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Is it Risky to Put All My Investments With One Firm?

Question: My wife and I are retired and in our mid-60s, and I want to consolidate all of our investments—my 401(k) and two IRAs—under one roof. Are we putting ourselves at risk if everything is at one firm?

– Chuck Rosa, Shelby Township, Mich.

Answer: We’re all still smarting from the collapse of major financial firms such as Bear Stearns, but experts say for most investors there’s little risk in consolidating accounts at one major brokerage. The Securities Investor Protection Corp., for one, covers investors for up to $500,000 for securities, including a maximum of $250,000 for cash. Plus, assets at brokerage firms or mutual fund companies are held in a custodial account and are not assets of the company, says Frank Boucher, a financial planner in Reston, Va. Translation: If the company goes belly-up, your assets are protected from creditors and regulators. Still, that doesn’t mean you’re safe from bad investments, so experts say it’s crucial to diversify your holdings regardless of how many brokerages are involved.

Question: My wife and I are retired and in our mid-60s, and I want to consolidate all of our investments—my 401(k) and two IRAs—under one roof. Are we putting ourselves at risk if everything is at one firm?Chuck Rosa, Shelby Township, Mich. Answer: We’re all still smarting from the collapse of major financial firms such as Bear Stearns, but experts say for most investors there’s little risk in consolidating accounts at one major brokerage. The Securities Investor Protection Corp., for one, covers investors for up to $500,000 for securities, including a maximum of $250,000 for cash. Plus, assets at brokerage firms or mutual fund companies are held in a custodial account and are not assets of the company, says Frank Boucher, a financial planner in Reston, Va. Translation: If the company goes belly-up, your assets are protected from creditors and regulators. Still, that doesn’t mean you’re safe from bad investments, so experts say it’s crucial to diversify your holdings regardless of how many brokerages are involved.

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    • This site has a great deal of valuable iniotmarfon but Frankie doesn’t know squat about Scottsdale. According to him, the streets and shops are barren due to 30 K millionaires. The streets are crowded and people are spending money as usual. Not everybody in Scottsdale has a variable rate mortgage. There are actually many normal families that live here. It’s just the idiots who make the press.

    • -1′

    • Even though the assets in a 401k plan and IRA appear to be similar because they are both tax deferred accounts , there are important differences that you need to consider when combing the accounts into a roll over IRA. Under ERISA ( federal law) a participant’s account in a 401k typically has unlimited protection from creditors claims; this is not true for IRA which are not ERISA protected and under various state laws often have only limited amounts that can be protected from the account holder’s creditors.

    • My biggest mistake was selling 50% of my Chevron stock when I retired in 2000. And investing in Morgan-Stanley Funds per my adviser … I loss $200,000 in 6 months. But the other 50% of Chevron stocks made money and split in 2004. Needless to say I left Morgan-Stanley Corp. in 2001. I am now with Merrill-Lynch and my portfolio is slowly growing. I am HAPPY and LIVING is Awesome in Hawaii.

    • @Chuck-

      Disagree– using multiple firms doesn’t increase the risk of ending upp with a firm that has problems. The risk is there already. For the indiviudal who puts all their assets in one place, they are 100% exposed if that firm has problems. Spreading it out to two firms reduces the individual’s risk to 50% at each. Just like portfolio diversification.

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