Brokerages that Fail are not FDIC-Insured. Neither are Fintechs. Synapse failed leaving frozen funds at Evolve Bank, Synapse and Yotta. The Synapse Fintech Bankruptcy has depositors complaining of frozen funds at Evolve Bank, Synapse and Yotta. According to Techcrunch, $160 million in funds remain frozen, while there appears to be an $85 million shortfall between Synapse’s partner banks and what depositors are owed (source: Reuters). The heart of this matter is something we've been warning about for years. FDIC insurance kicks in when banks fail, but not when brokerages do. We’ve seen more than a few cases where depositors were told they were FDIC-insured, only to discover this loophole (sinkhole), including crypto brokerage Voyager Digital, fintechs Synapse and Yotta, and the crypto exchange FTX. Even technology companies that seem like banks, including Paypal and Square (Block Inc.), are using pass-through deposits and are not FDIC-insured. When Voyager Digital failed, the FDIC sent the company a cease-and-desist order for making false claims. More and more non-banks are receiving these notices. So, is your cash FDIC-insured? Be sure to read the blogs below to learn about the giant sinkholes (not just a loophole) we are exposed to when a brokerage promises FDIC-coverage, and then has to file for bankruptcy. Smaller, younger firms, which many fintechs tend to be, are more vulnerable to a liquidity crisis and restructuring or liquidation. These firms also employ gamification and other appealing marketing campaigns to attract deposits, including those promises of FDIC coverage. Is Your FDIC-Insured Cash Really Safe? Better Read the Fine Print. https://www.nataliepace.com/blog/is-your-fdic-insured-cash-really-safe-better-double-check#/ Cash held at a brokerage does have some protection through the SIPC (up to $250,000). (The SIPC cash insurance level is not the lofty cash sweep millions that many of these brokerages advertise.) Further, the solution isn't necessarily to opt for a Money Market Fund. MMFs aren’t FDIC-insured either. Neither are annuities or target-date retirement funds. Getting a safe 5% yield is so tricky these days that we spend a full day on the topic at our Financial Freedom Retreat. (There are some options available.) Money market funds were in freefall in March of 2020. The Feds stepped in with a rescue plan. However, in the event the investors withdraw en masse going forward, there can be liquidity fees imposed. (You could be charged to withdraw your money.) In the event of a fund liquidation, there will be a suspension of redemptions. Here’s another blog that spells out the differences between all of these cash options. Money Market Funds vs. FDIC & SIPC. Are Any of Them Safe? https://www.nataliepace.com/blog/money-market-funds-vs-fdic-and-sipc-are-any-of-them-safe#/ Fintechs Claiming FDIC-Insurance Chime, Block Cash, Robinhood, Quickbooks and more all claim that deposits are FDIC-insured. They entice customers in with good interest rates, access to crypto and/or games and lotteries. It is only in the fine-print where you learn of the sinkhole. What’s even more heartbreaking is that these low-fee brokerage and cash apps cater to middle and lower income and less-sophisticated customers, who might be relying on the fun, splashy marketing claims without really understanding the buried legalese. The complaints of customers at Evolve Bank, Synapse and Yotta include people who are having to borrow to make mortgage payments. Whether we are interested in newer platforms, such as Wealthfront (2016), Acorns, NerdWallet, Stash, eToro, or SoFi, or more established ones (Paypal, Venmo, Cash App), it’s important to understand that these are not banks and as such are not FDIC-insured, if they fail. Banks So, what is your best protection? Do your banking at creditworthy FDIC-insured banks and observe the FDIC insurance limitations. There are a lot of banks in the U.S. that are at the lowest rung of investment grade. It’s also important to remember that First Republic Bank was rated A- the week before it began its process of being rescued. Brokerages Hold your retirement and brokerage accounts at a creditworthy brokerage. Place a higher priority on a large brokerage with a good rating over a smaller one that has fun games. If the brokerage is publicly traded, you can even look into the liquidity and profitability. At minimum, it’s a good idea to check the company’s credit rating and track record. As two examples:
It’s also important to buy our funds from creditworthy fund companies. Avoid doing searches for crypto funds and investing with a company that you haven’t heard of before. Those companies can get into trouble, and will impose unexpected charges and fees without warning. (Their ability to do this is included in the fine print.) Email [email protected] if you’d like updated Brokerage and Fintech Stock Report Cards. How Can We Make Sure Our Cash is Safe? Getting safe in today’s world is tricky. We have to have cash and liquidity in order to pay bills, eat and stay afloat with life’s many expensive challenges. We need some cash in our retirement accounts to keep our wealth plan age-appropriate and properly diversified. Earning a 5% yield on our treasure trove requires, at minimum:
Selling businesses or real estate to get a wad of cash is risky because:
Bottom Line We have to have some liquidity. Most of us pay our bills in our country’s currency. Crypto isn’t wildly accepted yet, and you can’t really have a currency that swings between a value of $15,000 and $74,000, as Bitcoin has over the past three years. We’d like to earn 5% yield. Both of those are tricky, but doable if we know how to avoid sinkholes, phishers, the taxman, false promises, sales, and marketing gimmicks, etc. That requires learning more life math. However, it’s the only way to be the boss of our money and design a plan that works in today’s Debt World. Some of the best ways of earning a safe yield require rethinking return on investment to include bills that we can toss out the window, which can amount to savings of thousands (or tens of thousands or more) annually. There are a lot more of these options than most of us are aware of. We spend one full day on What’s Safe? at our Financial Freedom Retreat. Join us! I’ll also be updating the What’s Safe section of The ABCs of Money 6th edition in the coming months, so keep an eye out for that release. Join us at our online Oct. 18-20, 2024 Financial Freedom Retreat. Learn how to: * Invest in hot industries, such as Nvidia and artificial intelligence, * Hedge against a weaker dollar, * Invest and compound your gains, * Green your retirement plan, * Easy and efficacious nest egg strategies, * Get hot and diversified (including in artificial intelligence and EVs), * Evaluate stocks, * Keep an age-appropriate amount safe, and, * Know what's safe in a Debt World. You'll even discover how to save thousands annually with smarter big-ticket choices. Yes, it's a complete money makeover. Email [email protected] to register. Learn the 15+ things you'll master and read testimonials in the flyer on the home page at NataliePace.com. Register by July 31, 2024 to receive the best price. "Ten minutes into the first day I was already much smarter about investing than I ever thought I would be in my life and I knew I was in exactly the right place at this retreat. I am amazed at how EASY and FUN it is to make my money work for me and those I love. I think this kind of information should be compulsory in schools. I wish I'd learned this sooner." CM If you’d like an unbiased 2nd opinion on your current wealth plan, email [email protected] for pricing and information. Join us for our Online Oct. 18-20, 2024 Financial Freedom Retreat. Email [email protected] or call 310-430-2397 to learn more. Register by July 31, 2024 to receive the best price. Click for testimonials, pricing, hours & details. Join us for our Restormel Royal Immersive Adventure Retreat. March 7-14, 2025. Email [email protected] to learn more. Click for testimonials, pricing, hours & details. There is very limited availability. Register by August 15, 2024 to ensure that you get the exact room you want. (There may not be an opportunity to register after August 15, 2024.) This retreat includes an all-access pass to all of our online training for a full year for two, and three 50-minute private, prosperity coaching sessions. Much more affordable than you might think. Email [email protected] to learn more. Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The Power of 8 Billion: It's Up to Us and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is are the most recent releases of these books. Follow her on Instagram. Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden. Check out Natalie Pace's Substack podcast on Apple and Spotify. Watch videoconferences and webinars on Youtube. Other Blogs of Interest Stocks Keep Hitting New Highs. Are You Thinking "Capture Gains?" Nvidia Volatility. Salesforce Drops. Election Years With Negative Yield Curves = ?. 5 Green Tips for Clean Beaches Week. Nio Sales Expected to More Than Double in 2Q 2024. So, You Think You Want to Be a B&B Owner... Artificial Intelligence and Crypto Scam Alert by the SEC. Netflix Evicts Unpaid Viewers. Empty Theaters. Retiring Soon? Start Planning Now. 2024 Rebalancing IQ Test. Answers to the 2024 Rebalancing IQ Test. May is National Bike Month. Paris and Amsterdam are the Stars. AI, Gold & Copper are on Fire. Sunpower Doubled. Sell in May and Go Away? What About the Election? Vacations that Color Our World Forever. The Magnificent 7 Drop to the Fantastic 5 9 Inflation, Budgeting, Debt Reduction and Investing Solutions. China & Russia Double Their Gold Holdings. 2024 Investment of the Year? The Reddit IPO. Meme Stock or Snap Land? Tesla's Factory in Germany Taken Offline by Activists. Bitcoin Sets a New Record High. The Importance of Rebalancing. Beyond Meat's Shares Surge. Quaker Oats' Pesticide Problem. Stocks are Flying High. Why Aren't Mine? Cut Your Tax Bill in Half. 9 Tips. Celebrity Jet CO2. Green Washing. The Facts. Some Solutions. Copper: Essential to the Clean Energy Transition. Uh. Oh. More Bank Trouble. Are Amazon, Square and Other Tech Companies Ripping Us Off? Housing. Unaffordable. What Works? Case studies and creative solutions. Don't Reach for Yield. Closed-End Funds. 2024 Investor IQ Test. Answers to the 2024 Investor IQ Test. Apple's Woes Drag Down the Dow. The Winners & Losers of 2023. Ozempic, Magnificent 7 & Beyond. 2024 Crystal Ball. The Underperforming DJIA, Full of Fossil Fuels and Forever Chemicals. A Spectacular Year for 3 of the Magnificent 7. The Best ROI* (Almost 40%!) & 7 Life Hacks That Save Thousands. Portugal Eliminates Tax Advantages for Ex-Pats. Earn $50,000 or More in Interest. Safely. Finally. WeWork's Bankruptcy. Half-Empty Office Buildings. Problems in our Personal Wealth Plan. Solutions for Unaffordable Housing. Cruise Ships Give Freebies to Investors. Should You Take the Bait? Should You Take a Cruise? Bonds. Banks. The Treacherous Landscape of Keeping Our Money Safe. 7 Rules of Investing 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) Lithium. Essential to EV Life. Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Are There Any Safe, Green Banks? 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. Which Countries Offer the Highest Yield for the Lowest Risk? Why We Are Underweighting Banks and the Financial Industry. Save Thousands Annually With Smarter Energy Choices Is Your FDIC-Insured Cash Really Safe? Money Market Funds, FDIC, SIPC: Are Any of Them Safe? My 24-Year-Old is Itching to Buy a Condo. Should I Help Him? The 12-Step Guide to Successful Investing. The Bank Bail-in Plan on Your Dime. Important Disclaimers Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations. ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience. Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Comments are closed.
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AuthorNatalie Pace is the co-creator of the Earth Gratitude Project and the author of The Power of 8 Billion: It's Up to Us, The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She is a repeat guest & speaker on national news shows and stages. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999. Archives
November 2024
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