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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76079  
Subject: How many brokerages Date: 1/24/2012 9:28 AM
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Anyone know if brokerages run a hard credit check on applicants ?

How much is too much in assets at one brokerage ? (assuming a single person)


I am considering a couple of new accounts to pick up promotions but it is likely I will refi or apply for another mortgage in the coming year.
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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 70002 of 76079
Subject: Re: How many brokerages Date: 1/24/2012 2:48 PM
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If you get a cash account, I doubt that requires a credit check. Usually you will not be able to buy a stock until they have cash in hand (as most require payment in 3 days or less these days).

A margin account allows you to borrow funds, sell short, trade options, etc. Then you borrow funds from the brokerage and pay interest on them. Then requirements can be more demanding, but usually you are borrowing against your own assets in the account. (Hence the margin call when asset values fall below certain limits.)

As to how much is too much, diversification provides certain peace of mind. But for small accounts it may not be worth it. Brokers usually provide better service and lower fees for larger accounts. So too small makes it more expensive. The limits of their account insurance can be a useful reference point.

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 70004 of 76079
Subject: Re: How many brokerages Date: 1/24/2012 3:00 PM
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The limits of their account insurance can be a useful reference point.

I'm concerned about this. Anyone else have more than one account to avoid the concern ?

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 70014 of 76079
Subject: Re: How many brokerages Date: 1/24/2012 6:19 PM
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Anyone else have more than one account to avoid the concern ?

Not I.

The insurance coverage for cash in your brokerage account is the same as banks - $250k IIRC.

The securities in the account have a higher level of coverage through the SIPC. IIRC, that figure is $2.5 million.

The issue would be if you have, say, $1 million in the account. Normally, you're fully invested, so you have only small amounts of cash in the account. But then you decide that it's time to sell the securities and go to all cash. While you were fully invested, you were fully insured. But if you sell off, you might exceed the limit of insurance on cash in the account.

I don't know if using some kind of money market fund instead of cash would impact this. Hopefully someone smarter about insurance coverage can fill in the blanks.

--Peter

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 70017 of 76079
Subject: Re: How many brokerages Date: 1/24/2012 7:31 PM
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I have more than one account but not for that reason.

I hold mutual funds at mutual fund companies, do my active trading with a discount broker and maintain an account with a full service broker for no better reason than that I've had the account for over 50 years. It does offer better check-writing services than the checking account associated with the discount broker.

And yes, if there were too much cash in the account I could run into some insurance limits, a problem prevented by having more than one account. But that's not the reason for splitting things up--when I do all my own research, I don't feel the full service broker is entitled to a commission, so I use the deep discounter to execute my order.

Best wishes, Chris

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