Washington Post Column on Sweeps
Columnist Allan Sloan discusses sweep accounts and gives a shout-out to Crane Data in his latest piece, which appears in The Washington Post. Entitled, "Have index funds or brokerage account? Two simple tips could be worth money," it says, "I'll also show you how to avoid being lowballed by profit-hungry brokerage houses on the cash that you have in 'sweep accounts.' Those are the accounts where brokerage houses put the proceeds from holdings that you sell or hold cash that you deposit." Sloan explains, "I'm certainly not the first journalist to suggest lately that you move money out of brokerage sweep accounts into money market funds. But it's something that bears repeating. I've got two motivations here. First, I've got an account at Charles Schwab where moving my cash to a money market fund from my sweep account increased my earnings about 500 percent. Second, I read the January issue of Money Fund Intelligence, published by my friend Peter Crane, and happened upon a table showing what investors were earning on sweep account cash as of Dec. 31 and what the firms' money market funds were paying." The column adds, "[T]he yield difference between sweep account and money funds is preposterous, verging on obscene. Take Merrill Lynch, whose sweep account was yielding 0.14 percent at year-end, less than one-fourteenth of the 1.99 percent the Merrill money fund was yielding. Or take Morgan Stanley (0.14 versus 2.00) or Ameriprise (0.20 versus 2.01) or E-Trade (0.20 versus 1.52) or Schwab (0.33 versus 1.94)." (Let Crane Data know if you'd like to see a recent copy of our Brokerage Sweep Intelligence, which tracks these rates.)
