5 Key Benefits Of Having Multiple Brokerage Accounts

The line between banks and brokerages continues to blur. Mega-banks such as Bank of America and Wells Fargo now offer brokerage services, while traditional brokers such as Charles Schwab, E-Trade and Interactive Brokers provide a range of banking services. Even many robo-advisors such as Wealthfront and Betterment combine the ability to invest with traditional banking functions.

Still, each institution has strengths and weaknesses. One broker may offer low trading commissions but average customer service, while another could have a great trading platform but no discounts for buying and selling mutual funds. Because of these differences, it may make sense for you to have more than one brokerage account.

How many brokerage accounts should you have?

One brokerage account may be the best way to organize your taxable investments. On the other hand, you might get the most out of your portfolio if it were spread across a handful of platforms with different features. In other words, there’s no “right” number of brokerage accounts for all investors — it depends.

With several accounts, you’d need to track your overall asset allocation, remember all your login credentials, gather tax forms and set your account beneficiaries, among other tasks. More accounts increase the chances that something could slip through the cracks. Owning just one brokerage account simplifies your money, and making investing easier can help you on your journey to build wealth.

Working with multiple brokerage firms could prove beneficial, too, depending on your investing strategy. For example, you may want to hold asset classes or funds that aren’t available from another broker or ensure your brokerage accounts each stay under the $500,000 threshold covered by SIPC insurance.

5 key benefits of having multiple brokerage accounts

Here are a few reasons why having multiple brokerage accounts can really pay off.

1. Lower fees

Brokers compete on cost — a lot. When Interactive Brokers and Charles Schwab debuted no-cost stock and ETF trading in 2019, the rest of the commissioned brokers followed. With that major cost out of the way, individual investors can focus on comparing brokers on other fees.

For example, many of the best brokers for mutual funds offer thousands of them with no or reduced transaction fees. Schwab and Vanguard are leaders here, while Fidelity Investments has its own totally free funds — no transaction fees and a zero expense ratio, too.

Additionally, some brokers still charge an IRA close-out fee. While it may be relatively small, there’s little reason it should go into their pocket if it could just as easily go into yours.

When it comes to these nickel-and-dime fees, two of the best brokers — who also don’t sacrifice customer service — are Fidelity and Charles Schwab. You’ll be able to quickly reach customer service, and you won’t be relegated to searching for an answer on a website. They also regularly top Bankrate’s reviews of best brokers.

2. Better research and education

Quite a few brokers compete to provide great research and educational resources for their customers. The best brokers offer detailed fundamental research on a huge number of stocks.

Some brokers such as Merrill Edge (owned by Bank of America) share in-house research reports, which go into great detail on a stock, offering earnings projections and more. The broker also provides articles and videos that explain topics such as retirement, college planning, personal finance and investing.

Other brokers, including Charles Schwab and Fidelity, offer a variety of reports from high-quality third-party providers. These brokers also provide market commentary, so you get a sense of how the market is performing and why.

Schwab and Fidelity are also well-known for their online educational materials. They provide a variety of articles and modules to teach you how to invest and use their tools, such as stock and fund screeners.

3. Lower margin costs

Another feature that more advanced investors might appreciate is lower margin costs.

To recap, margin is a type of loan that you can take against the equity in your brokerage account. Effectively, the broker allows you to overdraw your account and then charges you interest on the overdraft. The interest expense is simply rolled into your overdraft balance. Then whenever you add cash to your account or sell a stock, the margin balance declines.

There’s really a standout player in the industry here: Interactive Brokers has long been recognized as the leader in providing low margin rates, offering variable rates that depend on the federal funds rate. Its highest margin rate is about 1.5 percent above the benchmark rate from the Federal Reserve. Many other brokers charge much more for margin lending.

As the Fed raises or lowers interest rates, Interactive Brokers’ margin costs track these changes. And if you borrow more from the broker, the rate declines.

While margin loans are generally for more advanced investors, margin can help juice your investment returns, especially if used prudently and in moderation. Margin loans can also be used as an easily accessible emergency loan, if you need quick access to cash. However, any form of borrowing increases your risk.

4. Interest on cash balances

Some brokerages and robo-advisors provide attractive interest rates on cash balances, which usually rise and fall as the Federal Reserve adjusts rates, putting them among the best cash management accounts.

If you’re looking for a top brokerage here, check out Wealthfront, which has won Best Cash Management Account every year since 2022 in the Bankrate Awards. It’s the top pick if you want to earn attractive interest rates on your cash without exposing it to stock market volatility.

With most traditional banks offering a pittance on savings accounts — even when rates rise — it makes even more sense to keep your money  somewhere it will grow, like in a high-interest cash management account. In addition, because each allows you to spend right from the account and some even offer a free debit card, it’s easy to use them for multiple needs.

5. Brokerage account bonuses and promotions

Finally, it’s also worth pointing out that many brokers give you a little extra juice for opening an account with them. Generally, the more money you bring to the broker, the more they’re willing to give you as a bonus. If you can bring the dough to multiple brokers, you’ll rack up bonuses.

The top players for bonuses can offer up to thousands of dollars of cash if you bring enough money to the account. But even those with a more modest bankroll can end up with extra coin in their pocket. In fact, some promotions may require as little as $50 or $100 to participate, so it’s definitely in your interest to check out the best brokerage accounts for bonuses.

When it makes sense to open another brokerage account

Whether you want or need to open multiple brokerage accounts depends on a number of factors, and you’ll want to consider the following issues:

• Do you want to have your money across multiple accounts? Some people prefer to have their money all in one place, while others don’t mind handling multiple accounts. If you don’t mind the extra effort, multiple accounts could make sense for you.
• Do two providers offer something you need? A brokerage might specialize in a certain asset class or have a feature you want that’s not offered at your current provider. For example, you might need a specific account type at Broker A, but you really need the research at Broker B.
• Do you want to take maximum advantage of high interest rates? It could make sense to open multiple accounts and use one as your high-interest cash stash. With many cash accounts operating like checking accounts, you could even spend off it.
• Do you want a cash bonus and don’t mind holding an account open? Many providers offer a cash bonus, but you’ll have to keep the account open for a while to be sure they don’t claw it back, sometimes nine months or even a year.
• Do you want to save money on options trading? Some brokerages may provide free options trading — Robinhood and Webull are two notables — but you may like the service and features of another brokerage. If you’re looking to lower your costs, you could trade options with just one broker while doing the rest of your stock trading with the other.

FAQs

• Is there a limit on brokerage accounts?
  

  There’s no contribution limit for brokerage accounts and you can generally open as many as you like. However, SIPC insurance is usually capped at $500,000 per account type a person has at a broker, which could be a reason to spread assets across different firms.

• Can I transfer my investments to a different brokerage account?
  

  Many common investments, like individual stocks and bonds, can be transferred to a different brokerage account. But there may be restrictions, such as if a mutual fund you hold isn’t offered at the other institution.

• Should I consolidate brokerage accounts?
  

  You may want to consolidate your brokerage accounts if you prefer one investing firm over others, appreciate simplicity or like to see all your investments summarized on one platform.

Bottom line

The rivalry among brokerages is a boon for customers, of course. But are you taking advantage of it, or have you continued to stick with only one investment account?

While brokers offer many similar services, there are standouts in each category and certain ways that each broker adds a little something extra. With multiple brokerage accounts, you can take advantage of the strengths of each broker, mixing and matching the qualities that you find valuable. That should save you money and provide a better overall product and experience.

— Myriam Robinson-Puche contributed to an update.