Since there’ve been a few banks collapsing recently I’ve received a ton of questions about what happens to your investments if your brokerage goes bankrupt or shuts down due to financial issues. In this video, I’ll go through a few of the ways your money is safeguarded from losing everything as well as what happens if the brokerage you use goes out of business. We’ll be specifically covering U.S. brokerages like Vanguard, Fidelity, Charles Schwab, and newer investing platforms like M1 Finance.
🔒 AURA – 14 day free trial to see if your personal information has been leaked online
Check Out My Recommendations (It helps support the channel):
🔥 M1 FINANCE Investing- Free $10 (once you deposit at least $100 within 30 days)
Here’s a video on how to use M1 Finance
📝 Empower (previously called “Personal Capital”)- Free Net Worth Tracker & Retirement Planner
💎 WEBULL – Up to 12 Free Stocks When You Deposit Any Amount Of Money
💵 ROBINHOOD – 1 Free Stock
📧 Business Inquiries: JarradMorrowYT@gmail.com
When a brokerage goes out of business, it can be concerning for investors. However, several regulatory safeguards are in place to protect your investments in such situations. Here is a detailed explanation of what happens to your investments when a brokerage goes bankrupt:
SIPC Coverage: In the United States, the Securities Investor Protection Corporation (SIPC) is a non-profit organization that helps investors recover their assets when a brokerage firm goes out of business. SIPC covers up to $500,000 per customer, including a $250,000 limit for cash. Note that SIPC coverage doesn’t protect you against market losses or bad investment decisions; it only covers you if your brokerage fails.
Segregation of Customer Assets: Brokerage firms are required by law to segregate customer assets from their own. This means that your investments are held separately from the brokerage’s assets. If the firm goes out of business, your investments should not be affected, as they are not considered part of the bankrupt firm’s assets.
Liquidation Process: If a brokerage goes out of business, it will typically enter into a liquidation process under the supervision of the SIPC and a court-appointed trustee. The trustee will work to transfer customer accounts to another solvent brokerage firm, which will then take over the management of your investments. You may need to provide some documentation to verify your account holdings during this process.
Frozen Assets: During the liquidation process, your assets may be temporarily frozen, meaning you may not be able to buy or sell securities or access your cash. This freeze is usually temporary and is in place to ensure a smooth transition of accounts to the new brokerage firm.
Possible Delays and Losses: While the SIPC and the court-appointed trustee work to recover your assets, there may be delays in regaining access to your investments. Additionally, if your account holds more than the SIPC coverage limits, you may be considered an unsecured creditor and could potentially lose some or all of the funds exceeding the coverage limit.
FINRA BrokerCheck: Before you choose a new brokerage firm to work with, it’s a good idea to check its background and regulatory history through FINRA’s BrokerCheck website. This can help you avoid potential issues and ensure that you are working with a reputable firm.
In summary, if your brokerage goes out of business, your investments are generally protected by regulatory safeguards such as SIPC coverage and the segregation of customer assets. However, you may face temporary delays and limitations in accessing your investments during the liquidation process, and accounts exceeding SIPC coverage limits could potentially face losses.
Affiliate Disclaimer: Some of the above may be affiliate links. Support the channel by signing up or purchasing through those links at no additional cost to you. I appreciate you for helping me keep this channel running.
Disclaimer: This video is for entertainment purposes only. Everyone’s situation is different so do your own research before making any decisions with your money. If you need help then contact a Certified Financial Fiduciary before trying anything that is mentioned in this video. I prefer a Fiduciary financial advisor that charges an hourly fee as opposed to an ongoing fee based on a % of your portfolio….(read more)
LEARN MORE ABOUT: IRA Accounts
CONVERT IRA TO GOLD: Gold IRA Account
CONVERT IRA TO SILVER: Silver IRA Account
REVEALED: Best Gold Backed IRA
Investing your money is a smart way to grow your wealth and secure your financial future. However, with the recent wave of brokerages failing, many investors are wondering if their investments are safe.
Vanguard, Fidelity, and Charles Schwab are three of the top brokerage firms in the United States and have a reputation for being reliable and secure. But what happens if one of these firms were to fail?
First, it’s important to understand that brokerage firms are required to follow strict financial regulations and have safeguards in place to protect their clients’ investments. This includes keeping client assets separate from the firm’s own assets and maintaining a certain level of capital reserves.
In the unlikely event that a brokerage firm were to fail, there are additional protections in place to safeguard investor assets. The Securities Investor Protection Corporation (SIPC) is a nonprofit organization that provides up to $500,000 in protection for securities and cash held by a client at a failed brokerage firm.
However, it’s important to note that SIPC protection does not cover losses due to market fluctuations or investments that have lost value. It also does not cover all types of investments, such as commodities or futures contracts.
To further protect themselves, investors should always ensure that their brokerage firm is a member of SIPC and that their investments are covered by SIPC protection. They should also diversify their portfolio across multiple investments and monitor their accounts regularly for any unusual activity.
In conclusion, while the thought of a brokerage firm failing can be concerning, investors can take comfort in knowing that there are protections in place to safeguard their investments. By choosing a reputable brokerage firm, understanding the protections available, and monitoring their accounts regularly, investors can minimize their risk and continue to grow their wealth in a safe and secure manner.
what happens when insurance companies fail ?
So it's a hydra then..
M1 and the fintech brokerages could fall easily but fidelity and vanguard should be safe
are you entertained by idiots asking silly questions?
my guy fidelity and vanguard aint goin no where LOL
Vanguard and Jack are truly an amazing company/human, I've pretty much decided to tie my line to their ship (With the one exception is SCHD)
Making my way though The Little Book of Common Sense Investing for the second time and I find myself in ever increasing belief that the mad had it right 50 some odd years ago and retail investors just refused to listen.
Hoping to become a little more knowledgeable and dive into some of his more in depth books when they won't be so over my head,
Thank for all you hard work Jarrad, and I look forward to more vids!
If there is a thermo nuclear war, which bank should I use to park my money? I feel like this is phase 3 of this movie we call life.
You didn't mention, or I missed it, but most brokerages also carry additional supplemental insurance for larger accounts just to ease people's fears. Brokers usually discussion SIPC and supplemental insurance on the web site.
Let say the banking system affect Charles Schawb what would happen to SCHD if CS would to be bankrupt
My Pension fund in Vanguard is 50% Cash at the moment. Is the cash protected too, or only the investments in Funds and ETFs?
i belive that around year 2031 vanguard will completly own the world even your own land and houses
Every time Barack Hussein Obama is in charge of the country… This happens Crisis, Crisis.. Everywhere..!!…. keep voting for these scumbags demonrats you..S. people..!!
Thanks!!! This was timely. Appreciated
If brokerages lost all peoples money you better have a lot of lead …..the whole world would be a giant mess.
Even if a non dollar-denominated asset sees no real gains during inflation that's still much better than holding cash and seeing your real purchasing power undermined. In other words, sometimes you have to chose between the lesser of two evils.
Vanguard isn’t going under, Jarrad. They’ve expanded into advice services, which is yet another revenue generator for them.
They’re the Chase of the brokerage industry; boring, low risk, and don’t pay their employees nearly enough.
What protection does New York Life have?
Question, the ISPC Insurance is not really by brokerage but per account correct. In that case I could have multiple accounts with the same brokerage, in my case Fidelity and if each if below 500K, I would be fully covered. That's correct?
But the coverage would also be per account type, so if I have two joint account, both combine would be secured up to 500K, that is also true?
Thanks, Jarrad. You're the best! ❤
Now I'm a bit worried about having money invested in Fidelity. It's not the only brokerage firm I use however so there's that.
If they all go under the system went under we will have bigger problems than money
Thank you for this.
I been waiting on ur thoughts about this. Why did u wait so long to make a viedo!
So what should someone do if the banks collapse like bank of America as an example, causing a surge of people to reinvest, liquidate their portfolio or try to move their money into let's say schwab as an example. Then, resulting in schwab failing and ultimately bankrupt as well, what would be a good way to avoid that from happening to protect my money?
I got an email this week that Betterment increased their Cash Reserve FDIC insurance from $1mil to $2mil (they split it between different banks).
Nice overview of the protections.
IF the brokerages collapse you can basically bet that societal collapse is at hand. Worrying about them collapsing and the money implications is like worrying about lawn care while a tornado is rolling into your yard.
A better thing to worry about is how solutions to current problems are making the system even less flexible for the next set of problems.
I wouldn't consider a brokerage the same as a bank, but I also feel like Fidelity and Vanguard being the processors for many of our 401Ks it'd be a hot mess if they ever went under.