All eggs in one basket [all money at one firm?]

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Old Monk
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All eggs in one basket [all money at one firm?]

Post by Old Monk »

Hi,

Does it make sense to have all retirement ((401k, roth, IRA, 403(b)) money (~$2 million) with Vanguard for a couple (husband + wife) ?
OR
Should we split it between Vanguard and another company (Schwab, TD Ameritrade, etc.)? If so, which is the next best choice after Vanguard?

Since the collapse of Lehman brothers and scandals such as Enron, etc., am I being paranoid having all the money at one place?

Please note: The question is not about splitting the money between different funds ( say for S&P 500 between VFIAX versus BSPAX) but more about parking the money with 2 different companies while maintaining overall asset allocation.
SnowBog
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Re: All eggs in one basket

Post by SnowBog »

In the long run, I no longer have this concern. Technically, Vanguard doesn't have your money. The funds are setup and held by another entity. So your investments should be fine even if Vanguard ceases to exist.

In the short run, in theory its possible you might not have access to your funds for a few days. But between credit cards, savings/checking, etc. you likely have enough in other places such that this wouldn't be a problem.
venkman
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Re: All eggs in one basket

Post by venkman »

The BH wiki has a section on this topic.

https://www.bogleheads.org/wiki/Vanguard_safety
tibbitts
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Re: All eggs in one basket

Post by tibbitts »

This question comes up frequently. I have between 2% and 55% at each of six different providers (including banks and Treasury Direct, plus a legacy annuity held at an insurance company.) Currently I don't feel the simplification of a single provider is worth the seemingly minor risk of at least temporarily experiencing a loss of access to all my funds. On the other hand, with multiple providers, the odds of experiencing a loss of access at least temporarily at any one provider is obviously greater than with just one provider.
sport
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Re: All eggs in one basket

Post by sport »

I manage the investments for DW and I. However, as I age, there will come a time when I will no longer be capable of doing so. When that occurs, DW or my children will have to take over that responsibility. So, I try to keep things simple and avoid unnecessary complications, to make it easier for them.
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JoMoney
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Re: All eggs in one basket

Post by JoMoney »

I currently have my 98% of my retirement money at Fidelity (the remainder is in a relatively new employers 401k plan at T.RowePrice).
I wouldn't have any specific concerns about having it all with one of the major well-known and respected firms such as Vanguard, Fidelity, Charles Schwab, or one of a few others...

One of the good things about having the accounts consolidated in one place is it can help make it easier to keep watch on it. If there looks to be any discrepancy, I'm more likely to notice reviewing my one statement rather that having multiple statements scattered around different brokers.
In the event of fraud, some of the larger well-known brokers like Vanguard have explicit statements regarding reimbursing for fraud IF you follow basic security practices, like reviewing your statements and reporting fraud quickly.
https://investor.vanguard.com/ts/pdf/va ... -fraud.pdf
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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AnnetteLouisan
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Re: All eggs in one basket

Post by AnnetteLouisan »

Might be a good opportunity to discuss the role of the SIPC. There is some lack of awareness among the public (including me) about what it does and cannot do. It’s not a guarantor. It‘s the FEMA of the brokerage industry. I think that if a brokerage firm fails, FEMA ensures that you get your accounts returned, but it does not ensure against market losses or fraud. That’s the extent pf my limited understanding of this subject.
RadAudit
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Re: All eggs in one basket

Post by RadAudit »

sport wrote: Sat Oct 23, 2021 12:00 am I manage the investments for DW and I. However, as I age, there will come a time when I will no longer be capable of doing so. When that occurs, DW or my children will have to take over that responsibility. So, I try to keep things simple and avoid unnecessary complications,
+1

The larger problem than where the funds are is are the people you've designated to manage your investments willing and capable of doing so IAW your wishes?
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
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JoMoney
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Re: All eggs in one basket

Post by JoMoney »

AnnetteLouisan wrote: Sat Oct 23, 2021 8:07 am Might be a good opportunity to discuss the role of the SIPC. There is some lack of awareness among the public (including me) about what it does and cannot do. It’s not a guarantor. It‘s the FEMA of the brokerage industry. I think that if a brokerage firm fails, FEMA ensures that you get your accounts returned, but it does not ensure against market losses or fraud. That’s the extent pf my limited understanding of this subject.
I don't think FEMA is a good analogy for explaining this. SIPC is not an establishment or an agency of the government.

FWIW, I believe it depends on what type of fraud and where it happens on whether or not SIPC might come in to play. If it was a broker committing fraud in some accounting practices or handling of your cash and securities SIPC might cover it. If it was not fraud committed by the broker, but instead by some other malicious actor gaining access to your account SIPC probably wouldn't cover. Some brokers have written fraud promises/guarantees explaining that they will make the investor whole if the investor does their part to try and prevent, reviews there accounts regularly, and reports it quickly. Not all brokers have made such promises, and so far the government hasn't seemed willing to require it the way they have with Reg E for electronic fraud on individual/consumer banks accounts.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Ferdinand2014
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Re: All eggs in one basket

Post by Ferdinand2014 »

I am 100% in Fidelity and have no such worries. I go out of my way to avoid complication as it increases odds of problems or mistakes.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett
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tennisplyr
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Re: All eggs in one basket

Post by tennisplyr »

I’ve had Fidelity and Vanguard since back in the day…don’t feel the necessity to change one way or the other.
“Those who move forward with a happy spirit will find that things always work out.” -Retired 13 years 😀
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Steelersfan
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Re: All eggs in one basket

Post by Steelersfan »

Some people are comfortable having everything in one place (I am), some think diversity is the only way to go. And never the twain shall meet (if responses to previous posts like this are any indication).
Broken Man 1999
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Re: All eggs in one basket

Post by Broken Man 1999 »

sport wrote: Sat Oct 23, 2021 12:00 am I manage the investments for DW and I. However, as I age, there will come a time when I will no longer be capable of doing so. When that occurs, DW or my children will have to take over that responsibility. So, I try to keep things simple and avoid unnecessary complications, to make it easier for them.
This!

The last thing I want is for my family to have to chase all over the financial world trying to collect info on my investments.

All my investments (and DW's, for that matter) are at Vanguard, Treasury Direct, and Transamerica, and in our safe deposit box for paper I-bonds.

Although some posters here seem to be hesitant to share financial details with their children, it seems to me if one is counting on someone to assist them in their financial affairs as they age, it makes sense to make sure those expected to help have a full picture.

If you don't trust them, perhaps there are better folks to help you when you are suffering from cognitive decline.

Broken Man 1999
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UpperNwGuy
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Re: All eggs in one basket

Post by UpperNwGuy »

I have accounts at Vanguard, Fidelity, and Schwab. I don't find it to be complicated. In another 10 or 15 years I will probably try to get all my investments into a single place, but at the moment I would have a hard time deciding which place, so I'm happy to keep my options open.
placeholder
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Re: All eggs in one basket

Post by placeholder »

I'm not overly concerned about losing all the funds but there is a possibility of short-term disruption although I worry more about that with bank accounts so purposely have multiple ones there.
Broken Man 1999
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Re: All eggs in one basket

Post by Broken Man 1999 »

placeholder wrote: Sat Oct 23, 2021 3:27 pm I'm not overly concerned about losing all the funds but there is a possibility of short-term disruption although I worry more about that with bank accounts so purposely have multiple ones there.
We don't have any cash, but I do have lines of credit with two of my DDs. They hold more cash but then they are not retired like us.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
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Sage16
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Re: All eggs in one basket

Post by Sage16 »

We have consolidated all our finances down to one bank (for all our banking) and one brokerage company (for all our investments) but they back each other up. One of our brokerage accounts has a debit card, bill pay and the ability to write checks if for some reason our bank has an extended outage. We keep enough assets in the bank to cover us in case our brokerage suffers an extended outage. I would love to get down to doing it all with one institution but with so many hacks, denial of service attacks, etc, I fear there is a real possibility one of the banks or brokerages could be offline for an extended time while they sort it out and restore service and possibly accounts.
Bogle on investing: Diversify, focus on low costs, invest for the long term. Don't speculate and don't be distracted by volatility.
radiowave
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Re: All eggs in one basket [all money at one firm?]

Post by radiowave »

We have a two broker two bank strategy. That gives us backups and redundancy if one fails. However it does significantly add complexity.
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Stubbie
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Re: All eggs in one basket [all money at one firm?]

Post by Stubbie »

radiowave wrote: Sun Oct 24, 2021 9:16 am We have a two broker two bank strategy. That gives us backups and redundancy if one fails. However it does significantly add complexity.
This is our plan as well but use three of each.
Stubbie
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Re: All eggs in one basket [all money at one firm?]

Post by Stubbie »

Stubbie wrote: Sun Oct 24, 2021 9:41 am
radiowave wrote: Sun Oct 24, 2021 9:16 am We have a two broker two bank strategy. That gives us backups and redundancy if one fails. However it does significantly add complexity.
This is our plan as well but use three of each.
So when I'm gone, my wife has three accounts that she knows all about to deal with instead of one. She says that doesn't bother her.
lazynovice
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Re: All eggs in one basket [all money at one firm?]

Post by lazynovice »

Your post cites Lehman Brothers…

Here is an article from 2008

https://www.kiplinger.com/article/inves ... omers.html

Here is one from 2013
https://www.wsj.com/articles/SB10001424 ... 0120093726

As you’ll see, if you read them, individual retail brokerage customers quickly had their accounts moved elsewhere- either they moved them or they were moved to another broker dealer by the SEC. The mutual funds and ETFs were sold to other firms.

I am more concerned about a system outage than broker failure. We keep our cash in checking and savings accounts outside of our brokerage not really for this reason, but it is an added benefit.
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nedsaid
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Re: All eggs in one basket

Post by nedsaid »

AnnetteLouisan wrote: Sat Oct 23, 2021 8:07 am Might be a good opportunity to discuss the role of the SIPC. There is some lack of awareness among the public (including me) about what it does and cannot do. It’s not a guarantor. It‘s the FEMA of the brokerage industry. I think that if a brokerage firm fails, FEMA ensures that you get your accounts returned, but it does not ensure against market losses or fraud. That’s the extent pf my limited understanding of this subject.
SIPC guards against the insolvency of the Brokerage Firm.
A fool and his money are good for business.
iamblessed
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Re: All eggs in one basket

Post by iamblessed »

Sage16 wrote: Sat Oct 23, 2021 5:02 pm We have consolidated all our finances down to one bank (for all our banking) and one brokerage company (for all our investments) but they back each other up. One of our brokerage accounts has a debit card, bill pay and the ability to write checks if for some reason our bank has an extended outage. We keep enough assets in the bank to cover us in case our brokerage suffers an extended outage. I would love to get down to doing it all with one institution but with so many hacks, denial of service attacks, etc, I fear there is a real possibility one of the banks or brokerages could be offline for an extended time while they sort it out and restore service and possibly accounts.
Good job I would like to get to that point.
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Wiggums
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Re: All eggs in one basket [all money at one firm?]

Post by Wiggums »

In early retirement, we have reduced the number of accounts. Our AA is 65/35. Although I have no concerns with Vanguard, Fidelity, Schwab, T. Rowe Price, our portfolio is split between two of them. This gives us access to slightly different benefits of each broker.
"I started with nothing and I still have most of it left."
inverter
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Re: All eggs in one basket [all money at one firm?]

Post by inverter »

Just helped my parents consolidated the remaining 60% or so of their assets at Vanguard for a total in the high seven figures. No qualms whatsoever.
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Steelersfan
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Re: All eggs in one basket

Post by Steelersfan »

nedsaid wrote: Sun Oct 24, 2021 10:14 am
SIPC guards against the insolvency of the Brokerage Firm.
Up to a certain limit that many Bogleheads exceed: "The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash."

SEC finding a new firm to take over the accounts gets better results.
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nedsaid
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Re: All eggs in one basket

Post by nedsaid »

Steelersfan wrote: Sun Oct 24, 2021 12:37 pm
nedsaid wrote: Sun Oct 24, 2021 10:14 am
SIPC guards against the insolvency of the Brokerage Firm.
Up to a certain limit that many Bogleheads exceed: "The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash."

SEC finding a new firm to take over the accounts gets better results.
In addition, brokerage houses will sometimes purchase their own insurance to protect client accounts above the SIPC limits.
A fool and his money are good for business.
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Steelersfan
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Re: All eggs in one basket

Post by Steelersfan »

nedsaid wrote: Sun Oct 24, 2021 12:38 pm
Steelersfan wrote: Sun Oct 24, 2021 12:37 pm
nedsaid wrote: Sun Oct 24, 2021 10:14 am
SIPC guards against the insolvency of the Brokerage Firm.
Up to a certain limit that many Bogleheads exceed: "The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash."

SEC finding a new firm to take over the accounts gets better results.
In addition, brokerage houses will sometimes purchase their own insurance to protect client accounts above the SIPC limits.
Which Vanguard has. They don't disclose the amount, but I expect it's substantial. Maybe someone knows what level it is:

https://investor.vanguard.com/investing ... protection
Fedaykin
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Re: All eggs in one basket [all money at one firm?]

Post by Fedaykin »

I would never, ever put all my eggs in one basket like that. No matter how much is claimed about how stable or safe or whatever. When someone wants to take your money they will find a way; it's as simple as that.
Mr. Rumples
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Re: All eggs in one basket [all money at one firm?]

Post by Mr. Rumples »

One issue is how well the company can withstand and recover from a cyber attack. In 1987, Janus' phone lines collapsed under the weight of the calls - it of course wasn't an attack, just panic...Today, all of the firms have to fight ongoing attacks; they all have disaster recovery operations - which they rightfully don't share. How long recovery would take is unknown. Hopefully just a few days, but we really don't know.
"History is the memory of time, the life of the dead and the happiness of the living." Captain John Smith 1580-1631
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