Thread: SIPC Coverage

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  1. #1
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    SIPC Coverage

    With all of the failures of the crypto exchanges I decided to take a look at the SIPC Coverage. I utilize a few brokerages Ameriprise, TD Ameritrade, Fidelity and Vanguard. The SIPC protection at TD Ameritrade looks pretty good at 149.5 million per customer but if you keep reading it has an aggregate limit of $500,000,000.00. That does not seem like a big aggregate limit since they very easily could have more than 500 accounts with 1 million or more.

    I really do not want to have accounts everywhere to be under the SIPC coverage in each one. This is probably worry over nothing but still may be worth looking into. It sounds like most of the time if a brokerage fails they simply transfer the assets to a new SIPC brokerage. However if the institution liquidates then you will be a creditor in bankruptcy and will get paid through SIPC after the bankruptcy trustee pays you out. Going to talk to my broker this week and may move some cash into another account just to even out the coverage.
    Last edited by NitroZ7; 07-10-2022 at 02:29 PM.

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    #2
    We currently use four brokerages, it's just diversification for us.
    Not a bit different than investing in multiple funds, RE, commodities, etc.
    Adage older than anyone here ... "Eggs, Basket, Never" ... or close.

  3. Stocks/Investments Moderator boneil's Avatar
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    #3
    If something happened that a big broker became insolvent and investors weren't able to access the markets, the contagion would be catastrophic. Worst than the financial crisis and Lehman. The Feds would be quick to step in. Imagine the panic when a headline crosses that something happened at TD Ameritrade that may leave investors with no access to the market or their money, that there may be bankruptcy.

    I can't imagine how the customer wouldn't be able to just transfer their holdings to another broker. There would have to be some real shady stuff happening. Like Robinhood
    Thanos was the hero

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    #4
    Quote Originally Posted by boneil View Post
    If something happened that a big broker became insolvent and investors weren't able to access the markets, the contagion would be catastrophic. Worst than the financial crisis and Lehman. The Feds would be quick to step in. Imagine the panic when a headline crosses that something happened at TD Ameritrade that may leave investors with no access to the market or their money, that there may be bankruptcy.

    I can't imagine how the customer wouldn't be able to just transfer their holdings to another broker. There would have to be some real shady stuff happening. Like Robinhood
    It is a very low probability event but it did happen twice in the 70's. The way everything is interconnected and the risk of contagion may stress financial institutions. I'm not losing sleep over having a majority of my assets at TD but definitely going to call and just discuss it with my broker. We keep most of the cash holdings in a US Treasury money market fund to keep it under SIPC limits for the cash position.

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    #5
    I’m glad I don’t have $500 million to worry about. How do you have four brokerage accounts and keep track of keeping your investments diversified?

    I thought one of the responders here was just saying a couple of weeks ago that, they are locked into fixed, sold out of real estate and getting ready for the big recession?
    Last edited by Bassin08; 07-10-2022 at 06:22 PM.

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    Quote Originally Posted by Bassin08 View Post
    I’m glad I don’t have $500 million to worry about. How do you have four brokerage accounts and keep track of keeping your investments diversified?
    On the first day of each month, just go in and look at the balances, add them, check previous quarter and first of the year, possible first of prior year.
    Each brokerage is fully diversified, same risk profile with identical performance goals, rules, etc. The brokerages handle it from there. Very easy.
    We have no desire to manage our funds, none. We already don't enjoy managing our RE and we're working to liquidate most of it. COVID wasn't fun.
    Our goals are simple ... growth at 2% above inflation, lowest risk possible (we're both retired now), fully spread across the globe, mostly income.

    And we don't have $500M either ... otherwise one of my assistants would be inviting you to discuss things in person, while catching peacock bass.

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    #7
    Are you talking about four different brokerage companies? Also, how can you make 11% now?

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    Quote Originally Posted by Bassin08 View Post
    I’m glad I don’t have $500 million to worry about. How do you have four brokerage accounts and keep track of keeping your investments diversified?

    I thought one of the responders here was just saying a couple of weeks ago that, they are locked into fixed, sold out of real estate and getting ready for the big recession?
    The 500 million is an aggregate figure where the coverage caps out. So if you have 1000 accounts at 500,000 then you reach the cap. That is over the SIPC but it is very likely a large brokerage could have more assets under management than that. It could be in the billions.

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    Quote Originally Posted by Bassin08 View Post
    Are you talking about four different brokerage companies? Also, how can you make 11% now?
    Yes, four different companies. And we don't make 11% currently.
    Of course, our inflation rate isn't 11% either. We're not as exposed.
    We own our RE, we own our vehicle, we have a lower profile.

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    Quote Originally Posted by TampaJim View Post
    Yes, four different companies. And we don't make 11% currently.
    Of course, our inflation rate isn't 11% either. We're not as exposed.
    We own our RE, we own our vehicle, we have a lower profile.
    We own our RE, car and have zero debt. We have been that way for the past 25 years. We also have a lower profile, but not four brokerages. We had four brokerage accounts at the same company, but not $500 million. Actually not even $5 million.

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    #11
    Quote Originally Posted by Bassin08 View Post
    We own our RE, car and have zero debt. We have been that way for the past 25 years. We also have a lower profile, but not four brokerages. We had four brokerage accounts at the same company, but not $500 million. Actually not even $5 million.
    We're probably similar ... the majority of our worth is in RE, not the market.
    Although, we did work hard to ensure we'd max out pensions and SSI later.
    Truthfully, we don't want much. Personal health, each other and our safety.

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    #12
    Quote Originally Posted by TampaJim View Post
    We're probably similar ... the majority of our worth is in RE, not the market.
    Although, we did work hard to ensure we'd max out pensions and SSI later.
    Truthfully, we don't want much. Personal health, each other and our safety.