Interest rates on brokerage "sweep" accounts remain dismal, averaging less than half of the yields of money market mutual funds, according to the latest Brokerage Sweep Intelligence, a weekly report produced by Crane Data LLC. Our Crane Brokerage Sweep Indexes, which track the sweep account programs offered by the 14 largest brokerages, averaged rates of 0.28% for investors with less than $5,000 in cash, 0.43% for investors with $5K-$25K, 0.47% for $25K-$50K, 0.63% for $50K-$250K, 0.94% for $250K-$500K, 1.03% for $500K-$1M, 1.31% for $1M-$5M, and 1.53% for balances over $5 million. This compares with a yield of 2.24% for the average money fund, as measured by our Crane 100 Money Fund Index.
TD Ameritrade ranks as the lowest-paying brokerage on available sweep balances. The company's Money Market Deposit Account pays a mere 0.05% on balances under $25K, 0.10% of balances under $100K, and 0.25% on balances from $100K to over $5M. Looking at an average cash balance of just over $100,000, H&R Block ranks last with a yield of 0.15% on $100K to $250K balances, followed by Merrill Lynch and Smith Barney, which pay 0.20%, and by E*Trade, which pays 0.30%.
Raymond James ranks No. 1 among the large brokerages in sweep rates. The company pays 1.60% (1.61% APY) on all balances above $5,000. Lehman Brothers and Ameriprise rank 2nd and 3rd, paying rates of 1.25% and 1.24%, respectively, on balances of $100K to $250K.
Rates rise considerably for those with balances over $1 million, though the amounts still pale in comparison to yields available on market funds. Morgan Stanley ranks first among the $1M to $5M segment with a rate of 1.64%, followed by Raymond James' 1.60%, Smith Barney's 1.59%, and UBS's 1.49%.
While no solid numbers are available, Crane Data guesses that the amount held in "bankerage" accounts has shrunk over the past year. We estimate that these programs peaked around $400 billion two years ago and currently total approximately $350 billion. Though brokerages continue pushing investors into lower-paying banks, investors have clearly been resisting the trend over the past year, moving parked cash into money market mutual funds and higher-paying alternatives.
