With the recent collapse of Silicon Valley Bank and others, I thought viewers would find this topic timely and helpful.
A few useful websites:
1) What SIPC Protects
2) FDIC Homepage
3) Difference between FDIC and SIPC:
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Be careful of scammers. In the comments, I will NEVER suggest you contact me, offer any investment products, recommend an adviser or anything similar. Some scammers ask for investment help in the comments and later, other commenters post how “great that idea/investment/person is” in the replies. This is a scam. Do not fall for it.
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NEED FINANCIAL ADVICE?
1) Google “fee-only financial adviser” or visit www.NAPFA.org
2) #1 question to ask any financial adviser is “Are you a fiduciary to me 100% of the time” Get the answer in writing
3) Please note that some people call themselves “fee-based”. This is NOT the same as fee-only. Fee-only advisers have committed to being a fiduciary to you 100% of the time.
4) Speaking just for myself personally, I would only hire an adviser who is a fiduciary to me 100% of the time. This is not a suggestion on what you should do. We are all different and I do not know your personal situation.
MY VIDEOS ARE NOT FINANCIAL ADVICE (Disclaimer):
This information is provided to you as a resource for informational purposes only and should not be viewed as investment advice or recommendations. To get professional financial advice from a fee-only financial advisor near you, please visit www.napfa.org.
The decisions on how to invest, when to retire and other financial planning topics are some of the most important financial decisions you will make in your life. I urge you to seek professional financial advice as you make this decision. Ideally from a financial adviser, AND a CPA AND an attorney. Having the perspective of all three professions will help you make the decision that is right for you and your family.
This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor may NOT be suitable for all investors.
This information is NOT intended to, and should NOT, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, and/or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
I don’t believe in “get rich” programs. Rather, I believe in doing your homework and working with professionals who are a fiduciary to you 100% of the time….(read more)
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Investment firms like Schwab, Fidelity, and Vanguard are well-known for their stable and reliable performance. They are trusted by millions of investors who have put their trust and money in their hands. However, the unthinkable can happen, and these institutions may collapse. What happens to your investments then?
Firstly, it is important to understand that the collapse of a reputable investment firm like Schwab, Fidelity or Vanguard is unlikely. These institutions are backed by solid financial foundations, have rigorous risk management practices, and are monitored closely by regulatory bodies. However, it is not entirely impossible for them to go bankrupt due to unforeseen circumstances, such as fraud, mismanagement, or market crashes.
If such an unfortunate event were to occur, the assets held by the investment firm would be in jeopardy. However, investors need not worry excessively as there are several layers of protection put in place to ensure the safety of their investments.
The majority of investments held in a broker-dealer are covered by the Securities Investor Protection Corporation (SIPC). SIPC is a non-profit organization created by Congress in 1970 in response to the failure of brokerage firm Penn Central. It provides insurance protection for up to $500,000 in securities and cash held at its member firms. It is important to note that SIPC coverage does not protect against market losses, but it protects against fraud and mismanagement by the investment firm.
Furthermore, Schwab, Fidelity, and Vanguard have their own asset protection programs to provide additional safety buffers for investors. These programs are designed to protect investors from losses due to fraud by the firm or its employees.
Additionally, funds invested in mutual funds or ETFs are held separately from the investment firm’s assets. This means that even in the event of the firm’s bankruptcy, these assets remain secure and can be transferred to another fund manager.
All in all, if Schwab, Fidelity, or Vanguard were to collapse, investors need not worry excessively. The protections put in place provide multiple layers of coverage to ensure the safety of their investments. However, it is always prudent to diversify your investments and spread them across multiple institutions to minimize the risk of catastrophic loss.
Does the loaning your money when with a bank also apply to a Credit Union?. We are deciding between them and a brokerage.
so if you have 500k setting in a brokerage firm waiting for stock purchase or option trading you're saying that it is not considered cash but a security? and the whole amount should be protected under sipc?…
Thx, I think I’m a little confused on the fee only advisor. Currently I have assets with a major institution, Edward Jones. I get reports on my app and hard copy. I deal with an embedded advisor of Edward Jones. Would I seek out an independent financial advisor?
well presented thanks
With changes in the economy leading to instability in the stock market, some individuals may face a decrease in their investments in an effort to benefit from the current market conditions, I am considering liquidating my $725k portfolio consisting of bonds and stocks. Someone else in the same situation? Please tell me in the comments!..
From what I understand bank regulations were eased during the last administration and these two banks took on extra risk, bonds perhaps. Banks are supposed to be audited 2 times a year. The Suisse bank that had a rough patch was counting on a Saudi investor that couldn't add more before going over threshold amount. These are isolated instances.
Retiring soon and 520k worth of my positions are depleted. I am still making my employers match but I don’t want to sell since I missed out on the big sell off and wouldn’t want to wait on the sidelines, just confused as to what to continue doing apart from keep putting money in but I begin to think about the sunk cost fallacy and maybe I should consult with a licensed professional with valid ideas.
With the current bank run, it is great to have clarification on the “safety” of our brokerage system.
Number 5, have some gold and silver buried in the back yard
Retirement is wonderful if you have two essentials — much to live on and much to live for. Invest wisely and get good returns.
I'm not worried about the brokerage firm going under because the stocks are registered in my name. It's just a pain in the neck tracking down my stocks. I am more worried about the mutual funds, ETF's and ,especially, the mortgage backed securities biting the dust.
(Hello 2008!)
So how do brokerage houses make money??
You sud replace the word "if" with "when" ..What happens to our investment "WHEN" Schwab, Fidelity or Vanguard collapse
Thanks for the information. However, you are forgetting the reality of " Fraud ". This fact of life is always left out of finance. Regulators and lawmakers are subject to fraud and once that happens all bets are off. Think about it ? if every aspect of your protection is subject to percentage of fraud, how would you protect yourself ? It never fails to amaze me how people in this world think everyone else is an angel ? They say, insurance companies would never do that. Banks would never do that. The government would never do that, until they get burnt. Then, they complain and complain about how unfair life is and they become homeless. In my opinion there is no need to put your money in the bank and try to collect a little 3% to 5% return on your savings. The risks out weighs the benefits. Just take a 5% return per year of your money in a 401K ? if you subtract inflation which is 4% to 9% each year ( in reality ) and you subtract the fees you pay the brokers, you are in the negative. You will actually lose money.
I'm glad I ran across this vid. It helped answer some questions I had.
Really? Are we really talking about the potential collapse of Schwab, Fidelity, and Vanguard due to SVB mismanagement? Sorry but if these houses go down we will be in such deep sh*t we will have bigger things to worry about from a macro perspective.
Since vanguard investments are owned by the individual invester it won't fail ! Never
What happens if the custodian bank – e.g. State St. Bank in Boston that holds money market assets has a run on the bank? Are those funds segregated?
Good info about custodial
Greetings from Sao Paulo, Brazil.
Can you please make a video sharing your views on the balance between having physical/real world assets (land, houses, businesses) versus digital assets (stocks, REITs, other investments in the money market). I am mostly invested on the latter but I must confess it scares me a bit to have a larger proportion of my money in something that looks like figures on the screen rather than something tangible…even if I understand that securities have an underlying business. Thank you!
Thank Azul, great topic! I have wondered about this. I have Edward Jones accounts.
Let me make this short and simple, the inevitable collapse of the global financial system has already begin. Take any spare cash out of this institutions and put it in Physical Gold and or Silver in your own possession. If you hold it you own it. Become your own bank with NO counter party risk. History shows us that precious metals enable to at least preserve our wealth in real money with the possibility to thrive too.
We work hard for our money, we have a responsibility to ourselves and family to protect it.
If you feal any kind of insurance will protect you from loss of your money /savings, good luck with that. You're much braver than i am!
What if you have $1M in one firm spread in Treasuries and CDs all under $250K? Are you 100 percent covered?
Thank you for your content and your smiles!
Thanks, Azul. I am sharing this video with my Budgeting Families group.
Yeah man! Thank you always sweet to learn more and know you have things covered best you can. Just a small investor mostly holding these days. I have stocks and my BTC that are there to add to my life and make it better. I have small pension and social that work. have a positive cash flow after bills, and don't really have much debt and not wanting much either. adjusting to income change but again keep things within my means. It's about one's health mentally and physically. Retirement is different. But I am getting into it and enjoying the ride, got my first year in looking to enjoy and take advantage of the journey ahead. BE safe! and enjoy!
Very important video.
Financing cost is as of now at 4.75%(8th rate climb since Spring last year) Expansion at 7% and mortgage rates is at more than 7.5% yet the lowest pay permitted by law continues as before and my retirement portfolio has endured immensely these previous years, so my inquiry is what way do senior residents resign and live off such temperamental economy. The drawn out game is clearly not really for me as of now.
Are we really worried these companies will go belly up?
Quick question – is cash in a 401k account at Schwab protected up to 250k or 500k? Thank you!
Thanks for the comment about the benefits of having your assets held by a brokerage house, instead of your financial planner. My fee-only financial planner, who I've had for almost 20 years now, keeps our assets in Schwab. The more I listen to you, the more I realize that my planner is doing the right things with our money.
They say there's regulation. There's NOT! Lehman Brothers. Nobody is watching anything. The gubmint just bailed out SVB to avoid a contagion. Advice. Diversity. Cash, metal, real estate, stocks, bonds. There are huge geopolitical events unfolding right now. Diversify. Be well!
How can I get more profitable Investment in the market? Is this pump short getting wrecked and liquidated, or any indication of whale, corporate treasury buys?
On my forms it says not fdic insured- may lose value
Just keep the math in perspective- one million seconds is about 11 1/2 days , a billion seconds is over 32 years . A trillion dollars of assets is almost beyond the edge of human comprehension- how much do you need to be happy ? How fit are you ?
Thanks, Azul!
Question for you: you frequently talk about "fee-only" advisors and a five year plan. Can you do a video describing what you mean by this? I thought an advisor would just invest on my behalf, but it seems you're describing a more comprehensive approach. And would the plan be interactive? In other words, is this something that I would receive and use for several years without further input from the advisor, or is it something we would routinely review and update?
Really appreciate you and your insight!
Great info….. didn’t know about the differences between banks and brokerage houses and how they can/can’t use your money. Thanks.
Thanks Azul.