Have you ever wondered if putting all your eggs in one basket is actually a smart move when it comes to your investments? I’ve been pondering this question myself lately. After investing for nearly two decades, I’ve accumulated accounts across different platforms – some from old jobs, others from when I tried new investing apps. Now I’m questioning whether I should consolidate everything in one place or keep my investments spread out.
Let’s dive into whether it’s actually safe to keep all your money in one brokerage account or if you should diversify across multiple platforms
The Safety Question: Is One Brokerage Enough?
In short, yes, it is safe to keep all of your investments in one brokerage. However, this may not be the best choice for everyone.
Most reputable brokerage firms have robust security measures and insurance protection. However, there are both benefits and risks to consolidating everything in one place versus spreading your investments across multiple platforms.
How Your Investments Are Protected
Before we go further, let’s understand how your money is actually protected:
- SIPC Insurance: The Securities Investor Protection Corporation protects up to $500,000 per brokerage account (with a $250,000 limit on cash).
- Custodians: Most funds at major firms like Fidelity, Vanguard, and Schwab are managed by separate custodians, keeping your investments segregated from the broker’s own assets.
- Excess SIPC Coverage: Many brokers carry additional insurance beyond the standard SIPC limits.
It’s important to know that SIPC only protects you if your brokerage firm fails. It doesn’t protect you from market losses or bad investment choices.
Benefits of Keeping All Investments in One Place
There are some clear advantages to consolidation
1. Simplified Portfolio Management
Managing investments across multiple accounts can be time-consuming and confusing. With everything in one place:
- You can easily track your overall asset allocation
- Rebalancing becomes much simpler
- You’ll receive fewer statements and tax documents
- You’ll have fewer passwords and accounts to manage
As Westlin from Betterment points out, “Far too often, I see clients who think that they are diversifying by having four to five different brokerage accounts, when the investments they own at each firm are the same or very similar.”
2. Access to Premium Services
Many brokerages offer enhanced services to customers with higher account balances:
- Lower management fees
- Access to financial advisors
- Premium research tools
- Better customer service
- Specialized wealth management teams
For example, Vanguard offers Personal Advisor Services to investors with $50,000+ in assets, while Schwab provides enhanced services through their Schwab Private Client program for high-net-worth individuals.
3. Tax Efficiency
With one account, you can:
- More easily implement tax-loss harvesting
- Better track cost basis
- Avoid wash sales that might occur between accounts
Many automated tax-loss harvesting tools (like Charles Schwab’s) require minimum balances of $50,000 or more to activate.
Risks of Keeping Everything in One Brokerage
Despite the conveniences, there are legitimate reasons to consider multiple accounts:
1. Insurance Limitations
The biggest concern is the SIPC insurance cap:
Camille Gaines, a financial coach and AFC member, warns, “If you have a lot of money, you could go over the insured amount per account at one firm.” There is a $500,000 limit per account, with a cash limit of $250,000. If you are a wealthy investor, this may not be enough to protect all of your assets.
2. Cybersecurity Concerns
Even with robust security measures, no system is 100% failsafe:
“I like to keep a good amount of ‘cash’ in a money market account at a brokerage firm different from our primary brokerage firm just in case of a very unlikely default or a cyber security issue,” notes Gaines.
If one broker experiences a security breach, having assets elsewhere provides a safety net.
3. Access to Different Investment Options
Some brokerages specialize in different investment products or services:
- Some excel at international investing
- Others might have better options for specific sectors
- Certain brokers offer unique investment opportunities not available elsewhere
“Different brokerage firms may offer access to unique investment opportunities, such as initial public offerings, private placements or alternative investments,” explains Doug Roller, owner of Crossroads Financial Group.
When Multiple Accounts Make Sense
There are several situations where having investments in more than one place is actually beneficial:
For High-Net-Worth Investors
If your investments exceed SIPC insurance limits ($500,000 per account), splitting assets between brokerages provides additional protection.
For Specialized Investment Needs
If you want to access:
- Proprietary funds from different companies (like both Vanguard and Fidelity)
- Specific trading platforms for different strategies
- Unique services only available at certain brokerages
For “Just In Case” Security
Having some assets accessible elsewhere can provide peace of mind if:
- Your primary broker has technical issues
- There’s a security breach
- You need emergency access to funds
Finding the Balance: My Personal Approach
I’ve decided on a middle-ground approach that might work for you too:
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Main Brokerage: Most of my investments are held at one primary brokerage because they offer better services and make management easier.
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Emergency Fund: I maintain a money market account at a different brokerage with enough cash to cover several months of expenses – this serves as both emergency fund and backup if there’s ever an issue with my primary account.
-
Specialized Accounts: I keep certain accounts separate when there’s a specific benefit (like a health savings account with unique investment options).
This approach gives me the simplicity of consolidation while still providing some protection against the unlikely event of a brokerage failure or security issue.
Factors to Consider When Deciding
When determining your own approach, weigh these factors:
Portfolio Size
- Under $500,000: One account is likely sufficient (covered by SIPC)
- Over $500,000: Consider multiple accounts for additional protection
Investment Strategy
- Passive investor: One account might be simpler
- Active trader: Might benefit from specialized platforms
Service Needs
- Do you want access to advisory services?
- Are you looking for specialized wealth management?
- Do you need specific trading tools?
Personal Preference
- How important is simplicity to you?
- What’s your comfort level with consolidation?
- How much do you value redundancy for safety?
Common Questions About Brokerage Safety
Will I lose my money if my brokerage goes bankrupt?
Probably not. Your investments are typically held by a custodian separate from the brokerage firm itself. If a brokerage fails, your investments would typically be transferred to another broker. SIPC insurance also provides protection up to $500,000.
Are some brokerages safer than others?
While all major brokerages have similar protections, firms with longer histories and stronger financial positions might offer more stability. Vanguard, Schwab, and Fidelity are examples of well-established firms with solid reputations.
Should I be worried about cyber attacks?
All online platforms face some level of cyber risk. Reputable brokerages invest heavily in security, but no system is perfect. Using strong passwords, two-factor authentication, and being vigilant about phishing attempts are important steps you can take.
The Bottom Line
For most investors, consolidating investments in one brokerage account offers simplicity and convenience that outweighs the minimal risks. However, if you have substantial assets exceeding SIPC insurance limits or specific investment needs, maintaining multiple accounts might be prudent.
As Billy Voyles, president of Fundamental Wealth Designs, puts it: “If the goal is to grow, accumulate and achieve the highest rate of return possible, then it may make sense to have multiple brokerage accounts.”
What’s your approach? Are you a one-brokerage person or do you prefer spreading your investments around? I’d love to hear your thoughts in the comments!
Remember, the most important factor isn’t how many accounts you have but whether your overall investment strategy aligns with your financial goals. Whether you choose one brokerage or several, focus on building a well-diversified portfolio that matches your risk tolerance and time horizon.
More accounts means more to manage
Having multiple brokerage accounts also means more work for you.
“[It] makes it much harder to manage on an ongoing basis, especially with regards to rebalancing and risk reduction,” Westlin says. Rebalancing is done when you want to change how your portfolio is invested so that you don’t take on too much risk as the market changes.
Shari Greco Reiches, a behavioral finance expert and wealth manager at Rappaport Reiches Capital Management, also recommends avoiding using multiple brokerage accounts because it can be inconvenient and difficult to monitor them.
The more brokerage accounts, the more communication, such as statements and emails, that you receive. It may also prove more challenging to monitor your portfolio and your overall asset allocation (mix of stocks and bonds) when juggling so many accounts.
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Setting up a brokerage account is the first thing you need to do if you want to jump into the stock market.
You can think of this account as the vehicle that transports your money to your investments. Brokers can execute trades on your behalf, plus many of the top brokerage firms offer personalized services and market data to help guide you as you plan for your future.
In some ways, a brokerage account behaves similarly to your everyday checking or savings account: You can transfer money into and out of them, and theres no limit to how many accounts you can actually open. But is it smarter to have just one brokerage account where you put all the money you want to invest? Or should you spread out your investment funds across multiple accounts at different financial firms?.
Select asked the experts and learned that a more simplified approach to investing with just one brokerage account is often best. Yet, there may be a time when opening more than one account makes sense.
If youre thinking about having multiple brokerage accounts, heres what to beware of: