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Thoughts on safety of funds at Schwab vs big and small banks?

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  • Sat, Jan 30, 2016 - 09:46am

    #1
    lmcdel

    lmcdel

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    Thoughts on safety of funds at Schwab vs big and small banks?

I am not sure where to post this question, but in the middle of a long discussion on 9-11 was probably the wrong place (the daily digest from a few days ago)! I posted it once before in the forum, and didn’t receive any replies, so I’m hoping this time someone who has thought about/looked into this will be willing to share their thoughts. I am an avid reader of this site, but lack a good head for finances. I’m a stay at home parent, and do have a good head for looking forward at what I can do to protect my family from turbulent times. I have taken various steps on the physical front (in terms of our household), but most of our savings sits at Schwab, both in money market and retirement accounts.  I understand there are many risks, starting with not being able to access one’s money due to the site or phone lines being down. However, I wonder about the inherent safety vis a vis both big banks, and small community banks or credit unions. I would guess it is much safer than TBTF banks, but what about small banks or internet banks?  I would appreciate any thoughts, or pointers on where to do my own research. Thank you so much.

  • Sun, Jan 31, 2016 - 04:35am

    #2

    sand_puppy

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    I’d love to hear other money guys thoughts …

Hi Imcdel,

I'm not a finance guy by any means, but I can report what we are doing.

Both my wife and I have 401k accounts through our current employers at a traditional brokerage (Fidelity).  Funds are in Money market accounts, and gold and silver bullion (CEF, PHYS and PLSV) and are hence NOT FDIC insured.  So a major major major crash that took down Fidelity would pose a risk to these funds even if gold and silver were sound.

We have an IRA at Wells Fargo which we recently moved to a Hard Assets Alliance IRA and purchased physical gold coins which are stored with HAA.  In the event of a massive collapse, we would request physical delivery of the coins.  So I believe that these funds would survive a collapse and a "bail in."  (I hope.)

Though we are certainly not "rich," we took most of our prior employers 401k retirement funds out the brokerage account, paid the early distribution tax and income tax, and socked it away in physical gold and silver coins.  These are in safe deposit boxes at a local credit union and a separate local bank.

And we have some cash under the metaphorical mattress.

And of course:  stored food, water, a garden, extra compost, gardening tools, etc.  a small solar panel "kit" (4  -100 Watt panels) and an inverter big enough to run the deep freezer and be recharged by solar on a sunny day.

 

  • Sun, Jan 31, 2016 - 05:38pm

    #3

    pinecarr

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    Ellen Brown podcast on the banking system

Hi Imcdel-

   I am also no expert in banking.  However, I stumbled on a podcast by Ellen Brown this morning, who is very knowledgeable about banks and the risks associated with them.  In the podcast, she does mention some things to look for when assessing the safety of a bank.  Sorry, I didn't catch where it was in the podcast as I was doing something else while listening.  The podcast was on Jay Taylor Media, posted January 26, 2015 under the headline "Exit The Banking System ASAP!"  @ http://jaytaylormedia.com/audio/

   Glad you found a place to post your question where you are getting more responses!:)

 

  

  • Sun, Jan 31, 2016 - 07:15pm

    #4

    Oliveoilguy

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    Sand_Puppy

Great discussion….The only thing I want to add is to emphasize diversity. Some of the smartest people we know said that Oil would never drop below 60 again…..and here we are. Gold should be much higher by all objective measures….yet here we are. If I have learned anything during this financial manipulation it is that nobody knows what will happen, including and especially financial advisors, and that we must all learn to manage our own affairs and not pay someone who has no skin in the game. Why don't financial planners assume some of the risk?

I think we need to own stuff that does not make sense because the market does not make sense. I believe in Gold but I also own FB for the sake of diversity. Like you I have CEF, but also have some JNJ.

Always liked Marc Faber's allocation: 1/4 real estate, 1/4 Gold, !/4 equities and 1/4 cash. At least you can't loose it all.

  • Wed, Feb 03, 2016 - 03:27am

    #5
    Peak Prosperity Admin

    Peak Prosperity Admin

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    Trust Accounts

I understand that the difference between a Stock Brokerage and a bank is that a stock brokerage account is held in trust (meaning the clients funds are not commingled with the operational financial structure of the brokerage house).  If the brokerage goes bankrupt this will not effect the clients balances.  It hink the bigger risk are the investments.  Mutual funds, ETFs,…. all have material risk of default.

MDB

Baton Rouge 

  • Wed, Feb 03, 2016 - 06:09am

    #6
    Peak Prosperity Admin

    Peak Prosperity Admin

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    trust in a trust fund

[[email protected]]

I understand that the difference between a Stock Brokerage and a bank is that a stock brokerage account is held in trust (meaning the clients funds are not commingled with the operational financial structure of the brokerage house).  If the brokerage goes bankrupt this will not effect the clients balances.  It hink the bigger risk are the investments.  Mutual funds, ETFs,…. all have material risk of default.

MDB

Baton Rouge 

[/quote]

Yes, that is the basic concept re trusts as things stand now but Remember John Corizine and MF Global!

Money was 'held' in trust until it wasn't. I don't think people were ever made whole for that. He sure didn't do any jail time.

Always pays to keep in mind one of Chris' tenets here, that when they need to change the rules they will. It feels like with the shit storm that's coming, a lot of rules are going to get changed on a as needed basis.

Makes me want to stay as far away from counter party risk as possible, which is of course no easy feat if you want to diversify or are stuck for whatever reason behind a retirement.gov firewall

 

mememonkey

  • Mon, Feb 15, 2016 - 01:44am

    #7
    BuzzTatom

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    schwab

I can only tell you about my conversation with Schwab. They don’t do derivatives and as discussed above funds are not commingled. The money market I am in is ultra short term but they moved from Treasuries to other types of paper such as corporate, govt, etc…Not sure yet how I feel about that. I would call your rep and say let’s play Armageddon.

  • Tue, Feb 16, 2016 - 04:33pm

    #8

    hugh owens

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    schwab safety

excellent question #1. I suspect there is no way to know if  access to a schwab acct will always be guaranteed. We have our ret accts at Schwab but we have also diversified as much as possible into PM, tools, livestock, gardens, alt energy, kerosene lamps, medical supplies ,fuel storage etc. We don't own anything we can't repair. We would not live in a place dependent entirely upon supply chains and regard living in a dense urban environment  reliant upon those supply chains as high risk behavior.

  • Thu, Feb 18, 2016 - 03:08am

    #9

    Gratidude

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    Schwab sells customer orders to HFT firms

Original poster: I was "all-in" with Schwab (banking, brokerage, retirement) until I learned they sell their customer orders to high-frequency traders before the orders are executed. Some reports say they sell all their orders – some say they just sell a lot of them. I know this is common practice at brokerages but Schwab seems especially hypocritical about the subject since their management openly derides HFT while being tight-lipped about their actual practices. If you haven't already, read Flash Boys for how HFT costs you money without you knowing it.  

Starting last November I exited the market completely, which makes me looks prescient but it's really just thanks to Peak Prosperity, and transferred my accounts to the regional bank Umpqua (I live in N. CA). Now the only accounts I have left at Schwab are for banking and I intend to close those accounts soon. 

http://www.businessinsider.com/brokerages-make-millions-selling-orders-to-high-frequency-trading-firms-2014-4

 

  • Fri, Feb 19, 2016 - 09:31pm

    #10
    Libby Baker

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    Annuities?

Sorry for the repeat, but I am not sure where to post this question.

In this current climate, how safe are fixed and variable annuities with guaranteed return, double what you paid initially, within a 10 year period?  My annuities are with Voya Ohio and Nationwide.  I'm wondering if I should get out of them.

thank you.

Libby

[email protected]

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