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started by Sylvest Kyed on 06 Sep 13
started by Sylvest Kyed on 06 Sep 13
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Years ago, I was a limited partner at Bear Stearns and Company in New York City. We'd have a partners meeting, once a year, and I'd attend as a matter-of course. Now remember that we were a trading firm, also a brokerage firm. In those days we didnt do not exactly the number of investment banking that is done by some of the majors including Goldman, Merrill, and Lehman Brothers at the time.
What was best but is that we often known ourselves because The Bank. Its an odd period if you think about that people were never registered as a bank by the appropriate federal agencies. Nonetheless, on when people were talking about their own unique companies Wall Street, they often internally written about The Bank.
The reason behind this period is correct and quite simple. Years ago, if you wished to know how much cash a brokerage firm made all you'd to do was assess interest acquired versus interest expense, and you generally had the underside line, give or get a bit on a pretax basis. This formula was always correct, when I was s Senior Accountant with Arthur Andersen in the early 1970s, and we dominated banking and finance sort companies during those times.
Recently after all these years it appears like the same approach applies today that used in the past. Many people and organizations are still not making on the funds they've deposited with brokerage firms, the interest they should be making. They should keep a better eye on the resources. The whole situation could be the notion of IDLE CASH, and what's being finished with it. In the late 70s, Merrill Lynch led the with the develop-ment of what they called the CMA consideration which stood for Cash Management Account.
The goal was to increase against the banks both savings, in addition to professional and loan and struggle for that income. What-the brokerage firms are doing now is capturing your lazy cash from your own records on a daily basis and paying you interest on that dollar amount. What're the brokerage firms paying? The solution is most likely less than they are able to. Recently I saw costs on the order of 1.5-1.8.
What happens is that by the end of-the time, the company checks to-see what idle cash is available in your account. Visit What it takes to reach your goals industry poker 80967 - Aeroclub de Quimper JMLB to compare the meaning behind it. After that it sweeps the money and pays you 1.5-billion on the stability or-less. Meanwhile the firm working like a bank may re-invest your cash over-night in its own firm account in a much higher price. Do these figures add up to anything?
Can you believe that last year in 2006 Merrill Lynch will need to have created net, net $2 million for its own account after paying out lesser amounts in interest to its customers on the idle cash balances? Thats right; they made $2 billion after charges but before taxes. Is this any way to run a company? You bet it is. The $2 billion was up from $1.3 billion 2 yrs before that. What this means is the firm is getting better at sweeping the balances, and they are sweeping bigger balances.
Morgan Stanley began getting into the act last year, and Smith Barney that is held by Citigroup got into the game late by starting up last September with-the same technique. When Merrill was quizzed about the training, they came back and said that to be able to meet specific consumer requirements the agents at the firm are encouraged by the firm to discuss higher-interest options. Now I possess a brokerage firm, and will be in the company for 30 plus years, my reply to that is SURE.
The master of this game is Charles Schwab, the discount brokerage house. For more information, please consider checking out: jack shoptaw. These were using this system years before someone else. Merrill obviously got it from them. If you study Schwabs financials carefully, there's no question that they make more money from capturing the cash from their customers reports, plus edge attention than they do from brokerage commissions today.
Brokerage organizations also pay different interest rates on these idle money balances based upon the particular balance. As h-e always does by having less money to manage, the tiny man gets hurt. Balances below a $100,000 often have the lowest rate which will be probably about 1.25% right now. The big boys who have over a $1,000,000 sitting in the account can very quickly negotiate a higher rate by picking-up a telephone. What-the brokerage firm counts on isn't getting that telephone call.
They are not consciously aware of these idle cash balances constantly, because most of the people with brokerage accounts are often transacting business by buying and selling securities. They are contemplating losses and gains, perhaps not interest. Because if you're not watching your cash, whos watching it, this can be a error. To research additional info, people may check-out: digna | Activity Streams | 100sessions. The person in control of capturing your account, is h-e seeing it? Without a doubt he is, but its maybe not your interest he has at heart. His year end bonus is completely dependent upon how much he sweeps, and how little he has to cover you for your own money.
Forget about studying the small print in your agreements with the investment companies. They use language that needs an attorney to interpret. Thats why the agreements are written by lawyers. The documents will let you know the records are tiered. This implies the larger the balance, the more interest you'll get. Now how are you supposed to understand that?
Wachovia which owns the old Prudential broker system waits before last paragraph of their client contract to inform you that Wachovia might seek to pay for as low a rate as possible. That reminds me of the time that I was talking to an Over-all Motors engineer about how exactly much the jack cost in-the trunk. His answer at the time was a50 cents. I said you got to be kidding, are you telling me that my entire life is dependent upon a 50-cent jack when I get a flat tire in the middle of a winter night. His answer was Yes, 5-0 cents is what we pay. As I walked away, he yelled, Would you like to learn why we only spend 50 cents for that jack. I said sure, why? Because we cant get one for 1 / 4, he said.
Be cautious what you do along with your money, whos calling the shots onto it. This thought-provoking jack shoptaw article has numerous riveting suggestions for how to ponder this enterprise.
Goodbye and All The Best.