What about banks – places to store cash – offered by your broker? IFO doesn’t have enough experience or knowledge to feel comfortable giving advice on these, but she does have some for herself. Remember, we advise keeping your cash in more than one institution to have access to a wide variety of services.
Here’s an example of how to use a bank offered by your broker. You allow any dividends from the holdings in your brokerage account to build up in the bank they offer you. Now, you can immediately buy another stock or add to an existing one using that built-up stash, or you can send cash to your main financial institution by electronic funds transfer. There, you can pay bills, or send the money to another institution where you have cash or stock.
But brokerages are newer to this game than credit unions and banks. Cash transfers, or downloads to our own computer’s financial software, and other high-tech moves are pretty glitchy or even not possible to do. Admittedly, sometimes it’s just a matter of getting familiar with how the websites operate, but this kind of stuff makes us nervous. Needless to say, only a tiny portion of our cash is in those accounts.
Some credit unions are still fairly low-tech, a fact we learned when we opened a new account at what we thought was a local branch. It is nearly impossible to download financial information to our computer. We have to do it by hand. And they have something like 10 security questions in case you forget your user ID or password. This tells us that upper management is very new to this process or that their online banking service provider is.
And three months later, they closed the branch! Luckily, we moved shortly after that and our new town had a local branch. We’ve run this history over in our minds trying to think what we should have asked to avoid this, but realized it was unlikely that local staff would have known upper management’s plans.
Years ago, we opened a small account at a U.S. office of the Swiss bank, UBS, hoping we could use it to buy Swiss CDs and calendars using Swiss francs. US bank regulations forbade that gambit for small fry like us, but we decided to go through with opening the account anyway.
They, too, had a degree of glitchy-ness on online banking functions – could that have been a clue to hidden problems? Earlier there were reports that UBS wanted to play with the big boys. Maybe they didn’t get all the memos on how to do that. We’re naming the bank because it has had well-publicized financial problems and many, many CEOs over the past few years.
What do we learn from this? A. Bring a list of questions to any new financial institution you are looking at. B. Start small.