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Retail brokerages earn most of their money from uninvested cash from their customers. An easy strategy is to force customers to keep a few percent of AUM as cas
by kccqzy 2y ago
Retail brokerages earn most of their money from uninvested cash from their customers. An easy strategy is to force customers to keep a few percent of AUM as cash.
- koolba 2y agoAnd savvy investors avoid those platforms or manually move their cash holdings into money market funds. Requiring people hold some minimum cash amount is just charging a fee with more steps involved. And even the larger offenders of that approach are in the crosshairs: https://news.bloomberglaw.com/securities-law/wall-street-giants-in-crosshairs-over-broker-cash-sweep-accounts https://news.bloomberglaw.com/securities-law/wall-street-gia...
- kccqzy 2y agoYeah I'm in the latter camp where I manually move to money market funds. I don't avoid these platforms because I treat the uninvested cash as a checking account: my bills are paid through this account. I feel better comparing it against a regular checking account that pays zero interest. To be frank, I do not think it should require people to hold some minimum cash amount. Rather, the brokerage can require that buying securities with this reserve cash should be manual, and not automatic. That still gives savvy investors a way to do it manually.
- loeg 2y agoIt helps, but e.g. Fidelity's money market funds charge 0.31% higher fees (0.42%) than Vanguard's (0.11%).