Making Cents: Spring cleaning for your financial accounts

US Wealth Napolitano |

By: John P. Napolitano, CFP®, CPA, PFS, MST, RLP®

Spring cleaning has been something that families have endured in their homes for the generations. Yet with your financial stuff, few actually clean out things and issues can linger for years.

Financial spring cleaning does not only apply to older things, there are plenty of current issues for you that may benefit from a cleaning out. Let’s start with the financial accounts that you have spread out all over the place.  Having too many financial accounts only guarantees one thing.  It guarantees that your mailbox will be full of statements, disclosures and all of the other required mailings that financial companies must do to stay compliant with their respective regulators.  To the extent that your institution allows it, consider opting out of receiving statements in the mail and fetch them online to avoid having paper lying around with your confidential information on them.

Having multiple investment accounts may or may not be adding value to your portfolio as a whole.  The people that I’ve asked about their multiple investment accounts have many answers as to why there are so many.  The most common answer is apathy.  Apathy in that investors simply open new accounts at different institutions without paying attention to or merging in the older ones. Many people have multiple 401K’s, IRA’s, and general investment accounts.  These investors often have too many places to keep tabs on if the goal is to actually manage and pay attention to your investment choices. 

Some also feel that by having multiple accounts that they are actually diversified.  You may or may not be diversified and that may or may not help your overall performance.  Frequently we see those with many accounts and many holdings with very similar investments albeit with different names, and virtually no diversification.

If you are working with one or more investment professional, make sure that there is a coordinated effort so you don’t end up with mirror portfolios on different letterheads. Another possible downside to more than one investment advisor may be a tendency for them to compete on a performance basis.  This may cause more risk taking in an account than you’d like to incur as each of the advisors may be trying to outperform the other.

The comfort in having many bank accounts may stem from the FDIC insurance limits.  The Federal Deposit Insurance Corporation (AKA, FDIC) protects your deposits against the possible loss from a bank failure for up to $250,000.  It is important to know that this limit only applies to bank failures.  Fraud or other misappropriations of the money in your account are not covered by FDIC although banks will typically reimburse customers from frauds perpetuated against their accounts. In reality, savers can protect significantly more than $250,000 in any one institution by having multiple forms of ownership.  Perhaps more important than FDIC protection is the issue of diminished purchasing power for assets earning less than the rate of inflation.

John P. Napolitano CFP®, CPA is CEO of U. S. Wealth Management in Braintree, MA.  Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.