Ask Money

Consolidate accounts

Chris Farrell Aug 31, 2010

Question: My wife and I both have retirement funds and other investment accounts at various former employers or other investment locations. We’ve been thinking it would be a lot easier to track and maintain if we consolidated these in one location (e.g. Vanguard funds). But with the current market conditions and failures of banks and financial service firms is this maybe not a good strategy? How risky is it to have all of our savings in one place if that company should go under? Should we be trying to diversify not just the types of funds we invest in, but where they’re invested at as well? Jason, Minnetonka, MN

Answer: I favor of a modest amount of diversification with financial services companies. My experience is that most of us end up reasonably diversified anyway, with our retirement money and perhaps some long-term savings with a major mutual fund company, our checking and savings accounts with a credit union or bank, our insurance policies with an insurance company, and so on.

I agree with your overall point, however. I would never put all my eggs in one basket. It’s one reason why I never really understood the financial services supermarket concept where you can meet all your financial needs in one place. (There were many other reasons for distrusting the concept, including high fees and bad products; but that’s another story.)

I don’t think you are taking a major risk consolidating your investment portfolios with one company. Mutual fund investments are protected because you own the securities and these accounts are segregated. So, even if Vanguard, Fidelity, T. Rowe Price or some other major player got into trouble you’re still the owner of the securities. (Of course, as we learn all the time, ownership doesn’t prevent the value of your portfolio from going down.) The Securities Investor Protection Corp. provides an additional layer of security in case of fraud and malfeasance. (You can learn more about it at And then most major investment, brokerage, and mutual fund companies carry additional layers of insurance protection.

I’d go ahead and consolidate.

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