With the recent banking crisis, I’ve received a lot of emails asking me two related questions. First, what would happen to our investments at a broker if that broker failed. Second, what would happen to an ETF or mutual fund if the company behind the fund failed?
We cover both of these questions in today’s video.
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ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I’m the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I’m also the author of Retire Before Mom and Dad–The Simple Numbers Behind a Lifetime of Financial Freedom (
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Investing your money with large financial institutions like Schwab, Fidelity, or Vanguard seems like a secure way to grow your wealth. However, the possibility of these institutions collapsing always looms on the horizon, which leads to the question of what happens to our investments if it happens.
Firstly, it is important to understand that Schwab, Fidelity, and Vanguard are all reputable companies with a solid track record of financial stability. They also have measures in place to ensure the protection of their clients’ investments, including fidelity bonds, insurance coverage, diversification, and strict regulations on operations.
In the unlikely event of them collapsing, investors need not worry about losing their investments. This is because the assets of the customers are usually held in separate accounts and are not part of the company’s financial obligations.
For instance, Vanguard, for example, operates under a unique ownership structure where investors in the company’s mutual funds ultimately own the company. Thus, the assets are not part of the bankruptcy estate, so creditors cannot liquidate them to pay off the company’s debt. The same applies to Schwab and Fidelity, where clients own the assets they invest in and have access to them directly.
After the collapse, a trustee appointed by the court will come in and take control of the company’s assets. The responsibility of such a trustee would be to secure the assets of investors under his/her custody, liquidate them, and ensure the proceeds are returned to investors.
The process of liquidating assets of a fallen investment company usually takes between six months to a year. During this process, investors might face some delays in accessing their funds, but they will ultimately get their money. In addition, investors are usually notified in advance before any liquidation occurs.
In conclusion, the collapse of investment companies like Schwab, Fidelity, and Vanguard is an unlikely event. Still, even if that happens, investors need not be concerned about losing their assets. The fact the companies have robust measures to prevent such a scenario is a testament to their credibility. However, if it happens, investors must exercise patience and trust in the legal process. Ultimately, the law is on the investor’s side and their investment’s safety is at the forefront of any liquidation process.
No one mentions what would happen if too many had to use the $250,00 FDIC. Our government has only a small percentage available to cover
I wouldn't believe anything that comes out of the financial reporting of any of these institutions
I would know it was buy God's hand
The fall of the Mystery Babelyon financial system and the great reset
A new system is coming which will be for the people
@Rob Berger . Is there any concern with private brokerages like Fidelity, vs. public brokerages like Schawb? Is there any way to see if these private companies are financially healthy?
Thankyou for the valuable info.
Great explanation, thank you. What happens if the custodian goes bankrupt?
What about Schwab's sweep account? I called them yesterday on this issue. I'm going to be in mostly cash soon until this debt ceiling crisis is over. What happens if I have millions sitting in Schwab's sweep account waiting to invest, and then Schwab fails for some unlikely reason. Well, I get a bunch of deceptive answers…."You'r protected to 500K per person…we have additional insurance with Lloyds of London. There is SPIC etc etc." Well, bottom line, only 500k is protected right? "Uh, yes" Is this your understanding too? Thanks.
Mr. Berger this is a imperfect video. Schwab should write you a letter. Pick on your own bank.
We flood people with stimulus money then wonder why inflation. Most people are ignorant on economics and how the investment market works. The people are not necessarily dumb but ignorant. Too much entertainment like stupid Tick-tock. People can’t stand not being constantly being entertained. American will rot with entertainment stimulus. Waste of time.
We shouldn't allow companies to get this big.
Economists and business leaders are voicing concerns at the start of 2023 that the year could be a difficult one. JPMorgan Chase & Co. Chief Executive Jamie Dimon said that the Federal Reserve may need to raise interest rates to 6% to fight inflation, higher than the peak level between 5% and 5.5% in 2023 that most Fed officials penciled in after their December meeting. Although I read an article of people that grossed profits up to $500k during this crash, what are the best stocks to buy/short now or put on a watchlist.
Not a very good video. Didn't really learn anything and when he ends it with "in my view" he's telling everyone he really does not know.
A number of the most eminent market experts have been expressing their views on the severity of the impending economic downturn and the extent to which equities might plummet. This is because the economy is heading towards a recession and inflation is persistently above the Federal Reserve's 2% target. As I'm aiming to create a portfolio worth no less than $850,000 before I turn 60, I would appreciate any advice on potential investments.
Ty for good info
What is the different between SWVXX and SNVXX
I've moved my equities to cash in my Schwab account…what risk am I exposed to by doing that?
ha ha .. OKAY .. don't everyone panic all at once !!!!!!!! ..
…
..
ok .. now you can panic
I wish i learnt most of these principles about seven years ago. A lot of people have been trapped strongly in the matrix– Go to school, get a job, and then slave your whole life. Many miss out on life-changing information that could have great effect on their finances. I played with the stock market sometime in 2020, and I was surprised at how well it turned out. I want to put in $90k more into the market. I heard people are making really great returns despite the downturn. Any recommendations?
very professional video
Much of the inflation problem must be people living a minimalist life, especially young generation. Anothe part must be the fact be aging population. Another is less globalism lately.
Took to long to explain = boring …
Would that include CDs? that are in your Schwab brokerage account if they were to go belly up! and what about Ameritrade retirement accounts and their short-term bonds & (under 1 year) and balances-how safe are they as Schwab now owns TD! Thanks in advance if you manage to answer.
This is a great and informative video. Thank you
What happens if the Custodian collapses?
Thank you!
nice vid! I have a specific question about schwab bank.
If the bank fails does that mean the brokerage fails as well. doesn't the brokerage own the bank and would that cause the whole co. (the Brokerage) to fail or woild the brokerage continue to operate as normal…..I'm very confused on this poitn and haven't seen anyone address this other tan to sy they they the brokerage accounts would be safe. does that mean we would have to wait for spic to sort things out or would the customers be able to access their accounts
This video concerns Schwab, Fidelity and Vanguard….does what Bob Berger describes here about them, also apply to Merrill Lynch too?
Retirement? What is that?