Save time and money with a central assets account.
A central assets account can help you gain greater control over your finances and simplify your administrative chores. With this account, many of your investment and banking activities would be consolidated into a single brokerage account that keeps track of a variety of transactions on a single statement. A central assets account may be especially worthwhile if you:
* Keep your money in relatively low-yielding checking or savings accounts. * Leave funds idling in your brokerage account while you decide on your next move. * Fail to follow through promptly on bonds that are being called. * Maintain multiple relationships with banks, brokers or other financial services firms.
Central assets accounts generally offer six basic features that help increase the value of your portfolio:
1. Automatic investment of idle cash in a money market account. Your deposits and cash generated from interest, dividends and securities sales are all automatically "swept" or invested into a money market fund. You will usually have a choice of several types of money market funds (a taxable money market fund, a government securities fund, a tax-free fund or maybe a state tax-free fund). 2. Most central assets accounts offer a daily sweep for balances of $ 1,000 or more, or a weekly sweep for balances of $1 or more. A few firms are more generous, offering daily sweeps for balances of $1 or more. The sweep feature helps keep all your assets at work and eliminates the inconvenience of reinvesting small, periodic payments. 3. Composite monthly statements showing transactions and balances. Additionally, you would receive a year-end summary statement, which typically provides a record of securities transactions, checking and card activity useful for portfolio analysis or tax planning. 4. Check-writing privileges against the assets in the account, which gives you ready access to your money. There is usually no charge for the unlimited check-writing privilege, and your assets continue to earn money market interest until each check clears. 5. A charge card or a debit card, which automatically debits your account electronically. In the case of a debit card, purchases are debited against the balance in your cash and money market fund account. You pay no credit charges or monthly payments. Cash advances are usually available from participating cash machines or banks. Terms vary for accounts that come with charge cards. 6. An optional securities margin account, which lets you borrow against certain securities at favorable rates without payment schedules, prepayment penalties or a lengthy approval process. (A margin account is not for everyone and does have risks. Because of market fluctuations, you may be required to deposit additional funds in your account. Before establishing a margin account, discuss the implications with a financial services professional.)
Different brokerage firms offer various extra features as part of their central assets account packages. For example, you may be able to have your salary, Social Security, pension or other income deposited directly into your central assets account, so that you never lose a day of money market interest. And nearly all firms operate 24-hour, toll-free service numbers specifically serving their central assets account clients.
If safety is a concern, keep in mind that securities held in brokerage accounts are often protected. Fees for central assets accounts tend to be competitive with, or possibly lower than, fees charged by banks for services such as credit cards, checking accounts and safe-deposit boxes. The account with the lowest annual fee is not always the cheapest. When determining the true cost of your financial account relationship, be sure to factor in the rate of interest paid. A lower rate can offset the benefits of a low fee and ultimately make the account dramatically more expensive than an alternative with a good rate and a higher annual fee.
Helen c. Allen is Associate Vice President, Investments, Dean Witter Reynolds Inc., New York, N.Y., (800) 488-4840.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||Personal Finance|
|Author:||Allen, Helen C.|
|Date:||Jul 1, 1995|
|Previous Article:||Sizzle is great, but what about the steak?|
|Next Article:||A look inside the new financial center.|