Money Watch: Should I put all my assets in 1 brokerage firm?

— -- Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisorsanswering reader questions about saving, protecting and growing your money. To submit a question, e-mail USA TODAY personal finance reporter Christine Dugas at: cdugas@usatoday.com.

Q: I work at a major brokerage firm. I have transferred all of my assets to this firm and am well diversified in well-known mutual funds, corporate bonds, annuities and a money market fund. Am I putting my financial future at risk because I work exclusively with this firm?

A: It is common for brokerage firms to require employees to keep their investment accounts in-house. As long as you keep in mind a few guidelines, you'll be fine.

It's important to know about the Securities Investor Protection Corporation. The SIPC protects brokerage accounts of each customer when a brokerage firm is closed due to bankruptcy or other financial difficulties and customer assets are missing from accounts. It also protects brokerage accounts of each customer up to $500,000 in securities, including up to $250,000 on claims for cash.

If you have an amount invested that exceeds these limits, you can protect it by having separate accounts that are held in different client names, such as one that is in an individual name and another in the name of a husband and wife. The SIPC would protect each account up to the stated limits.

Alternately, you could consider opening a second account with another brokerage firm. That way you'll get up to $500,000 coverage in both accounts. But you may need permission from your employer to open an account outside of your firm.

You should know that the SIPC does not insure losses that occur as a part of regular market fluctuations. Some people believe that SIPC will protect them from losing money on a bad investment, but this is untrue.

You can verify that your brokerage firm is a member of SIPC by calling the SIPC Membership Department at 202- 371-8300 or by going to www.sipc.org/ and searching under the " member database."

There are other financial considerations that you should also keep in mind.

•Loss of privacy. Your co-workers may be able to see your account balances.

•Expense. Most brokerage firms are rarely the low-cost option, so an employee could effectively be paying more than they need to by having all of their accounts with the employer. If you are allowed to look elsewhere, then you should seek out a better deal at firms such as Vanguard, TD Ameritrade and Fidelity Investments.

•Risk. If your employer offers you a 401(k) plan, which almost always needs to stay in-house, you may want to consider holding your non-401(k) money outside for greater diversification and less risk.

And don't forget that most certified financial planners recommend that you keep between nine months and 18 months worth of living expenses in cash or cash alternatives.

Since major brokerages generally pay low interest rates on savings, you can often do better by having your savings in a local or online bank. In the current interest rate environment, a bank money market can be a good option for a better-than-average interest rate.

Banks are also in a better position to provide consumer lending than brokerages. If you may need a mortgage, car loan, home equity loan or personal loan, a bank will likely be a better option.

Regardless of where you keep your investments and savings, it is always a good idea to ask a lot of questions, be informed and to shop around. It is rarely if ever the case that one financial firm will be the only answer for all of your financial needs.

Gregory Plechner, NAPFA-registered financial adviser

Modera Wealth Management, Westwood, N.J.

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