On Mar 6, 12:16*pm, sandybeth <sandy...[at]yahoo.com> wrote:
As regards the new sweep account, SandyBeth wrote:
- quote -

You're not missing anything, that I see, except that interest rates
are currently very low for ready cash. Purchasing an independent money
market mutual fund is not much of an improvement, in my experience,
and involves looking at fund prospectii, but you could inquire.

A few years ago I had a mm fund as the only one available, but when it
dropped to 0.14% I got nervous about the spectre of "breaking the
buck" (failing to hold the par value thus losing principal). I didn't
like the policies at that institution, and expedited a transfer.
Trying to look on the bright side of your "new improved" sweep, you do
not have to worry about your principal under 100k.

Depending on your anticipated use of the funds, you might consider
looking into a bank account and signing up for Treasury Direct, which
allows you to automatically purchase T-Bills at auction. I've
forgotten the amount, but that service is commission-free under (I
think) 100k, and possibly that ceiling has been raised. The forms
(downloadable) I saw were a bit daunting, but someone somewhere at the
bank must know how to do it.

The larger issue you bring up is something I've been watching since
the 1980's, that even though monopolies do not theoretically exist in
fact (or are regulated), a lot of industry participants either talk to
each other or watch what each other is doing, then move in the same
direction (as in compensation committees who site "peer groups," banks
who bought CDO's, the current liquidity crisis, even the price of
foods, and so on). This is such a complex set of issues, and so easily
subject to personal bias interpretation, that I'm not sure at all how
to talk about it, but societies have a tendency to stagnate under a
"status quo" or "business as usual" mentality. In the 1980's, the then
Chairman of Merrill Lynch, Don Reagan (who later was called to serve
in the Ron Reagan Cabinet), took the "status quo" away from banks with
the Cash Management Account. Earlier in the century, it was A.P.
Giannini (founder of Bank of America) who took the status quo away
from banks, opening accounts for the common man - a philosophy which
still persists and has flourished.

Just be careful, in today's hopefully temporary environment of crisis
disruption in liquidity. Don't sacrifice safety of principal for an
extra 0.5% interest.

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Elle wrote:
- quote -

Plus, I'd lose my penny to low-balance fees. But I'm only talking about
flushing out the cash/money-market portion.

-Tad

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"Tad Borek" <borekfm[at]pacbell.net> wrote
- quote -

If you voted with your feet, you did fight it, by taking
your business elsewhere.

I personally do not condone at all keeping an account with
one cent in it open. That pushes fees up for the rest of
this company's customers and just promotes more nastiness.
They mess you over, so you try to mess them over, and then
they maybe come back at you with more fees for low minimum.
And so on.

Sandybeth, as I am sure you are thinking but for others,
maybe it's time to shop around for another broker.
TRowePrice, Vanguard, Fidelity all seem to get good reviews
these days, for prices and customer service. Disclosure: I
am a 20+ year Fidelity client.

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sandybeth wrote:
- quote -

I had a similar conversation with a TD Ameritrade rep a couple months
ago when I found out they were paying 0.05% on sweep on an old account I
had there. That's not a typo! The real nerve was that the wet behind the
ears rep had the audacity to suggest that this FDIC insured account
paying 5 cents per $100 per year (before taxes) was somehow good for
customers. I reminded him that a few brokerage firms had a regulatory
action against them several years ago for defaulting people into a new
and much-worse sweep account. One of them that I will not speak the name
of derived a significant percentage of their net income at the time from
the interest-rate spread that results when you pay your customers 1% for
their money while lending it out at a much higher rate. So yes, you're
on the right track on that thought.

But this is business, why fight it? I symbolically wrote a check for all
but $0.01 of the cash balance and put it to work in my real account.

So - vote with your feet?

-Tad

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On Mar 6, 12:16*pm, sandybeth <sandy...[at]yahoo.com> wrote:
- quote -

I don't think you are. Other brokerages have done this, including
OptionsXpress, where I have an account. Can you buy a money market
fund with your cash?

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Just received a letter from my brokerage firm (Oppenheimer). Our
account cash balances will now sweep into this Advantage Bank Deposit
Program, rather than the money market they've been swept into. Big
difference is that we will now be paid under 1% interest (unless you
have over a million bucks, where you're earn 2.78%), whereas the
previous cash balances earned much more in money market (3.67% on last
statement). When I called, I talked to some aid who tried to tell me
that this was SOOO much better for the clients in that the Advantage
program was FDIC insured, blah, blah. To me, it seems like a way for
Oppenheimer to invest our cash balances and earn money off them, while
giving us peanuts. Maybe I'm just misinterpreting things, but I'm
going to try to talk to our actual broker today, not an assistant. In
any case, we don't have a choice of this sweep.
Any comments or similar situations out there? Am I missing something?
SandyBeth

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