How to Protect Your Assets from Financial Difficulty

Kimberly Watson, Editor in Chief
July 17, 2012 /

If you have your assets under with one brokerage firm, it would be wise to consider the following. When a brokerage firm is closed due to a variety of reasons, and the assets of clients are missing from their accounts, protection is provided by Securities Investor Protection Corporation (SIPC). This protection is extended to clients in the sum of $500,000 in securities and includes claims for cash up to $250,000.

An alternative option would be a brokerage account with another firm. This would enable you to be covered for $500,000 from the two accounts. Keep in mind that the SIPC does not protect the loss of assets resulting from a poor investment.

Other aspects to consider include brokerage firms not being a low cost option. Therefore, anyone employed by a brokerage, would not only be exposed to a privacy risk, but could be paying more, if they have all their assets with the employer. If permitted, it could benefit you by considering options elsewhere.

Should an employer offer you an in-house 401(k) plan; you could consider retaining your other assets at another source. This would provide for diversification and a reduced risk. Also consider that financial professional recommend maintaining between nine and eighteen months, for living expenses.

It is usual for the primary brokerages to pay relatively low interest rates on savings. This position could be improved by savings in a local or online bank account. It is generally accepted that for an interest rate above average, the money market is a viable option. This is supported by banks being in a better position, for the provision of lending than brokerages.

Irrespective of where you decide to keep your financial assets, always ask questions, stay informed and research your various options.


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