In investing, as with much in life, complexity is generally avoided. So why own more than one brokerage account, which means having multiple passwords, balances, interfaces, and tax forms?
Well, it's complicated. But it doesn't have to be. While you may be among those with more than one account, good reasons exist to simplify. Keeping more than one account generally isn't that compelling a strategy for the average investor when balanced against the benefits of simplicity.
- While multiple brokerage accounts may provide benefits to a narrow range of retail investors, the added work may outweigh any advantage.
- Having more than one account means getting multiple emails, handling added 1099 tax forms, negotiating different platforms, and using many passwords (which carry hacking risks).
- Most investors will find what they need—meaning tutorials, knowledge base, and a sufficient number of investment vehicles—on a single platform.
When Less Is More
How do people end up with multiple brokerages? Sometimes it happens for the same reason they have more than one credit card—they saw an offer to open the account and jumped. Maybe one brokerage was offering a better return on the cash savings portion or dangled something consumer-friendly like bill payment. Others may have more than one account through a marriage that has joined a couple's finances together.
Whatever the reason, having multiple brokerage accounts means more management: more emails, logins, tax forms, and more. You may want to ask yourself if this is really worth whatever benefits you're getting. Most online brokerages offer similar features like selling and buying stocks and bonds, investor education, research tools, and bill paying, minimizing the need for bouncing from one platform to the next. Streamlining may be in the best interest of the average investor.
"It's just more work," Shari Greco Reiches, co-founder of wealth management firm Rappaport Reiches Capital Management in Skokie, Illinois, said in an interview. "Investing is complex as it is, and having multiple broker accounts means it's harder to track overall allocations, investments, tax strategies, dividends, capital gains. It's just more work."
Multiple steps are involved in opening and managing an account. And the issue of safety, in the form of secure and safe passwords, must be addressed with each account.
When More Is More
Multiple accounts and the added work they bring may have benefits for a narrow group of investors, said Reiches, who is also a behavioral finance expert whose book Maximize Your Return on Life was published in June. Cryptocurrency is one example of an investment that not all platforms trade, and a crypto-first brokerage like Coinbase is probably a better place to trade cryptocurrency than a mainstream brokerage. TD Ameritrade, for example, doesn't offer individual crypto trading. Robinhood offers it, but with limitations.
Alternative investments like private investments and gold coins may also require an account with a specialized brokerage, according to Reiches.
Not all firms offer the same investment vehicles. For example, one may offer more international exposure, while another may have some esoteric investments not offered by another. Fees may also vary slightly. These are things to research. Still, for the average investor, those minor differences may not be compelling enough when considering the added work from managing multiple accounts.
The Bottom Line
Few advantages are bestowed to the average retail investor by having multiple brokerage accounts. One needs to focus on investing, and more than one account may be an unnecessary, costly, and time-consuming distraction. Most large brokerages will have a wide range of stocks, bonds, exchange-traded funds (ETFs), and other funds required by the average investor. Still, if you want to take advantage of small differences in fees and platforms, or if you want to trade cryptocurrencies and esoteric investments, go ahead and explore multiple platforms.
What are the benefits of having multiple brokerage accounts?
For some investors, using multiple brokerage accounts has advantages. These would be people interested in alternative investments like cryptocurrencies, private investments, or gold coins. They would also need to have the time and the management skill necessary to investigate platforms, fees, rates, and range of investment vehicles.
Are there advantages to having only one account?
Simplicity is sometimes its own reward, and a simplified investing structure is probably best for most retail investors. A single login and password, one source of year-end tax forms, and one brokerage sending emails will keep things easy to manage.
What about another account for crypto?
Most mainstream brokerages don't offer crypto trading. Others offer it, but with limitations designed to reduce volatility. Platforms like Coinbase specialize in cryptocurrency and may be a good place to start.