Kiplinger's Says Avoid Sweep Yields
Kiplinger's Retirement Report says, "Retirees, Avoid Sweep Accounts With Low Yields," in a new article. Author Eleanor Laise writes, "Many major brokerage firms in recent years have eliminated higher-yielding money-market funds as a sweep option, pushing customers into lower-yielding bank sweep accounts. Often, the cash is routed to banks affiliated with the brokerage firm, plumping up the firm's profits. Brokerage firm Edward Jones eliminated its money-fund sweep option for new brokerage customers in February. Merrill Lynch removed money-fund sweep options for most new accounts last September, and most existing money-fund balances have been moved to deposit accounts at Bank of America, Merrill's parent-company bank. Charles Schwab eliminated money-market funds as a brokerage sweep option for most new accounts in 2016. Such moves can seriously crimp customers' yields. The 100 largest taxable money funds yield 2.25% on average, according to Crane Data, while the average brokerage sweep account now yields just 0.25% for balances up to $100,000. Schwab's sweep options currently yield 0.33% for balances below $1 million, while the yield on Merrill's bank sweep ranges from 0.14% to 0.75%, depending on the level of account assets." The Kiplinger's piece adds, "Brokerage firms are trying to squeeze more profits out of customers' cash as their earnings from trading commissions have taken a hit. An industry price war has driven commissions down to just a few dollars -- or even zero, in some cases. By flocking to brokerage firms offering low-cost trades, `consumers 'have voted with their dollars, and they want $4.95 trades instead of reasonable-paying cash,' says Peter Crane, president of Crane Data, which tracks money funds and other cash vehicles. 'It's like consumers in effect want fees they can't see.'"
