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Frequent Contributor

Fidelity Core/Settlement Account

Fidelity Brokerage has included gov m-mkt fund SPAXX as one of core/settlement account for quite a while. So what is the big deal today in the news & press release about this? Except to point out [shaming?] that other brokers still offer low rates for core/settlement a/c - there, one has to use a noncore m-mkt fund and move money manually with 1-day settlement [Schwab, etc].

A big deal made in the related news is that this isn't a default option for Fido-affiliated advisory accounts, but is available for asking. Again, I don't see a big deal there.

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YBB
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Frequent Contributor

Re: Fidelity Core/Settlement Account

On a tangent issue, I am reminded the Gov't spends a lot of time fighting for fiduciary rights for investors.  I am not so concerned here.  I can protect myself.  I can easily search for best way to park my cash.  Where I really wish the Gov't would spend time on is fighting for fiduciary rights for health insurance insureds.  The fact that some insurance companies do not proactively make an effort to save their customers money by offering similar insurance, less costly plans among the ones they offer is outrageous.  The dollar impact is huge compared to the dollar impact on investors.  

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Participant ○○○

Re: Fidelity Core/Settlement Account

Thanks Yogi.

My account core was defaulting to FCASH - I called to get it changed to SPAXX [federal MM].

I truly appreciate all you do on these forums!

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Frequent Contributor

Re: Fidelity Core/Settlement Account


@SteadyEddy wrote:

Thanks Yogi.

My account core was defaulting to FCASH - I called to get it changed to SPAXX [federal MM].

I truly appreciate all you do on these forums!


Good

At Fido Brokerage, if one clicks on Core/Cash in Positions, it shows the Core/Settlement options and allows changes online.

YBB
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Contributor ○

Re: Fidelity Core/Settlement Account

Mine is the FDIC settlement account, with no alternative to switch to when I tested it, but I periodically transfer amounts to their Treasury Only MM fund. The stated amount available to trade includes the latter, but I haven't been trading, so don't know for sure.  Expect to spend the money on new house in Dec. I may not keep the small Fidelity account afterwards.

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Re: Fidelity Core/Settlement Account


@jmrdnc wrote:

Mine is the FDIC settlement account, with no alternative to switch to when I tested it, but I periodically transfer amounts to their Treasury Only MM fund. The stated amount available to trade includes the latter, but I haven't been trading, so don't know for sure.  Expect to spend the money on new house in Dec. I may not keep the small Fidelity account afterwards.


Perhaps calling Fido might help?

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Explorer ○○○

Re: Fidelity Core/Settlement Account

This is something I was totally ignorant of. Thanks!

Put in a call to Fidelity to ask about SPAXX (and FZFXX):

   Can I still write checks?

   Since I must pay Calif. taxes on-line, will the automatic withdrawal still work?

   Does money to and from all trades automatically flow into and out of this fund?

From what I could tell there are no required minimums for either of these funds.

Any other questions anyone think I should ask for when they call back?

Flute 

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Re: Fidelity Core/Settlement Account


@flutemcgill wrote:

This is something I was totally ignorant of. Thanks!

Put in a call to Fidelity to ask about SPAXX (and FZFXX):

   Can I still write checks?

   Since I must pay Calif. taxes on-line, will the automatic withdrawal still work?

   Does money to and from all trades automatically flow into and out of this fund?

From what I could tell there are no required minimums for either of these funds.

Any other questions anyone think I should ask for when they call back?

Flute 


I have SPAXX and am able to write Fidelity checks. I make withdrawals to my online bank and my local bank. Yes, trades automatically flow in and out of this core fund.

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Re: Fidelity Core/Settlement Account

A year or so back I made this switch when yogibearbull introduced the  idea to me. Thanks YBB - I have enjoyed the additional earnings. Some of Fidelity's accounts do not offer the MM as a core. The Fidelity HSA account does not; however, I keep about $100 and earnings in the FDIC settlement account and the rest in the MM Account. I also have a Fidelity Cash Management Account that I use a my checkbook. The FDIC settlement account is the only option there; however, I don't keep anything in that account except current spending funds. I have found that the rate on Fidelity FDIC funds is higher that I can get at any of my local banks. It may be less that other online banks; however, the ability to manage the funds all in one place outweighs the extra earnings to me.

Capital
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Explorer ○○

Re: Fidelity Core/Settlement Account

I have SPAXX as my core/ settlement account but about a year ago a Fido rep. suggested I move my larger cash holdings to MM (SPRXX- higher yield) It's my understanding that money flows between these two funds for check writing , overdraft protection, etc. That's been my experience.

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Frequent Contributor

Re: Fidelity Core/Settlement Account

https://www.barrons.com/articles/fidelity-sweep-accounts-cash-rates-federal-reserve-schwab-merrill-l...

[My highlights in blue or red] ".....Fidelity caused a stir on Wednesday with an announcement that the firm “has challenged conventional industry practices” by automatically defaulting brokerage customers into a government money-market fund yielding 1.9%.....Fidelity didn’t actually reveal anything new with the announcement (triggering some angry responses from advisors on Twitter). The firm has defaulted nonretirement accounts into Fidelity Government Money-Market fund (ticker: SPAXX) since the third quarter of 2015. New retail retirement accounts made the switch in May, 2019. Advisors who custody with Fidelity are still defaulted into F-Cash, rather than the money-market fund.....Schwab’s pending acquisition of brokerage and advisory accounts from USAA was the big pool of cash held by USAA customers [Edit: that Fido may be targetting]....Vanguard brokerage customers are automatically defaulted into Vanguard Federal Money-Market (VMFXX)....."

YBB
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Frequent Contributor

Re: Fidelity Core/Settlement Account [Fido Tapping its Other M-Mkts for Core/Settlement Shortages]


@grierchas wrote:

I have SPAXX as my core/ settlement account but about a year ago a Fido rep. suggested I move my larger cash holdings to MM (SPRXX- higher yield) It's my understanding that money flows between these two funds for check writing , overdraft protection, etc. That's been my experience.


This has been reported by posters - that if one has multiple Fido m-mkt a/c, then Fido taps them automatically if there is a shortage in the core m-mkt. This looks like an unwritten Fido policy. 

As with most such things, this works until one day it suddenly doesn't.

Most other brokers would require a manual transfer with 1-day settlement

YBB
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Contributor ○

Re: Fidelity Core/Settlement Account [Fido Tapping its Other M-Mkts for Core/Settlement Shortages]

"This has been reported by posters - that if one has multiple Fido m-mkt a/c, then Fido taps them automatically if there is a shortage in the core m-mkt. This looks like an unwritten Fido policy. 

As with most such things, this works until one day it suddenly doesn't.

Most other brokers would require a manual transfer with 1-day settlement."

This is a customer friendly Fidelity brokerage policy. Regarding "this works until one day" it doesn't, applies to most things in life, like the Stretch IRA . Death and taxes being a notable exception. 

Thanks for bringing attention to various settlement fund policies.

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Re: Fidelity Core/Settlement Account [Fido Tapping its Other M-Mkts for Core/Settlement Shortages]


@jmrdnc wrote:

"This has been reported by posters - that if one has multiple Fido m-mkt a/c, then Fido taps them automatically if there is a shortage in the core m-mkt. This looks like an unwritten Fido policy. 

As with most such things, this works until one day it suddenly doesn't.

Most other brokers would require a manual transfer with 1-day settlement."

This is a customer friendly Fidelity brokerage policy. Regarding "this works until one day" it doesn't, applies to most things in life, like the Stretch IRA . Death and taxes being a notable exception. 

Thanks for bringing attention to various settlement fund policies.


I am wary of things that just work informally as these can have serious consequences when they stop working. So, I never tapped into this feature revealed by other posters. I am OK with default SPAXX and T-Bills. It seems that Fido even has auto-roll for T-Bill auctions - requires manual action at Schwab, etc.

YBB
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Explorer ○○

Re: Fidelity Core/Settlement Account


@PaulR888 wrote:

... Where I really wish the Gov't would spend time on is fighting for fiduciary rights for health insurance insureds.  The fact that some insurance companies do not proactively make an effort to save their customers money by offering similar insurance, less costly plans among the ones they offer is outrageous.  


State governments -- state insurance departments -- exert a lot of control over health insurance companies and the policies they sell. 

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Re: Fidelity Core/Settlement Account


@Merjet wrote:

@PaulR888 wrote:

... Where I really wish the Gov't would spend time on is fighting for fiduciary rights for health insurance insureds.  The fact that some insurance companies do not proactively make an effort to save their customers money by offering similar insurance, less costly plans among the ones they offer is outrageous.  


State governments -- state insurance departments -- exert a lot of control over health insurance companies and the policies they sell. 


As a "beneficiary" of 2 insurance/annuity failures, I would say that don't count on those touted but unfunded state insurance. You may not lose money but you can be stuck/frozen for years.

Long stories.

YBB
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Explorer ○○○

Re: Fidelity Core/Settlement Account

TDAmeritrade recently introduced some NTF ETF's that could serve as a MM substitute if one should choose.... to remedy the low yielding FDIC bank default option for brokerage accounts. If purchased, you would need to sell the ETF for available funds to trade obvoiusly. 

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Re: Fidelity Core/Settlement Account

Wrt, cash holdings in Fidelity accounts here is my understanding for my level of cash. 

For IRAs, SPAXX is best Core.  FZDXX is best backup to Core with $10K minimum.  If I want to buy something, Fidelity will use the backup to Core money if my Core has insufficient funds for the purchase with one exception.  If I am doing an Automatic Investment, I need to have the funds available in the Core.  

For Trust account, I have SPAXX as my Core.  FZFXX is also available.  I just checked with Fidelity and the 7 days yields are very close, 1.85% vs 1.84%.  Apparently these change over time so it is wise to occasionally check what's available.   FCASH is really low yield.  Backup to Core would be FZDXX with $100K minimum or FDRXX with no minimum.  

Core must use a Gov't money market fund.  Backup to Core are money market funds, not called a Gov't money market fund.  

Re: my previous insurance company irritation, for many years my mom had a legacy Medicare Supplement Plan with Blue Shield that included hospital, doctor services and drugs, all in one plan.  My mom paid $9K a year for the plan and she thought it was great because she could go to any doctor and never got a separate bill to pay.  It was not until I turned 65 and shopped for a Medicare Supplement Plan (Plan F) and Part D Prescription Drug Plan that I realized how badly my mom was being ripped off on the legacy plan.  Blue Shield had to have known that they had newer, alternatives covering the same expenses, at a lot cheaper premium.  Fiduciary for my mom?  NOT!  Shame on them for not have corporate oversight to ensure elderly are not being ripped off.  This is what makes my blood boil when it comes to insurance companies and what I wish the USG would investigate and protect the elderly.  This is where the USG should focus its Fiduciary Rule efforts, not on brokerage companies, IMHO.  

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Re: Fidelity Core/Settlement Account [Multiple M-Mkt Funds]

I had a chance to observe how Fido handles multiple m-mkt funds.

In one account, gov SPAXX is the designated core and there is also higher rate retail-prime SPRXX. Before making a fund buy [settles T+1], the core SPAXX had insufficient funds, but noncore SPRXX had more than enough. Surprisingly the Balance tab already showed total m-mkt balance as core/cash, cash available to trade, cash available to withdraw. So, both m-mkt funds seemed linked internally.

Now what happened after fund buy transaction.

On T+1, core SPAXX was zeroed out. The Position screen showed pending activity for the remainder at the bottom; the Balance tab showed negative for the remainder.

On T+2, I saw that a redemption for the remainder amount was auto-entered for the noncore SPRXX and everything was evened out on T+2.

So, my conclusion is that both m-mkt funds [core & noncore] were internally linked, Fido sort of extended 1-day credit for the buy transaction, and settled everything on T+2.

I wish Schwab would also do something similar. There, Schwab Bank is the core/settlement but it pays little. If there is a cash shortage after a transaction, Schwab can start to liquidate holdings at random to cover cash shortage and that can be bad. It would be nice if Schwab would do that from m-mkt funs(s) [all noncore] first. May be it would, but I don't want to test it as it may not.

 

YBB
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