ASSET MANAGEMENT ACCOUNTS

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ASSET MANAGEMENT ACCOUNTS

Published by sam - 25/09/07 - 04:09:58 am

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Asset management accounts, offered by brokerage houses in the hope of attracting customers for securities transactions, provide comprehensive financial services in a single account: the buying and selling securities; a free checking account (with no limits on the number or size of the checks); money market fund for your cash balance; the safekeeping of your securities, with interest, dividends, and sale proceeds paid directly into your account; a credit card; automatic payment of mortgage and other constant-figure payments; and telephone payment of any other bills you specify. Each monthly statement covers all these activities, and the year end statement provides you with most of the information needed for your tax return. If you own a wide variety of securities or write large numbers of checks, you may find these accounts both convenient and economical, since the higher interest they earn on their cash balance usually offsets the services charges.

Eligibility requirements for these accounts, however, are fairly stringent. The minimum balance required ranges from $5,000 to $25,000, although some firms will waive the minimum balance if the depositor transfers into the account $20,000 in securities. In addition, annual service fee range from $25 to $100. The minimum balance earns relatively high money market rates, and the other services—especially the bill payment feature and the comprehensive statements—maybe well worth the fee of the time and postage they save depositors.

The term asset management gives some potential customers the impression that the brokerage house actively manages the assets in the account. This is not correct. The brokerage house is involved in the account only with respect to the purchase and sale of securities—and only on explicit instructions from the depositors. IF the brokerage firms changes full commissions, buying and selling securities will cost you more than a discount broker would charge, and some asset management accounts are offered by discounts brokers, and consumers who maintain asset management accounts with full service brokerage firms can nevertheless use discount brokers for buying and selling securities by depositing into the account securities they purchase elsewhere and by transferring securities that they plan to sell from the asset management account to their discount broker.

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