|Money market funds could have earned us|
000's more in interest this year.
One of our own brokers, Charles Schwab, and now Morgan Stanley, have shifted the cash sweep to much lower-yielding bank funds, some of which are affiliated with the brokers themselves: [bold added]
At Morgan Stanley, $6.3 billion of that cash is in a money-market mutual fund yielding 1.8%. On Aug. 13, the firm will shut that fund and sweep its clients’ idle cash into bank accounts that, after a transition period, could yield much less.Our current financial institutions provide us decent service for other products, so we won't switch. However, I'll have to resume doing something that I thought I wouldn't have to do any more--actively manage our cash balances.
As Charles Schwab also did earlier this year, most major brokerages have shoved clients out of money-market funds and into lower yielding bank sweeps, thereby capturing much of the return on customers’ cash for themselves.
In a bank sweep, your brokerage automatically rakes together and deposits your spare cash in one or more banks. Banks hand the brokerage a hefty fee, and the brokerage hands you some crumbs. For any given investor, a few dollars from dividends or interest income don’t amount to much. Rolled together with idle cash from thousands of other investors, they can add up to millions.