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Wall Street's biggest firms, fresh from a massive regulatory settlement over allegations that they published tainted research and blackmailed corporate executives during the bull market, now want to be your banker as well as your stockbroker. Oh, and they'd like you to pay more for the privilege, too.
Merrill Lynch rolled out a new program this year called Beyond Banking, offering customers with six-figure accounts such extras as FDIC-insured, interest-bearing cash accounts, direct-deposit service, debit cards, unlimited check writing, no-fee Internet bill payment and reimbursements for ATM fees paid to other banks. Meanwhile, discount broker Charles Schwab has applied for a federal bank charter and hopes to begin offering checking accounts, savings accounts and certificates of deposit as soon as this year. Brokerage industry sources say Goldman Sachs, Lehman Brothers, UBS PaineWebber and others may follow.
All have seen their revenues head south during the long, cold winter of the stock market, and they're looking for ways to reverse the migration. But they're also trying to boost revenues by increasing fees, which sends a mixed message to existing and potential customers. On one hand, they want more of your business. On the other hand, they're going to hit you with higher trading commissions, a fee for mailing account statements and other niggling new charges.
Not that there aren't advantages to having a one-stop shop for banking and investing. There is a definite convenience factor in getting a single monthly statement and having the ability to shift money between various accounts by visiting a single Web site. Banking with your broker also eliminates a step during those times when you want to move money back into the stock market. Plus, plenty of people are comfortable with their brokerage firms and trust that they will receive top-notch money management advice.
The big brokerages, though, do not have a blemish-free record of investment advice. Why should you trust them with even more of your financial life? Then there's the issue of FDIC protection, which usually tops out at $100,000 per individual or $200,000 per couple. (Merrill Lynch has two bank charters, so its protection is double those amounts.)
If the idea of banking with your broker appeals to you, limit cash holdings to the FDIC coverage amount. That way, you get full insurance protection and the advantage of spreading your nest egg between several money managers.
If all you want is access to your financial information on a single Web site, go with an account aggregator like www.yodlee.com.
Scott Bernard Nelson is a financial writer at The Boston Globe.