Should You Worry About the Safety of Schwab Accounts?

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I wrote the following letter to IMA clients, but I suspect some of you may find it of interest as you may have accounts at Charles Schwab, Fidelity, or TD Ameritrade.

Many investors, including my clients, have been worried about their Schwab account safety. Are they right to be worried?

My firm, IMA, is sending this email to all our clients. We could have sent it only to those who have money in IMA accounts at Schwab, but in many cases our clients have assets outside of IMA management. Also, though this letter focuses on Schwab, I address TD and Fidelity as well.

I have received a few inquiries from clients expressing their concern about the safety of their money at Charles Schwab. Schwab has been in the news because the banking side of the business made investments into high-quality, long-term bonds whose prices have declined as interest rates have risen.

I could go into a very detailed analysis of Charles Schwab, but I won’t waste your time. The situation is fluid; interest rates can rise, worsening the losses, and deposits can outflow a lot more, deepening the losses further.