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I have my brokerage business with one particular well-known US brokerage house. I find being able to access my retirement accounts and personal investment accounts through the one interface useful.

However, I was talking with a friend of mine and she said she never puts more than about $50k into any particular brokerage account.

Managing three or four such accounts seems like too much overhead for me. I'd prefer to spend my "investment time" reading up on my investments and researching new ones.

One reason to have more than one brokerage account with different houses is the issue of SIPC insurance:

Within limits, SIPC expedites the return of missing customer property by protecting each customer up to $500,000 for securities and cash (including a $250,000 limit for cash only).

What other reasons could I have to use more than one brokerage account?

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    50k? - missing a 0? Else that is just .... not smart. – Ross Nov 24 '15 at 14:33
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    I know of no reason besides the SIPC limit. Restricting each brokerage to 50k seems extreme though. Is it possible she meant 500k? – Bishop Nov 24 '15 at 15:37
  • No, she was definitely squirrelling away values less than $50,000. – Peter K. Nov 24 '15 at 15:55
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    No reason for that - actually a bad practice as it takes away from the power of compound investing - which starts to work really well at 100,000 and above. – Ross Nov 24 '15 at 18:51
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    @Ross - Can you explain this last comment? Large balances at a bank might get offered a higher rate, and at a broker, lower commission, but this is all unrelated to compounding, per se. – JoeTaxpayer Nov 24 '15 at 20:00
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I believe the answer here is no:

SIPC protection of customers with multiple accounts is determined by "separate capacity." Each separate capacity is protected up to $500,000 for securities and cash (including a $250,000 limit for cash only). Accounts held in the same capacity are combined for purposes of the SIPC protection limits.

So even having 2 individual accounts - you would only be covered for $500,000/$250,000.

You can see more about the type of accounts that would give your more coverage here.

Also note: If you own a stock - the record probably exist. Therefore you would not lose your ownership or shares. The SIPC is there to protect the times this does not happen.

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    Thanks for the capacities / coverage link! I'm leaning towards this as the answer, but I'll leave it open for a day or two to see what other answers I get. +1 BTW! – Peter K. Nov 24 '15 at 19:08
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I use two different brokerages, both well-known. I got a bit spooked during the financial crisis and didn't want to have all my eggs in one basket.

The SIPC limits weren't so much a factor. At the time, I was more worried about the hassle of dealing with a Lehman-style meltdown. If one were to fail, the misery of waiting and filing and dealing with SIPC claims would be mitigated by having half of my money in another brokerage.

In hindsight, I was perhaps a bit too paranoid. Dealing with two separate brokerages is not much of an inconvenience, though, and it's interesting to see how their web interfaces are slightly different and some things are easier to do with one vs the other. Overall, they're really similar and I can't say there's much advantage (other than my tin-foil hat tendencies) to splitting it up like that.

  • Thanks for your insight! +1 Yes, I can understand being spooked by the financial crisis. – Peter K. Nov 24 '15 at 20:29

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