The deal is a good one for USAA members - as Schwab is a better dedicated investment company, he says. Transitioning to Schwab will be a “net no-change” as Fidelity’s trading platform is also robust, he says. Right now, those assets are held on Fidelity’s National Financial Services platform. “If it doesn't make sense for them to maintain such a large cash position, can look at alternatives or can look at competitive firms,” Scaturro says.Īpart from cash sweep changes, Scaturro says that day-to-day operations won’t change much for brokerage clients. It means that when you have two choices like this that serve the same purpose, you recommend the one that's best for the customer and not the one that's best for you,” Roper says.Ĭlients will ultimately vote with their wallets, Scaturro says. “If the words ‘best interest’ mean anything. Wealth managers at Schwab will need to recommend the best vehicle for their cash to clients, she says, and assure that large amounts of cash don’t pile up in the lower-return sweep account. “Unless they have something that's better still.” “Where customers already had that existing account, Schwab has the responsibility to put them in an account that's comparable,” Roper says. “We hope to be able to share more in the coming months, after the close of the transaction, expected next year.”īarbara Roper, director of investor protection at the Consumer Federation of America, says that Schwab has a responsibility to provide much more than a disclosure document to the clients moving over to their platform. In response to a series of questions regarding how it would prepare USAA clients and wealth managers for this transition, a Schwab spokeswoman offered the following statement: “I don't want to say Schwab doesn't offer a good plan for that when they do - it's just a different business model,” he says. The Schwab sweep may also be a good option for some members, Scaturro says. We don't want to scare people away from something that isn't an issue if it's not,” Scaturro says. “There could be changes on the sweep account on the Schwab side that actually don't create any issues. The communication materials are more about the general conversion itself, rather than comparing interest rates, Scaturro says. While self-directed brokerage members are receiving information about the transition, Scaturro says, clients need to be proactive about discussing their options. Across both self-directed and managed money platforms, that percentage is lower, at 12.9% cash. The average USAA self-directed client keeps a sizable portion of their portfolio in cash - about 20%, according to the Schwab presentation deck. An additional 145,000 accounts representing $23 billion are managed by financial reps, according to the Schwab presentation deck. There are 1 million self-directed accounts representing $67 billion in client assets moving over to Schwab. However, the majority of USAA brokerage clients are self-directed and don’t work with a wealth manager. Investment Management over allegations including disclosure failures about revenue sharing in cash sweep products.Īnd in December, the SEC reached a $17 million settlement with Avantax over alleged revenue-sharing violations, including in cash sweep products, at 1st Global Advisors, which was acquired by Avantax’s parent company in May 2019.ĭo you have a news tip you’d like to share with FA-IQ? Email us at. In January, the SEC reached a $1.2 million settlement with O.N. Sweep accounts - used by firms to hold customers’ cash - have also been an area of interest for the Securities and Exchange Commission in recent months.Įarlier in March, the SEC charged Cambridge Investment Research Advisors over alleged disclosure failures about revenue-sharing arrangements involving money market sweep funds and certain mutual funds, as reported. “It’s simply unfair that consumers are being asked to pay more on credit cards and loans, while the banks are pocketing the interest rate hikes that should be earned on custodial money instead of raising interest rates for people who are trying to keep their savings.” “ being hit with the double-whammy of higher credit card and loan rates on one end and low rates of interest on their bank accounts and other investments,” Galvin said in a statement. The office of the Secretary of the Commonwealth William Galvin says it has sent letters to Merrill, LPL Financial, Ameriprise, TD Ameritrade, Securities America and SoFi asking them whether they intend to raise the rates on their sweep accounts following Wednesday’s 0.25% rate increase by the Fed. Massachusetts’ securities watchdog is investigating whether Merrill Lynch and five other brokerage firms are harming their customers by refusing to raise interest rates paid in customers’ sweep accounts in light of the recent rate increase by the Federal Reserve
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