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I do not need any stats to know if Schwab is milking their customers more than their competitors. Personal experience is more than sufficient. Milking can be in the form of money and / or other frictions, and their brokerage sweep feature and mandatory cash holding in Robo accounts speak for itself.
I am not one to quarrel with the weather. I had given many suggestions to Schwab to improve, including written suggestions. I have then decided to adapt and use them for what they are tolerable and use Fido for everything else.
Incidentally, I opened both Schwab and Fido accounts the same day 20 years ago. My Fido assets were about 10 times larger than my Schwab assets before TD accounts were transferred to Schwab. Fido never offered me any freebies or asset transfer bonuses. I use all investment vehicles, except interval funds. I do not use advisory services.
I have had my head taken out for being ahead of others in sharing negative info about brokerages and other financial institutions. It seems I offend forum members in my sharing. So, I will stop.
On a separate note, I, as a customer, once had a very poor experience with United Health - prior to ACA. I thought they were A holes and switched to other carriers. What I failed to consider was to look into their business financials and buy UNH stock. If they can try to screw me so blatantly, may be they have some sort of moat. Given that experience, I should look into if Schwab has a moat that allows them to provide poor customer experience and then buy Schwab stock.
"I should look into if Schwab has a moat that allows them to provide poor customer experience and then buy Schwab stock."
I read the Company Report at M* which has a glowing Wide moat ranking. I did not see any compare and contrast against Morgan Stanley, Merrill Lynch, or IBKR in the report to rely on the report's glowing ranking. Clients of Morgan Stanley and Merrill Lynch tell me how they make it sticky for them to leave. I know a few IBKR customers and none want to leave IBKR to go to Schwab. I still can not figure out what competitive advantage Schwab has.
One of the bear cases against Schwab presented in the report is the following and I do not follow the logic (any one?):
"A Japan-like scenario of near 0% interest rates for an extended period would significantly reduce earnings and likely necessitate a change in business model. The Fed may have to lower interest rates if a recession occurs."
Schwab relies very heavily on uninvested cash from customers -- don't know why there is confusion around this. Not offering auto sweeps into a MM fund like Fidelity and Vanguard is not due to Schwab being lazy, it is central to Schwab's strategy. Also Schwab MMF settles T+1 unlike Fidelity MMF which settles same day so another opportunity for Schwab to extract rent. Schwab strategy succeeds for the exact same reason that the large banks can get away with offering laughably low rates on savings account -- sloth behavior from customers.
I find Schwab customer reps generally more friendly than Fidelity but Schwab sucks in efficiency compared to Fidelity. I'd happily move to Fidelity if my RIA supported them. I did 4 account transfers into Schwab and they found a way to screw up/significantly delay all 4. That takes a special talent. Today I called Schwab to check on the status of an IRA transfer for which I submitted the paperwork more than 2 weeks back. Radio silence from Schwab even after a Message Center follow up. Not even a simple "Yea we got it, give us X days". Funny thing is that Fidelity as the releasing institution sent me an automated mail (very unusual) acknowledging the request.
Also Schwab MMF settles T+1 unlike Fidelity MMF which settles same day so another opportunity for Schwab to extract rent.
Well, sort of. Fidelity requires the purchase money to be available same day, which is the definition of "same day" settlement. But you don't start earning money in the new MMF account until the next day. And isn't that really what we care about here?
Here's an excerpt of a post by a Fidelity moderator on a Reddit thread:
Settlement for money market funds is generally same day. For anyone unfamiliar, the settlement date is the day on which payment for securities bought, or certificates for securities sold, must be in your account. ... When you purchase a Fidelity mutual fund, they begin earning dividends or interest on the first business day after the effective purchase or trade date, including money market funds. The core position is the exception to this, as the core begins accruing interest once funds are posted after a deposit
Contrast that with "true" T+0 MMF settlement. I purchased a Fidelity MMF at Merrill on June 28th (last trading day of the month). Had it started earning money the first business day (July 1) after the trade date, then I would have earned no divs in June. Yet I was credited with earnings for the month. The activity log reads: "PAY DATE 06/28/2024".
Here's an excerpt from the FZDXX prospectus - a higher yielding MMF available in a Fidelity retail account:
Shares purchased by all other orders generally begin to earn dividends on the first business day following the day of purchase.
Here's an excerpt from the FSIXX prospectus, another Fidelity MMF, one that is available to retail customers at Merrill:
Shares purchased by a wire order prior to 12:00 noon Eastern time for Tax-Exempt Portfolio, prior to 2:00 p.m. Eastern time for Treasury Only Portfolio, or prior to 5:00 p.m. Eastern time for Government Portfolio, Money Market Portfolio, and Treasury Portfolio, with receipt of the wire in proper form before the close of the Federal Reserve Wire System on that day, generally begin to earn dividends on the day of purchase.
BTW, Merrill sets an 11:45AM settlement time for FSIXX in order to get same day settlement. (If logged into Merrill, see here.) I guess it takes a little time to get the money wired to Fidelity.
FSIXX is a treasury only (state tax-exempt) MMF currently (as of July 16) offering a higher 7 day yield (5.18%) than does FZDXX (5.15%).
Tuesday I went to move money from Taxable to checking at Schwab. During transfer, up pops margin loan ,as not enough cash in taxable account. So I cancel transfer & put in to sell 1100 shares of the mutual fund. Wednesday morning checking account shows transfer of $1100 or shares of the MMMF. How did that happen ? I guess they assumed I still wanted to move the money to checking instead of investing it elsewhere !
If you cancelled the transfer, that shouldn't happen.
But if you clicked on some tab that asked how to fund the transfer to avoid margin, then the sell and transfer would be tied.
FYI, to avoid possible mistakes (and I have made some), I always double-check order entry or cancellation in the Order Status screen - not just at Schwab, but also at Fido and Vanguard.
The only saving grace of 'old school' wirehouse brokerages in 2024 is that when you task your FA/VP/broker to do something, they'll usually do it right the first time and/or get back to you with updates or questions as needed. Of course, you're paying like $200 each time you buy/sell a stock, so you're paying for the service.
Self-service retail brokerages are still pretty good and their pros still outweigh their cons in my book, but sometimes they really do bork things up or flat-out drop the ball on stuff.
@msf With Schwab, if I purchase a new position I have to sell SWVXX the same day because SWVXX will settle next day.
With Fidelity(my understanding) is that the MMF will auto trade and settle next day to cover the prior day purchase therefore MMF position earns interest for an additional day in a Fidelity MMF vs. a Schwab MMF wrt purchase of any instrument that settles T+1.
At my individual level, the interest loss between Schwab and Fidelity isn't much but in the aggregate this is a pretty big deal for Schwab hence why Schwab does it different than Vanguard and Fidelity. It adds friction because I have to manually do a 2nd MMF trade to cover a buy. The friction has no benefit to me ergo it only benefits Schwab.
I just checked transfer confirmation from Schwab & it shows Margin ! I'll keep an eye out & see if it shows in next statement. This has happened before, & after checking statement I found no margin charge.
@yogibearbull "But if you clicked on some tab that asked how to fund the transfer to avoid margin, then the sell and transfer would be tied. Of the four accounts held at Schwab, none had enough cash to cover the transfer ! The only tab was taxable & that was canceled. *8* ball effect ! Have a good day YBB, Derf
Schwab relies very heavily on uninvested cash from customers -- don't know why there is confusion around this. Not offering auto sweeps into a MM fund like Fidelity and Vanguard is not due to Schwab being lazy, it is central to Schwab's strategy. Also Schwab MMF settles T+1 unlike Fidelity MMF which settles same day so another opportunity for Schwab to extract rent. Schwab strategy succeeds for the exact same reason that the large banks can get away with offering laughably low rates on savings account -- sloth behavior from customers.
I find Schwab customer reps generally more friendly than Fidelity but Schwab sucks in efficiency compared to Fidelity. I'd happily move to Fidelity if my RIA supported them. I did 4 account transfers into Schwab and they found a way to screw up/significantly delay all 4. That takes a special talent. Today I called Schwab to check on the status of an IRA transfer for which I submitted the paperwork more than 2 weeks back. Radio silence from Schwab even after a Message Center follow up. Not even a simple "Yea we got it, give us X days". Funny thing is that Fidelity as the releasing institution sent me an automated mail (very unusual) acknowledging the request.
As I explained before, T+1, isn't a problem. I hardly ever have cash, unless risk is very high. I always sell a fund and buy another, no MM. Even if I sell a fund into cash, I buy into MM fund immediately = same day settlement.
"I did 4 account transfers into Schwab and they found a way to screw up" I transfer probably at least 20 times, never screw up. Several friends and relatives I sent to Schwab have done transfers; all had zero problems. I have done transfers online (no paperwork) for years now.
Customer service at Fidelity is far better than Schwab. Fidelity reps used to be good, but in the last 3–5 years, the service has deteriorated.
MSF post several things that take more time or don't exist. Well, I'm a trader for about 25 years. No single bond, stocks. No CD or treasuries. No sophisticated pro trade software. It's all mutual funds/ETF and rarely trading CEFs very short time. Schwab site is better and easier. If I need to trade and look at other things which is rare, I open another session, as I do with other sites. That's why I have a 24" screen. I also trade on my cell if I need to, but usually I don't. I like speedy update, Fidelity updates are behind. The most irritating is end of month distributions. I see them at Schwab already at 8-9 PM on the same day, it takes Fidelity another day, sometimes 2 days. For me, as a fund trader, Fidelity is the worst, and I have been in several shops, they will not wave the commissions on Inst shares, all the others did many of them.
@FD1000 "Even if I sell a fund into cash, I buy into MM fund immediately = same day settlement"
How is the above possible when you don't know what the sale proceeds will be(or even that the sale will actually go through) or do you do a conservative estimate and sweep up the remaining next day?
Cash drag in Schwab isn't a thing for active traders like you but I'm not in the account daily so for me cash drag costs start adding up because I have multiple Treasuries spread out over multiple accounts with varying maturities so at times it could easily be a week of my matured Treasury earning squat or near squat at Schwab vs. automatically earning a solid rate at Fidelity.
I've never been a day trader but many years back I was "active" (5-10 trades a month). Going by memory but I would not touch Schwab for any level of active trading. Both web and mobile apps are significantly less stable than Fidelity.
All of my transfers have been electronic and for every single one of them I've had to follow up with Schwab reps multiple times to actually get it done and done right.
The necessity of doing a 2nd MM transaction to either avoid margin or cash drag for every single buy/sell is a major turn off for me -- basically double the work for no additional benefit compared to Fidelity.
Fidelity's major flaw is the wire transfer form when FFC is needed -- that thing is a radioactive disaster.
Your point about Schwab allowing you to invest in I Class shares is interesting. No limits or account minimums at all? I can invest in most I Class shares at low to no minimums but that is due to my RIA.
How is the above possible when you don't know what the sale proceeds will be(or even that the sale will actually go through) or do you do a conservative estimate and sweep up the remaining next day?
Well, pretty easy. Suppose you own US LC, before closing, they were down 1.3%. If I sell $500K, I deduct 5% (for me it's 3%, I never made a mistake), and enter a buy order for $475K. The next day, I do the rest.
BTW, most of my money is in IRA. Fidelity will not let you execute a buy order for the sell proceeds at all. You must call a rep, many times I argued with them, and they can enter a 90% buy, even if you sold a bond fund. I deal mostly with bond funds with min change, and why I buy at 99% on the Schwab site instead of wasting time and energy.
90% is a Fidelity invention I haven't seen in any other broker. Sometimes they lie and say it is a SEC rule.
Interesting that Fidelity does not allow a buy order on unsettled funds. Could it be due to not having a margin facility on the account?
I Class entry at low minimums is a nice to have. The primary reason for RIA account is access to Alts which is not possible without RIA. I have a healthy slug of private debt and PE investments. The incremental benefits far outweigh the additional cost of an RIA.
Catch 22. If your investing knowledge is below average, you don't know if your RIA is good. If it's above average, you don't need one. RIA is a jack of all trades and a master of none. Anytime you need a real advice, you need to see a real pro. For taxes related issues see a CPA, for trusts see an attorney. Fidelity sell/buy rules is an internal decision, I don't have margin in any of my accounts.
I have margin in (taxable) a/c at Fido and Schwab. Although I no longer use margin debt (so, my margin loan balance is $0), I like the benefits of the margin feature in easier trading - orders can be entered with zero net impact on the settlement day.
Exceptions are T-Bills/Notes when they want the money only 1-2 after the auction. Only Fido will recognize pending maturity for Treasury auto-roll (not Schwab; feature N/A at Vanguard).
But I run into these issues in IRAs - both at Fido and Schwab. Surprisingly, Vanguard just issues a warning but allows the trades in IRA. There is limited-margin for IRAs too but I haven't bothered with that.
With Schwab, if I purchase a new position I have to sell SWVXX the same day because SWVXX will settle next day.
With Fidelity(my understanding) is that the MMF will auto trade and settle next day to cover the prior day purchase therefore MMF position earns interest for an additional day in a Fidelity MMF vs. a Schwab MMF wrt purchase of any instrument that settles T+1.
Your understanding is correct as far as it goes, but it doesn't address when within the day that settlement occurs.
Investors receive dividends if they own securities at the close of market on the record day. MMFs declare divs daily. You get the div for a day if you own the fund at the close of market. That's why T+0 MMFs pay divs from the day of trade - settlement is intra-day and you own the shares the day you buy them. And why they don't pay divs the day you sell - settlement is again intra-day and you don't own the shares at the end of the day.
That's not the way the prospectuses of most Fidelity MMFs read. FSIXX is an exception, as seen in the prospectus excerpt above. This is also why it has a trading deadline of 2PM (Merrill requiring trades by 11:45AM to meet this deadline). Any later trades aren't processed until after market close (i.e. T+1) like most securities.
This idea of intra-day trading and deadlines may not be familiar to many. Some people may remember that Fidelity Select funds used to price (and trade) hourly. Similar idea, though the closing day didn't matter much since these funds declared divs annually(?), not daily.
You are correct that the MMF "auto trades" the next day, and settles that same next day. But what you're missing is when within the day it sells and settles. That happens before market open. Check your activity log or statement; it says "Morning Trade". You don't get the MMF div on the settlement day because you don't own the MMF shares at the close. Even though you "auto traded" the MMF on the settlement day.
The trading timing for Fidelity MMFs is described, albeit not too clearly, in the brokerage agreement:
If You Utilize a Fidelity Money Market Fund as Your Core Position If you utilize a Fidelity money market fund as your core position and there are debits in your account generated by account activity [e.g. bill payment] occurring prior to the market close each business day ... these debits will be settled at the market close using the following sources, in this order: • the Intra-day Free Credit Balances • redemption proceeds from the sale of your core position at the market close • redemption proceeds from the sale of any shares of a Fidelity money market mutual fund held in the account ... • [available margin] There will be an additional sweep early in the morning prior to the start of business on each business day, and certain unsettled debits in your account along with debits associated with certain actual or anticipated transactions that would otherwise generate a debit in your account during the business day will be settled using redemption proceeds from the sale of your core position early in the morning prior to the start of business.
That early morning MMF sale prior to market open is to settle the debit generated by acquiring a new position the previous day.
Bottom line - yes, the Fidelity MMF trades the day of settlement; no you don't get an extra day's div because the MMF sale is settled prior to close of business that day. Same result as with SWVXX, that earns its dividend on the trade date because it settles on the following day. SWVXX prospectus.
MSF post several things that take more time or don't exist. I think that everything I posted in the previous post was either a prospectus excerpt or a description of an actual trade I made, could you (FD1000) state what it I posted that doesn't exist? Well, I did also post current 7 day yields, but I don't think that's what you're questioning
@msf Ty for that detailed explanation on there being no difference between Schwab and Fidelity regards interest earned on MMF trades due to settlement day differences
That said Fidelity and Vanguard imo are still better imo because one is not forced to manually enter a 2nd MMF trade for every single buy/sell.
@FD1000 Regards your Catch 22 comment -- I could be a card carrying member of the investing Mensa club and determine that I want exposure to PE and private debt interval funds. But I still need a RIA to access them no matter my IQ.
Most of my trades are between Fidelity or TR Price funds, so there is no time out of the market. Buy and sell occurs at the same time. In cases where I trade between different fund families, waiting a day for trade to complete is generally no big deal.
That said Fidelity and Vanguard imo are still better imo because one is not forced to manually enter a 2nd MMF trade for every single buy/sell.
Most should don't trade, and most shouldn't own MM. This is such a small thing, no need to worry about, even if you didn't do the second buy, the yearly difference is meaningless. You still need to look at the TOTALs. Vanguard? no thank you, bad servicess. Fidelity? sure. But, as I said, waving commissions is probably about $2K for me. The ability to invest 99% on day one when I switch funds at Schwab can generate another $K These are all peanuts.
Regards your Catch 22 comment
I made a generic comment not related to you. All I can tell you is that I met probably at least with 30-40 financial advisors, and I wasn't impressed. Most are just salespeople who repeat what is fed to them. Most are not real fiduciaries, even if their title says so. A good one should assess your goals in a couple of hours, set a plan for years to come, and only make changes at pivotal points. They also should put you in up to 5-7 funds, at least half indexes, it's not a brain surgery. That means charging you maybe $1000-1500 first time and nothing for years, hardly any of them will do it. Fiduciaries should look at their clients interests, not charge them every year, and never by the size of their portfolios.
For those reading this thread, comments by @FD1000 and @stayCalm for the name Catch22 are addressing possible circumstance(s), and not related to a poster name at this site. Good evening.
@FD1000 We're talking past each other because we don't have the same needs from a brokerage or RIA.
- I'm never 100% in the market so cash earning a competitive rate vs. nothing matters to me. - I do not have time to login to my Schwab account daily. Sometimes it might easily be 4 weeks between logins. Terrible waste of my time to login daily to prevent opportunity cost of idle cash. - Lost interest being peanuts. Relative to each individual investor as to what is considered peanuts. For example $250K sitting idle for 4 weeks costs $962 at a rate of 5%. Not a princely sum but no reason for me to pad Schwab's pockets. - I'm not a fan of layering unnecessary costs(RIA) but in my case I get access to investment instruments that I can't otherwise get without a RIA so cost/benefit to me totally worth it, it isn't even a close call. - The flat fee advisory model isn't a substitute for what I need from an RIA + most advisors aren't familiar with Alts. The boilerplate allocation stuff can be spit out by a robo advisor, don't need a human for that. Even an occassional subscription to portfoliovisualizer will be cheaper and better than most advisors.
Ok, I got it. MM pays now 5+% but for years it pays under 1%. A couple of year from now it will be much lower. I can always find pretty good risk/reward bond funds but that's my specialty. Logins at 4 weeks interval and not interested too much tell me Fidelity is better for you. How can $250K sit idle? Suppose I sell 1 million and buy $950K(5% less than a million) it's only $50K. To have $250K sitting idle means you sold $5 million. I'm a stickler in that dept, if I see $100 left, I invest it. Taking care of my money and logging in 10 minutes 2-3 times per week is worth it. I always check all my other financial institution sites too. IMO, It's a must in the digital world to protect and verify your assets. I only invest in funds/ETFs, very rarely, I trade leveraged CEFs for hours/days when I see a good trade, like 2020, or 2022.
250K was a hypothetical number to illustrate a point. I have Treasuries of varying maturities across multiple accounts -- I dislike having to frequently login to check whether there is idle cash sitting in the account.
I'm not going to share the details of my price arrangement with my RIA. RIA fees per web search can range from 0.25% to 2% but you already know this since you mentioned previously about speaking to many RIA's.
Comments
I do not need any stats to know if Schwab is milking their customers more than their competitors. Personal experience is more than sufficient. Milking can be in the form of money and / or other frictions, and their brokerage sweep feature and mandatory cash holding in Robo accounts speak for itself.
I am not one to quarrel with the weather. I had given many suggestions to Schwab to improve, including written suggestions. I have then decided to adapt and use them for what they are tolerable and use Fido for everything else.
Incidentally, I opened both Schwab and Fido accounts the same day 20 years ago. My Fido assets were about 10 times larger than my Schwab assets before TD accounts were transferred to Schwab. Fido never offered me any freebies or asset transfer bonuses. I use all investment vehicles, except interval funds. I do not use advisory services.
I have had my head taken out for being ahead of others in sharing negative info about brokerages and other financial institutions. It seems I offend forum members in my sharing. So, I will stop.
On a separate note, I, as a customer, once had a very poor experience with United Health - prior to ACA. I thought they were A holes and switched to other carriers. What I failed to consider was to look into their business financials and buy UNH stock. If they can try to screw me so blatantly, may be they have some sort of moat. Given that experience, I should look into if Schwab has a moat that allows them to provide poor customer experience and then buy Schwab stock.
I read the Company Report at M* which has a glowing Wide moat ranking. I did not see any compare and contrast against Morgan Stanley, Merrill Lynch, or IBKR in the report to rely on the report's glowing ranking. Clients of Morgan Stanley and Merrill Lynch tell me how they make it sticky for them to leave. I know a few IBKR customers and none want to leave IBKR to go to Schwab. I still can not figure out what competitive advantage Schwab has.
One of the bear cases against Schwab presented in the report is the following and I do not follow the logic (any one?):
"A Japan-like scenario of near 0% interest rates for an extended period would significantly reduce earnings and likely necessitate a change in business model. The Fed may have to lower interest rates if a recession occurs."
I find Schwab customer reps generally more friendly than Fidelity but Schwab sucks in efficiency compared to Fidelity. I'd happily move to Fidelity if my RIA supported them. I did 4 account transfers into Schwab and they found a way to screw up/significantly delay all 4. That takes a special talent. Today I called Schwab to check on the status of an IRA transfer for which I submitted the paperwork more than 2 weeks back. Radio silence from Schwab even after a Message Center follow up. Not even a simple "Yea we got it, give us X days". Funny thing is that Fidelity as the releasing institution sent me an automated mail (very unusual) acknowledging the request.
Well, sort of. Fidelity requires the purchase money to be available same day, which is the definition of "same day" settlement. But you don't start earning money in the new MMF account until the next day. And isn't that really what we care about here?
Here's an excerpt of a post by a Fidelity moderator on a Reddit thread: https://www.reddit.com/r/fidelityinvestments/comments/159dtyj/settlement_time_for_money_market_fund_investments/
Contrast that with "true" T+0 MMF settlement. I purchased a Fidelity MMF at Merrill on June 28th (last trading day of the month). Had it started earning money the first business day (July 1) after the trade date, then I would have earned no divs in June. Yet I was credited with earnings for the month. The activity log reads: "PAY DATE 06/28/2024".
Here's an excerpt from the FZDXX prospectus - a higher yielding MMF available in a Fidelity retail account: Here's an excerpt from the FSIXX prospectus, another Fidelity MMF, one that is available to retail customers at Merrill: BTW, Merrill sets an 11:45AM settlement time for FSIXX in order to get same day settlement. (If logged into Merrill, see here.) I guess it takes a little time to get the money wired to Fidelity.
FSIXX is a treasury only (state tax-exempt) MMF currently (as of July 16) offering a higher 7 day yield (5.18%) than does FZDXX (5.15%).
But if you clicked on some tab that asked how to fund the transfer to avoid margin, then the sell and transfer would be tied.
FYI, to avoid possible mistakes (and I have made some), I always double-check order entry or cancellation in the Order Status screen - not just at Schwab, but also at Fido and Vanguard.
Self-service retail brokerages are still pretty good and their pros still outweigh their cons in my book, but sometimes they really do bork things up or flat-out drop the ball on stuff.
With Schwab, if I purchase a new position I have to sell SWVXX the same day because SWVXX will settle next day.
With Fidelity(my understanding) is that the MMF will auto trade and settle next day to cover the prior day purchase therefore MMF position earns interest for an additional day in a Fidelity MMF vs. a Schwab MMF wrt purchase of any instrument that settles T+1.
At my individual level, the interest loss between Schwab and Fidelity isn't much but in the aggregate this is a pretty big deal for Schwab hence why Schwab does it different than Vanguard and Fidelity. It adds friction because I have to manually do a 2nd MMF trade to cover a buy. The friction has no benefit to me ergo it only benefits Schwab.
Have a good day YBB, Derf
"I did 4 account transfers into Schwab and they found a way to screw up"
I transfer probably at least 20 times, never screw up. Several friends and relatives I sent to Schwab have done transfers; all had zero problems.
I have done transfers online (no paperwork) for years now.
Customer service at Fidelity is far better than Schwab. Fidelity reps used to be good, but in the last 3–5 years, the service has deteriorated.
MSF post several things that take more time or don't exist.
Well, I'm a trader for about 25 years. No single bond, stocks. No CD or treasuries. No sophisticated pro trade software. It's all mutual funds/ETF and rarely trading CEFs very short time.
Schwab site is better and easier. If I need to trade and look at other things which is rare, I open another session, as I do with other sites. That's why I have a 24" screen. I also trade on my cell if I need to, but usually I don't.
I like speedy update, Fidelity updates are behind. The most irritating is end of month distributions. I see them at Schwab already at 8-9 PM on the same day, it takes Fidelity another day, sometimes 2 days.
For me, as a fund trader, Fidelity is the worst, and I have been in several shops, they will not wave the commissions on Inst shares, all the others did many of them.
"Even if I sell a fund into cash, I buy into MM fund immediately = same day settlement"
How is the above possible when you don't know what the sale proceeds will be(or even that the sale will actually go through) or do you do a conservative estimate and sweep up the remaining next day?
Cash drag in Schwab isn't a thing for active traders like you but I'm not in the account daily so for me cash drag costs start adding up because I have multiple Treasuries spread out over multiple accounts with varying maturities so at times it could easily be a week of my matured Treasury earning squat or near squat at Schwab vs. automatically earning a solid rate at Fidelity.
I've never been a day trader but many years back I was "active" (5-10 trades a month). Going by memory but I would not touch Schwab for any level of active trading. Both web and mobile apps are significantly less stable than Fidelity.
All of my transfers have been electronic and for every single one of them I've had to follow up with Schwab reps multiple times to actually get it done and done right.
The necessity of doing a 2nd MM transaction to either avoid margin or cash drag for every single buy/sell is a major turn off for me -- basically double the work for no additional benefit compared to Fidelity.
Fidelity's major flaw is the wire transfer form when FFC is needed -- that thing is a radioactive disaster.
Your point about Schwab allowing you to invest in I Class shares is interesting. No limits or account minimums at all? I can invest in most I Class shares at low to no minimums but that is due to my RIA.
To each their own!
If I sell $500K, I deduct 5% (for me it's 3%, I never made a mistake), and enter a buy order for $475K. The next day, I do the rest.
BTW, most of my money is in IRA. Fidelity will not let you execute a buy order for the sell proceeds at all. You must call a rep, many times I argued with them, and they can enter a 90% buy, even if you sold a bond fund. I deal mostly with bond funds with min change, and why I buy at 99% on the Schwab site instead of wasting time and energy.
90% is a Fidelity invention I haven't seen in any other broker. Sometimes they lie and say it is a SEC rule.
I'm not paying RIA a penny
I Class entry at low minimums is a nice to have. The primary reason for RIA account is access to Alts which is not possible without RIA. I have a healthy slug of private debt and PE investments. The incremental benefits far outweigh the additional cost of an RIA.
RIA is a jack of all trades and a master of none.
Anytime you need a real advice, you need to see a real pro. For taxes related issues see a CPA, for trusts see an attorney.
Fidelity sell/buy rules is an internal decision, I don't have margin in any of my accounts.
Exceptions are T-Bills/Notes when they want the money only 1-2 after the auction. Only Fido will recognize pending maturity for Treasury auto-roll (not Schwab; feature N/A at Vanguard).
But I run into these issues in IRAs - both at Fido and Schwab. Surprisingly, Vanguard just issues a warning but allows the trades in IRA. There is limited-margin for IRAs too but I haven't bothered with that.
Investors receive dividends if they own securities at the close of market on the record day. MMFs declare divs daily. You get the div for a day if you own the fund at the close of market. That's why T+0 MMFs pay divs from the day of trade - settlement is intra-day and you own the shares the day you buy them. And why they don't pay divs the day you sell - settlement is again intra-day and you don't own the shares at the end of the day.
That's not the way the prospectuses of most Fidelity MMFs read. FSIXX is an exception, as seen in the prospectus excerpt above. This is also why it has a trading deadline of 2PM (Merrill requiring trades by 11:45AM to meet this deadline). Any later trades aren't processed until after market close (i.e. T+1) like most securities.
This idea of intra-day trading and deadlines may not be familiar to many. Some people may remember that Fidelity Select funds used to price (and trade) hourly. Similar idea, though the closing day didn't matter much since these funds declared divs annually(?), not daily.
You are correct that the MMF "auto trades" the next day, and settles that same next day. But what you're missing is when within the day it sells and settles. That happens before market open. Check your activity log or statement; it says "Morning Trade". You don't get the MMF div on the settlement day because you don't own the MMF shares at the close. Even though you "auto traded" the MMF on the settlement day.
The trading timing for Fidelity MMFs is described, albeit not too clearly, in the brokerage agreement: That early morning MMF sale prior to market open is to settle the debit generated by acquiring a new position the previous day.
Bottom line - yes, the Fidelity MMF trades the day of settlement; no you don't get an extra day's div because the MMF sale is settled prior to close of business that day. Same result as with SWVXX, that earns its dividend on the trade date because it settles on the following day. SWVXX prospectus.
MSF post several things that take more time or don't exist.
I think that everything I posted in the previous post was either a prospectus excerpt or a description of an actual trade I made, could you (FD1000) state what it I posted that doesn't exist? Well, I did also post current 7 day yields, but I don't think that's what you're questioning
Ty for that detailed explanation on there being no difference between Schwab and Fidelity regards interest earned on MMF trades due to settlement day differences
That said Fidelity and Vanguard imo are still better imo because one is not forced to manually enter a 2nd MMF trade for every single buy/sell.
Regards your Catch 22 comment --
I could be a card carrying member of the investing Mensa club and determine that I want exposure to PE and private debt interval funds. But I still need a RIA to access them no matter my IQ.
This is such a small thing, no need to worry about, even if you didn't do the second buy, the yearly difference is meaningless.
You still need to look at the TOTALs.
Vanguard? no thank you, bad servicess.
Fidelity? sure. But, as I said, waving commissions is probably about $2K for me. The ability to invest 99% on day one when I switch funds at Schwab can generate another $K
These are all peanuts. I made a generic comment not related to you. All I can tell you is that I met probably at least with 30-40 financial advisors, and I wasn't impressed. Most are just salespeople who repeat what is fed to them.
Most are not real fiduciaries, even if their title says so. A good one should assess your goals in a couple of hours, set a plan for years to come, and only make changes at pivotal points.
They also should put you in up to 5-7 funds, at least half indexes, it's not a brain surgery.
That means charging you maybe $1000-1500 first time and nothing for years, hardly any of them will do it. Fiduciaries should look at their clients interests, not charge them every year, and never by the size of their portfolios.
Good luck.
Good evening.
We're talking past each other because we don't have the same needs from a brokerage or RIA.
- I'm never 100% in the market so cash earning a competitive rate vs. nothing matters to me.
- I do not have time to login to my Schwab account daily. Sometimes it might easily be 4 weeks between logins. Terrible waste of my time to login daily to prevent opportunity cost of idle cash.
- Lost interest being peanuts. Relative to each individual investor as to what is considered peanuts. For example $250K sitting idle for 4 weeks costs $962 at a rate of 5%. Not a princely sum but no reason for me to pad Schwab's pockets.
- I'm not a fan of layering unnecessary costs(RIA) but in my case I get access to investment instruments that I can't otherwise get without a RIA so cost/benefit to me totally worth it, it isn't even a close call.
- The flat fee advisory model isn't a substitute for what I need from an RIA + most advisors aren't familiar with Alts. The boilerplate allocation stuff can be spit out by a robo advisor, don't need a human for that. Even an occassional subscription to portfoliovisualizer will be cheaper and better than most advisors.
Good luck too on your journey.
MM pays now 5+% but for years it pays under 1%. A couple of year from now it will be much lower. I can always find pretty good risk/reward bond funds but that's my specialty.
Logins at 4 weeks interval and not interested too much tell me Fidelity is better for you.
How can $250K sit idle? Suppose I sell 1 million and buy $950K(5% less than a million) it's only $50K. To have $250K sitting idle means you sold $5 million. I'm a stickler in that dept, if I see $100 left, I invest it.
Taking care of my money and logging in 10 minutes 2-3 times per week is worth it. I always check all my other financial institution sites too. IMO, It's a must in the digital world to protect and verify your assets.
I only invest in funds/ETFs, very rarely, I trade leveraged CEFs for hours/days when I see a good trade, like 2020, or 2022.
What does someone pay for RIA services?
I'm not going to share the details of my price arrangement with my RIA. RIA fees per web search can range from 0.25% to 2% but you already know this since you mentioned previously about speaking to many RIA's.