5955]

Thanks so much for the valuable information you gave us on this topic. I just found you and will look into all your previous posts as I'm sure they will be just as valuable and interesting.

[@mikephilpot9857]

Very important topic. Thx for the video. 👍

[@belangp]

Good video. All ETF's and mutual funds (including money market mutual funds) are governed by the Investment Company Act of 1940. It requires each fund to be a separate corporate entity with its own management and also requires all assets to be held in a trust with an independent custodian. It's a beautiful thing.

[@gorkushka]

what about CITs? My understanding is that a Collective Investment Trust is owned by a Bank but are For the Benefit Of the shareholders.

[@darylwhetstone3959]

Excellent information provided!! Thank you for putting this information together for those of us that are not financial wizards, and lack a lot of understanding of the financial world.

[@me_and_my_dog9670]

Thank you for this show. I have been concerned about Schwab- I don’t have mutual funds but I do have stocks and hoping that I chose wisely.

[@joekuhnlovesretirement]

Congratulations on reaching 100,000 subscribers. 100% high quality content.

[@rob_berger]

Much appreciated!

[@johnlennon232]

The bank crisis isn't over yet, and experienced individuals know credit crises don't end quickly. Some find it amusing that some think it's resolved, but in reality, we're headed for a major economic downturn due to this ongoing bank crisis.

[@SF-fb6lv]

Thanks for the video! When I asked these questions of the firm that our 401k accounts are in, the woman I spoke with said "You are the first person I've had ask these questions." The first two representative I spoke with hadn't heard of SIPC or thought it was SPIC; I don't know why they were even working there. Scary.

[@billfrete8487]

Wow thanks this was my question. You answered it wonderfully.

[@DAGenao]

Great info, Rob. My question is whether the custodian bank is allowed to invest the assets in a particular fund. If that is the case, we're still at risk if the custodian bank collapses.

[@kerney3043]

You didn't address this, but what happens if the custodian that is holding the funds goes bankrupt. At least with Fidelity, Vanguard, or Schwab we somewhat know those companies and how they are run. Now it appears we have to do our research to see how the custodians are doing as a business. What happens if one of the brokerages was using SVB as their custodian?

[@brickell123]

That is the key question he didn’t answer.

[@mollypaintscows]

Excellent question. We’ve been wondering the same thing.

[@crtune]

This reflects a misunderstanding of what a custodian does. It places all new invested funds directly into the portfolio stocks you see on your semi-annual report for the mutual fund. They ONLY make money with the small annual expense ratio outlay taken out in all mutual funds. You should note and understand the expense ratio of your mutual fund, which will tell you how much the fund manager and custodian are being paid. The only way businesses which only do custodian work can fail is if the Assets Under Management (the totals of all managed portfolios) so drastically collapses that this no longer covers their expenses. This is a disaster scenario of ridiculous proportions where massive amounts of the public have nearly simultaneously cashed out (with penalties!) their 401ks. We will be worried about much more than just money if such a scenario was to occur. This doomsday stuff is not likely at all, but lack of understanding of the differences between BANK, BROKER-DEALER and CUSTODIAN are everywhere. People are often demonstrating they do not understand these fundamental business model and legal (as well as regulatory) differences.

[@melissanative1799]

I WISH SOMEONE COULD ANSWER THIS EXCELLENT QUESTION. DON'T CUSTODIANS USE BANKS TO STORE THE MONEY? I WANT TO KNOW WHAT THE CUSTODIANS DO WITH THE MONEY.

[@crtune]

@@melissanative1799 Each fund is its own balance sheet. Money goes into the cash section and when enough positive cash flow occurs more shares are bought on the open secondary stock market. The values one sees for the fund shares are the net equity of that fund. Typically only a small amount of each fund is cash. In the end this will be in a special "escrow" type account designated as the property of the fund share owners. If there is a lot of money in the fund in cash something is wrong; it's supposed to be invested in the securities portfolio.

[@GenXstacker]

This is an excellent question which has popped into my mind since most of my portfolio is at Vanguard.

[@Coyotehello]

Just stumbled on your channel. Very nice clear information in this video. I will now have a binge watching rainy Sunday time on your channel...

[@nicholasmartinez6043]

This was the perfect video for my questions: thank you. I’ll continue to keep my cash in a vanguard money market account for the higher yield vs a bank account

[@corneliajennins5714]

Heard someone say the best season for a financial breakthrough is now, especially with inflation running at a four-decade high. I have approximately $750k stagnant in my port_folio that needs growth. What is the best way to take advantage of this downturn?

[@anthonymilner1088]

@agathariley9176 This recommendation literally came at the right time, I dipped by $11k in stocks last week alone. Its crazy! I just looked up Kathleen Yanelli Carole online and researched her accreditation. She seem very proficient & I wrote her detailing my Fin-market goals . Information they say, is power. Thanks for this

[@bobfrassetto8837]

precious metals....

[@asdf3568]

gold

[@jolaz69]

Gold hasn’t gone up that much

[@mscolli3]

@@jolaz69 Will soon since the dollar is collapsing. Just make sure its physical gold not an ETF or something paper.

[@jeanettelabarb6521]

Thank you so much for the clear explanation. You have put my mind at ease.

[@rogerhoke3103]

Thanks Rob you helped answer a lot of questions I had about the current situation. 👍

[@ponzianomanning3071]

I feel more at ease with my stock and money market acc. at Fidelity. Thank you!

[@mrbigglesworth375]

I recently was told it would be a good idea to remove my margin account status within my brokerage account. I did so as I don't use it anyhow. But the reason as I understand is the margin status somehow allows the brokerage to lend my share out to others, which could complicate things depending on who was borrowing those shares. Maybe I am over reacting but I did notice that my account now shows "your shares" statement on each position. Just food for thought. I use Vanguard BTW.. love them.

[@boriskasperov7718]

Thank you for taking the time to record this video. It was educational and reassuring.

[@subduggal7472]

Wow! You make complex things very clear.

[@Emily-le2op]

I suggest you offset your precious metals and get into digital stocks and other digital assets, Downturns as bad it can be, provides good buying opportunities in the markets and it can also create volatility giving great short time buy and sell opportunities too. This is not financial advise but get buying, cash isn’t king at all in this time!

[@SageMadsen]

To the newbies I would say have a mentor. Not sure where you will get an experience one, but if your knowledge of the market is limited, it seems like a good bet.

[@beachdancer]

What was left out is how safe a money market fund is intrinsically. The risk is that borrowers go broke.

[@p38cobra]

The opening got me hooked

[@JoeSmith-jd5zg]

Thanks Rob. Great topic and excellent explanation!

[@timclifford5172]

This is the clearest explanation I've seen on the difference between banks and brokerage firms. It not only states the facts but also provides simple and accessible ways to verify the information. Having been in the financial services industry for over 20 years, I appreciate that this explanation was delivered without fear-mongering or bias, offering an excellent summary.

[@cedomirdzunic5194]

How unbelievable it is to me that this is a free content. Fantastic work sir! Thank you so much for putting all this together!

[@thumper823]

Such a good posting...I'm sure many people had the question "what would happen to my investments if say a Vanguard went under?" Thank you for explaining the separation between the investment firm and custodian.

[@PennyPincher60]

Incredible amount of research that was well presented. thank u.

[@harinair7066]

Thanks for making this video Rob! Question: Would we be protected if the custodian bank fails?

[@billrailsback5176]

Excellent- it´s all about "Segregation of Assets". Brokerage firms keep our assets apart from theirs, whereas Banks (And Life Insurance Companies as I understand) Do NOT. Cheers

[@robertstankay8753]

Just an amazing summary n breakdown of issues were All concerned with great someone this intelligent can make it easier to comprehend..thx😎

[@w1swh1]

Thanks Rob. That's very reassuring as I have mutual fund assets in Schwab, Vanguard and Fidelity. As you said we don't want another Madoff!! I've watched the Netflix documentary twice now and it still sends shiver down my spine (where was the SEC?)

[@jjuarez83]

I been too afraid to ask this. If these institutions fail I would feel like a fool for putting money away for retirement.

[@Cenlalowell]

Your not by yourself

[@spencerwinston4334]

With a Marxist tyrant Brandon Biden, all investments are dicey as Marxists do not adhere to Constitutional property principles. Tyrants tyrannize that's what they do by definition. The Marxists are snakes and reptiles of the lowest order. Biden would nationalize a piggy bank in a church in a New York minute as this obvious degenerate tyrant is raiding the free market citadels like Ghenghis Khan Marx on a holiday rampage. Vanguard and others with SVB as emblematic are so "woke" at the top, the Marxists are looking to change the drapes at Vanguard HQ to Crimson Marxist red. Never, never, never, never, never, never turn your back or guard on a Marxist. Be careful please everyone, the Marxist tyrants are pervasive even in seemingly "safe harbors."

[@hownwen]

If any of these fail, we probably don't need our retirement because we'll probably be dead or slaves of the countries that chant death to American

[@whatisrealknowtheformula6137]

You wouldn’t feel like a fool; you would have been complying with standard retirement advice. Buck the standard.

[@thinkingoutloud6741]

It’s not too late for them to make fools out of us all. The”Big” people will be protected and it’s all of us little people that will suffer. That’s the way it has been throughout history.

[@rufuspipemos]

Sooooooo, what happens if the custodian goes under? State Street saw their stock plunge in 2008. According to what I read the brokerages and fund companies would be "unsecured creditors." Your thoughts?

[@SasiSarma-pc6zq]

Great information Rob- especially with the news this week.

[@PilatesinSacramento]

Thank you for the detailed video. You addressed one of my concerns of recent days. Good to know!

[@tmangeles7575]

Thank you. I called Vanguard and asked this question and they never responded. Subscribed and upvoted.

[@brettgreen9247]

Individual stocks are the safest asset if you can handle the volatility. Buy all 30 stocks of the DJIA, a price weighted index. Matches most diversified index fund's performance and you get more compounding periods. Easy peasy. Great video. Cash is the banks asset, stocks are your asset. Thank you .

[@Neo-tn1mc]

Preferred Stock !

[@rickhammond2473]

Tesla is they are a decade ahead of the rest of the field.

[@RobotsCanDoAnything]

Rob, great discussion. Excellent education.

[@ksmithreps1]

Very informative and exactly what has been swirling in my head! Thanks for posting!

[@low-keyobserver8539]

If a bank goes under who does the FDIC pay first? The majority of the under $250k accounts or the more obvious millionaires with friends?

[@stephenduda947]

Are the online high interest yielding banks the ones that are in trouble?

[@danstevens6495]

I work for one of the big firms and I also have our money their also.. i feel very secure about our 3:19 finances relative to having money at my firm vs. a bank

[@NewPragmatic]

Excellent explanation of SIPC. Highly recommended viewing for anyone with brokerage concerns (basically rest easy, but watch).

[@vincepoy2]

One thing you didn't cover is with Brokerage Accounts using Schwab for example, they have something for univested cash which depending on the broker, can either be a Money Market Fund or it goes to a FDIC account. For the former, that would be covered by SIPC insurance while for the later, it is under FDIC insurance with the bank it went to but in both cases, the FDIC Bank or the SIPC Money Maket Fund would still be investing that money however they want.

[@rob_berger]

That's my understanding as well.

[@tomatden]

I had this exact question as well, and here’s another wrinkle. Say I have a regular brokerage account with Schwab, a traditional IRA, and an inherited IRA also with Schwab. Does each account get 250K of coverage (for a total of 750k of coverage)for uninvested cash, or is the combined total of uninvested cash in all 3 accounts only covered by 250K? Thanks in advance, super helpful channel!

[@SimpleAbundance]

@@tomatden I don’t have the answer but my understanding is per person per type of account, I think you’d qualify for 500k, . I’d call them, I’m really curious what the answer is. An Ira is an Ira imo but the term “inherited “ is throwing me off as I’m not familiar with trusts and the other nuances of inheritance

[@hanwagu9967]

SIPC and FDIC do not do the same thing, so you shouldn't consider that SIPC is to brokerage securities and cash as FDIC is to deposit cash. SIPC covers "cash" in your brokerage cash/sweep/clearing account, because they are still considered securities being normally held in money market fund accounts. FDIC covers dollar for dollar in case of bank failure up to the limit. SIPC does not cover dollar for dollar in case of brokerage failure. It covers in case of loss, theft, or fraud. It covers the cost to repatriate your securities, or securities held as cash (e.g. cash in your money market fund sweep account) in non-commodity related cash accounts. In the case of brokerage money market fund, no, the brokerage is not investing the money however they want. You know what the money is being invested in because it is in the underlying money market mutual fund. It is booked as such, that's why it is considered securities and not covered by FDIC even though it is "cash".

[@cathleengrady1351]

Great explanation, very clear. One question on following the money or assets. In Schwab’s case, State Street Bank as custodian, what type of access does SSB have to custodial assets? Should we be concerned about the viability of custodians?

[@rickysand1900]

Great question. I was wondering the same thing.

[@pejpm]

At that point you’re basically asking “what if the entire financial system collapsed?”

[@cathleengrady1351]

Yes, that is right. And a question I have asked for a long time but have not received an answer.

[@hanwagu9967]

what do you mean by what type of access does state street have? They hold custody of the assets, that's it. State street is required to maintain separate balance sheets from it's corporate operating assets, its custodial and/or administration assets, and assets under management.

[@melissanative1799]

EXACTLY, DON'T CUSTODIANS STORE THE MONEY IN A BANK ACCOUNT WHICH IS WHAT WE ARE TRYING TO AVOID, RIGHT? OUR ENTIRE FINANCIALY SYSTEM IS SAID TO BE COLLAPSING AND I AM AFRAID TO KEEP MY HARD EARNED MONEY IN ANY BANK.

[@jlchambe77]

Thank you. I’ve been wondering these things. You explained it very clearly.

[@yonghu4362]

Very timely and helpful.

[@norbertruijling6763]

Better 'style' would be to answer the questions right away, and then explain. Now I have to listen to the entire video to get the answer.

[@jcd3869]

VERY little covered subject. Thanks.

[@eliasthienpont6330]

I keep my gold in my dungeon guarded by a pair of manticore.

[@johncotton7058]

What about uninvested cash at a brokerage? Its swept into an account usually set up by the brokerage. Is that account FDIC or SIPC? Thanks, great and timely video, of course.

[@MaryBethMcCoy]

FDIC insured like a regular bank up to 250K.

[@rufuspipemos]

Vanguard does it best... when money comes over it automatically lands in a Government Money Market first, so it never sits in cash.

[@Alumnikiid]

SIPC protects the securities and “cash” in your brokerage account up to $500,000.

[@hanwagu9967]

@@MaryBethMcCoy no. it depends on what kind of sweep account.

[@user-jy7yw5kw3w]

I think Vanguard would be the last one standing since it’s owned by its members. Wouldn’t it then take all its members to withdraw at once for it to fail?

[@shortyofshorts1249]

You’re right, Vanguard is a very strong and reputable company. Us that invest in their ETFs support them and reap the great/ stable return ratio.

[@spencerwinston4334]

With a Marxist tyrant Brandon Biden, all investments are dicey as Marxists do not adhere to Constitutional property principles. Tyrants tyrannize that's what they do by definition. The Marxists are snakes and reptiles of the lowest order. Biden would nationalize a piggy bank in a church in a New York minute as this obvious degenerate tyrant is raiding the free market citadels like Ghenghis Khan Marx on a holiday rampage. Vanguard and others with SVB as emblematic are so "woke" at the top, the Marxists are looking to change the drapes at Vanguard HQ to Crimson Marxist red. Never, never, never, never, never, never turn your back or guard on a Marxist. Be careful please everyone, the Marxist tyrants are pervasive even in seemingly "safe harbors."

[@Cgopat]

Thank you for the easy to understand explanation.

[@rickc3291]

Very helpful and clearly presented information. Thank you!

[@amazonlily0]

What if custodian commits fraud or go belly up? E.g state street in your example. Is there any regulation or monitoring control on them?

[@kenapple2532]

good question. I'd like to know about the custodian.

[@bigpicturethinking5620]

The custodian going “belly up” is the same as the brokerage doing the same. Fraud is different, though, and who knows maybe there is insurance for such a thing?

[@jimdude5529]

what happens if an a large asteroid hits the earth tonight ? The problem is not a bank run. It is actually a fear run. Fear has no limits. Yet there's a lot of money bet on the color of fear.

[@hanwagu9967]

there's a difference between custodian and custodial services. state street and bny mellon aren't good examples, since they are unique banks. Fraud is one of the scenarios SIPC provides limited insurance coverage; however, for some reason a Ponzi Scheme is not considered fraud or theft, contrary to statute. You just need to look at SIPC and the government's handling of Madoff.

[@mimi-ny1wq]

Thank you for the timely video! I recently read the article that reads: "Schwab carries excess Securities Investor Protection Corporation (SIPC) insurance provided by Lloyd's of London and London insurers. The combination of SIPC protection and Schwab's policies total an aggregate limit of $600 million, limited to a combined return to any customer of $150 million, including cash of up to $1.15 million. Fidelity's excess SIPC insurance has a per-customer limit of $1.9 million on uninvested cash with a total aggregate limit of $1 billion." Does this mean Schwab only protects the customers who has $150 mil? (probably the institution customers with employee retirement accounts?) - unlike Fidelity that specifies the per-customer amount up to $1.9 mil? Thank you in advance for your input.

[@spencerwinston4334]

With a Marxist tyrant Brandon Biden, all investments are dicey as Marxists do not adhere to Constitutional property principles. Tyrants tyrannize that's what they do by definition. The Marxists are snakes and reptiles of the lowest order. Biden would nationalize a piggy bank in a church in a New York minute as this obvious degenerate tyrant is raiding the free market citadels like Ghenghis Khan Marx on a holiday rampage. Vanguard and others with SVB as emblematic are so "woke" at the top, the Marxists are looking to change the drapes at Vanguard HQ to Crimson Marxist red. Never, never, never, never, never, never turn your back or guard on a Marxist. Be careful please everyone, the Marxist tyrants are pervasive even in seemingly "safe harbors."

[@1rstTry]

No that is not what that means. Remember that brokerage firms must keep your assets separate from the firms assets. Simply put, if a brokerage firm went under, your assets would just get moved to another institution and then you would set up online access and go on with your life. The SIPC/Lloyd’s protection is for MISSING assets. Firms get audited monthly to make sure assets are kept separate.

[@vincepoy2]

They will pay a total of $600M to all customers combined and each customer is covered for up to $150M which includes up to $1.15M in cash, remember this excludes the $500,000 from the SPIC which includes up to $250,000 in cash. The problem is the $600M for all customers combined as Schwab holds $7.0+ Trillion in customer assets and only $600M will be covered. The next issue is they have 33.8 Million active brokerage accounts so even at $1M each and they have lots of accounts with way higher balances including mines for example, they can only cover 600 customers in total. If they were to pay everyone a fair share, $600M for 33.8M accounts, each account would get $17.75. Now, that's assuming that their ecess insurance was still active. If they were failing, what are the chances they would be actually paying their premiums.

[@PLeejo]

​@@1rstTry they keep that money in a BANK. ours is in Wells Fargo. If banks go, so does THAT deposit, no?

[@frednesvet5046]

​@@1rstTry what do you mean MISSING assets? How can they go missing? Do you mean that Schwab didn't put my money in the investment that my advisor bought for my portfolio?

[@kenvandeburgt1232]

This is pure gold. Thank you.

[@msisles6278]

Your investments are protected under rule 15c3-3. The clearing broker is required to do a reserve calculation and set aside funds in segregated account. In addition, under the rule a daily possession or control calculation is done daily to ensure fully paid and excess margin securities are under the control of the broker. Any segregation violation and the broker must act to reduce the violation.

[@sureshmangtani8499]

What happens when a custodian goes under? Like State street bank… is that possible? Thanks

[@jimdude5529]

The objective is to create less banks. To worship the global savior. All hail the new world order.