Are There Any Advantages to Having Multiple Brokerage Accounts?

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In the era of easily accessible investing platforms, the question arises: Is there any benefit to having multiple brokerage accounts? The short answer is yes. There are several advantages to diversifying your brokerage portfolio, each tailored to your unique financial goals and investment strategies. GOBankingRates’ Best Banks 2023 survey, 56% of overall respondents said they would have different types of accounts across various banks. While this response does mark a slight decline from 2022’s figures, where 70% of surveyed respondents said they would be interested in banking at multiple institutions, it still makes up well over half of Americans. Here’s a breakdown of the potential benefits:

Diversification of Investment Options

Different brokerages offer unique investment products and services. By having accounts with multiple brokers, you can access a wider range of investment options, including exclusive funds, stocks, or alternative assets that may not be available on a single platform. According to 2023 data from Gintux, “42% of people with a brokerage account have an IRA in addition to the account.” Showing the popularity and normalcy of having at least one more account, especially one committed to an IRA.

Risk Management

Just as diversification is key in an investment portfolio, spreading your assets across multiple brokerages can reduce the risk associated with a single institution’s failure or limitations. It’s a way to safeguard your investments from brokerage-specific issues.

Specialized Features and Tools

Some platforms might offer specialized tools or features that cater to specific investment styles. For example, one brokerage might provide superior research tools for active traders, while another might offer a robust robo-advisor for passive investors. Utilizing multiple accounts allows you to leverage the best features from each.

Some well-regarded and best received companies where you can use robo-advisors:

• SoFi
• Betterment
• Fidelity
• Wealthfront
• Vanguard

Tax Advantages

Incorporating tax diversification into your investment strategy can be as crucial as diversifying your assets. For example, profits and dividends from a standard taxable brokerage account are subject to annual taxes. However, by allocating some of your investment funds into tax-advantaged accounts like IRAs, health savings accounts, or 401(k)s, you can potentially reduce the tax liability associated with your taxable account. This approach allows you to strategically manage the tax implications of your various accounts, setting you up for financial success both now and in the future.

Access to Different Levels of Service

Some brokerages offer premium services, personalized advice, or lower fees to clients with higher account balances. For example, Fidelity offers its wealth management clients, those with more than $250,000 in professionally managed assets, the Fidelity Rewards+ program. This program provides higher yielding, lower expense money market funds based on three tiers of eligible assets, with yields ranging as high as 5.2% to more than 5.3% on these elite funds. By diversifying your accounts, you can access these benefits without needing to consolidate all your assets under one roof.

Promotional Offers

Brokerages often run promotional offers for new accounts, such as cash bonuses or free trades. For instance, Charles Schwab provides a sign-up bonus when you register using a referral link from a friend and Ally Invest grants a cash bonus for initiating and funding a new account with a specified minimum deposit. By opening multiple accounts, you can take advantage of these promotions, boosting your investment capital.

Backup and Redundancy

In the unlikely event that one brokerage faces technical issues or downtime, having another account ensures that you can still execute trades and access your funds.

Cons of Having Multiple Accounts

Managing multiple brokerage accounts can introduce complexity and increase the likelihood of overlapping investments, leading to a less cohesive asset allocation strategy. Additionally, the added paperwork and potential for neglecting accounts can make it challenging to maintain a clear overview of your financial portfolio. “Managing multiple accounts requires more time and effort,” said David Rafalovsky, the CEO of Oxygen, a banking services and financial technology platform. “There’s a higher risk of incurring fees, especially if you’re not meeting minimum balance requirements. And let’s not forget the potential for confusion and stress. Balancing several accounts can be overwhelming, leading to errors like missed payments or oversights in budgeting.”

While there are clear advantages to having multiple brokerage accounts, it’s essential to be mindful of the potential drawbacks. Managing multiple accounts can be more time-consuming and may make it harder to keep track of your overall asset allocation and performance. Additionally, you’ll need to ensure that you’re not duplicating investments across accounts, which could inadvertently increase your risk.

In summary, having multiple brokerage accounts can offer flexibility, access to a broader range of investments, and opportunities for optimizing your financial strategy. However, it’s crucial to weigh these benefits against the added complexity and ensure that your approach aligns with your overall investment goals and risk tolerance.

Editor’s note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates’ editorial team.

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