Clark finally calls out Schwab for paying low interest on default "sweep cash"

I was 100% Schwab, now I’m mostly Fidelity. This is a concern and a key reason why I’m going to move more and more assets out of Schwab. You have to work to keep 100% invested. It’s not entirely easy because there is no dollar based or fractional share trading. I’m an ETF and individual Stock and Bond user, not a Mutual Fund user. If you’re not careful, if you don’t shove every leftover Dollar manually into SWVXX, then Chuck uses it at a low cost for his own purposes. Fidelity has SNAXX as a default for cash — you don’t have to remember to buy it, or sell it. When I took over Mom’s Schwab accounts in 2018, she had $100,000s in sweep cash earning almost nothing. That made me so angry.

2/13/2023 podcast transcript:

The interest rates you earn on these money market funds with Fidelity and Vanguard, they go up and down every day just based on what the flow of money is in the marketplace and what interest rates are being paid. Now another of my three favorite children, Schwab is kind of in a penalty box with me on this. Now they’re paying on money into what’s called an automatic sweep. They’re paying about 0.45%, less than half a percent, where Fidelity and Vanguard are paying 10 times that Schwab, after one of the stories bashed them, I think the Wall Street Journal story, the next day Schwab ran a full page ad on the Wall Street Journal saying, Hey, we offer these wonderful money funds available to you, which did not deal with the issue, which is Schwab as a conscious decision is cheating their account holders on their idle cash.

Why would Schwab behave like one of the brokerage operations of a giant monster mega bank? They shouldn’t be behaving that way. Chuck Schwab, I know you’re in retirement, you’re at your wonderful home on the big island of Hawaii, probably looking out at the surf right now, but I want you to fix this because it’s your name on the building and start treating your customers like you should. Now what does it mean if you are was Schwab? You manually have to move your idle cash from the sweep account into one of these money funds that Schwab offers just like Vanguard and Fidelity. But you manually have to do it and as long as you do, it’ll take you maybe a minute and a half to do it.

You’ll suddenly go from earning less than half a percent to four point something percent on your money. And we are all creatures of habit and inertia and a lot of times there are things we know we should get around to but we don’t quite get around to 'em. This is a call for you, whether you do business with a giant monster mega bank with your idle cash sitting there earning one 100th a 1% or you’re with, I don’t know why you’d be with the brokerage operation in one of these giant banks unless you just hate your money. But anyway, if you are at least get that money working for you by moving it into one of the higher yielding money market accounts with the full commission brokerage house attached to a giant monster mega bank.

And if you’re a Schwab customer, just do the move to move your money forward so that you’re doing better with your money because it’s your money. You worked hard for it, you want it working hard for you, not for the stockholders of one of the giant monster mega banks or someone like that. It’s your money. Make it grow. Krista,