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“It’s not about having lots of money.  It’s knowing how to manage it.”

— Anonymous

Is My Money Safe? 

In light of the recent banking turmoil, we wanted to address a common question: What happens to my money if my bank or brokerage firm goes under?  It’s important to understand the difference between a bank and a brokerage firm and the protection these institutions provide for your money.

The Nalls Sherbakoff Group is neither a bank nor a brokerage firm.  We are considered a Registered Investment Advisor (RIA), registered with the U.S. Securities and Exchange Commission (SEC).  Our firm does not physically “hold” our client’s assets such as cash or investments.  We use Charles Schwab as our custodian and that is where our client accounts are housed.  The custodian’s job is primarily to process transactions when securities are bought and sold, collect dividend and interest payments, make distributions to you or a designated party, and produce monthly statements.

Our firm is a fee-only advisory firm which means we do not receive commissions of any kind, sell products, or participate in revenue sharing.  We have a fiduciary duty to act in the client’s best interest. We encourage all investors to visit FINRA’s broker check website: https://brokercheck.finra.org/.  This helps you make informed choices about investment firms and advisors and provides easy access to their professional backgrounds and experience.

What to Know about Bank Accounts

When you deposit money into a bank account, the bank will either hold it as cash, invest it, or make a loan.  Your money is used in the bank’s overall operations and is reported on the bank’s balance sheet.  Although banks do fail, deposits in checking and savings accounts are among the safest of all assets.    

The Federal Deposit Insurance Corporation (FDIC) is a U.S. government agency that provides insurance coverage to depositors in the event of a bank failure. The FDIC provides insurance coverage of up to $250,000 per depositor, per insured bank, for each account ownership category.  This coverage applies to all types of deposits, including checking accounts, savings accounts, and certificates of deposit.  To calculate how much coverage you have, you can use the FDIC’s Electronic Deposit Insurance Estimator (EDIE): https://edie.fdic.gov/

What to Know about Brokerage Accounts

When you deposit money into a brokerage account, the SEC prohibits broker-dealers from using customer money or commingling it with the firm’s assets.  In other words, your personal investments are separate from the firm’s overall operations.  In fact, the deposit is not even reported on the firm’s balance sheet.  This means that if a brokerage firm went bankrupt, a creditor would have no rights to the underlying account holder’s funds.   

The Securities Investor Protection Corporation (SIPC) is a nonprofit corporation created by the U.S. Congress to protect investors in the event of the failure of a brokerage firm.  The insurance coverage provided by the SIPC is limited to $500,000 per ownership capacity, with a limit of $250,000 in cash. Keep in mind SIPC does not protect against market loss. 

Maintaining Peace of Mind

There are steps and precautions investors like you can take to help protect your assets (and your peace of mind!).  The good news is that there are multiple layers of protection to safeguard investor assets.  Per the recently issued FINRA Investor Alert, “In virtually all cases, when a brokerage firm ceases to operate, customer assets are safe and typically are transferred in an orderly fashion to another registered brokerage firm.”