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How many investment accounts do you have?
If you are anything like me ... then I'm sure you've opened and tested out all kinds of different accounts.
For over the past decade I have opened numerous investment accounts for one reason or another. Most of these were traditional brokerage accounts ... or non-retirement accounts as some would say.
Some of these companies were purchased by larger brokers, while others went out of business. Every time this happened ... my assets were safe and protected and moved to another account.
As the years have passed, I have realized that having several open brokerage accounts makes tracking our investments more painful. There isn't anything wrong with having multiple accounts open necessarily ... but my wife and I like simple.
And having 5+ accounts open at one time is anything but simple.
Today I would like to share my thoughts and strategy on brokerage accounts.
Then I would like to explain why I decided to close one of my absolute favorite brokerage accounts I opened over 5 years ago ... which was my Robinhood individual account.
Brokerage Account Strategy
There are times when you don't necessarily have control over the number of brokerage accounts you have opened.
For example ... years ago I had a 401A workplace retirement account opened through Fidelity. Years later ... I still have the account even though I haven't worked there in over 10 years. The rules of that plan restrict me from rolling it over and it has to stay put.
Today, I have a 457B account from my current employer ... which uses a different broker. You probably get where I'm going here ...
Even though I could eventually roll this account over one day to a different broker ... I can't do that until I terminate my employment.
So right there I have two different retirement accounts from two separate employers that use two different brokers.
When it comes to investment accounts through an employer ... you don't have much control over your broker.
However, when it comes to traditional brokerage accounts ... you generally have total control of where you invest your money.
Again I'd like to point out that for some investors, having accounts spread out across multiple brokerages isn't a big deal to them. However, for my wife and I ... it has become a big deal.
We want simplicity.
Recently we've been trying to manage and close the estate of one of our parents. The good news was that most of our parents assets were held through multiple accounts through the same broker. This simplified an already difficult estate to close.
After going through this, my wife and I decided simpler is just better so we decided to narrow down our non-retirement accounts to two brokers -
For anyone who has been following along here on the blog for the past 5+ years, you may notice one of my favorite brokers is not listed - Robinhood.
My History Using Robinhood
Since 2015 ... I had been a strong supporter of using Robinhood to invest and build a stock portfolio.
There were a lot of features offered through the Robinhood trading app that were appealing (at the time).
For example, the biggest draw for me were the free commission trades on stocks and ETFs.
This made it simple for an investor like me to invest $50 or $100 at a time ... without worrying about paying a $7.95 commission. All I needed to worry about was having enough funds available to purchase at least 1 share of stock.
And in those first several years of opening my account ... I placed hundreds of trades in the $50 to $100 range. Basically anytime I had enough funds to purchase a share of dividend stock I wanted to buy ... I put in the order.
Note - At the time, Robinhood did not allow fractional shares to be purchsed.
Over the past 5 years, I have built a solid portfolio of blue chip stocks and REIT's from my Robinhood account. Just last year (2019), these stocks produced $1,327.54 in annual dividend income.
Robinhood helped me build a solid foundation of dividend stocks that is part of the financial independence plan that my wife and I have put together. This account helped to change the way small investors like me accumulate assets ... by lowering or in their case eliminating trading fee's.
But for all the good Robinhood did for my dividend income portfolio, I recently decided to close my account ... which was a tough decision.
Below I share the reasons why I ultimately closed my account this past month.
3 Reasons to Close my Robinhood Account
Recently, I have been debating closing my Robinhood account for a few reasons ... which I've listed below.
Ultimately ... these 3 reasons alone did not push me to close my individual account at Robinhood.
However, if you read further ... there was one reason that finally pushed me to close it.
Here are a few of the minor reasons I considered closing my Robinhood account.
Note - As I mentioned earlier, my wife and I have investment accounts through Fidelity ... which I reference in my decision process.
1 - Fidelity Now Offers Free Trades
What once made Robinhood stand out were their free trades. However, now that Fidelity is offering free trading through their app ... it has changed the game for my investments.
The ability to buy and sometimes sell stock with no commission is important to me ... which is why I always liked Robinhood. It allowed me to invest small amounts of money over and over without racking up huge fee's. And over the course of 5 years, it allowd me to build a portfolio worth over $40,000.
But with my other main brokerage account (Fidelity) offering free trading now ... it levels the playing field for my accounts.
2 - Fidelity Now Trades Fractional Shares
While not a major factor (but still important) ... Fidelity recently started offering fractional share trading ... and so has Robinhood.
This allows me to invest $100 in a company as opposed to the requirment of buying 1 full share of stock.
Fractional share trading was and still is one of the reasons why I also like M1 Finance. For now ... I've decided to keep my M1 Finance account open for the time being.
3 - We Have Too Many Accounts
Over the past 5 to 10 years ... I got a little crazy by opening up too many brokerage accounts. At the time my intentions were good ... test out these different accounts to see which ones I liked using the best.
But as competition has increased with online brokers and fee's have dropped, some of the newer trading platforms are not as appealing ... including Robinhood.
Remember ... we are looking for simplicity with our personal finances.
Something had to give ...
Having too many brokerage accounts has complicated our investment tracking.
The REAL Reason I Closed my Robinhood Account
The reasons I listed out above all played a role in my decision to close my Robinhood account and transfer my assets to Fidelity. However, on their own I probably would not have closed the account ... at least for a while.
What really made the decision easy was one of my biggest issues with Robinhood - setting up your beneficiaries.
Actually ... there is no setting up of beneficiaries at all!
As my wife and I go through our estate planning process, we have been updating our beneficiaries in our investment accounts.
We have made sure to update the beneficiaries in all of our retirement accounts like a Rollover IRA, Roth IRA's, 457B, and 401A accounts. We've updated both the primary and contingent beneficiaries on these accounts in case something were to happen to the both of us.
In addition, we've also made the same updates to beneficiaries on all of our non-retirement accounts ... including at Fidelity and M1 Finance.
But when it came to updating our beneficiary information at Robinhood, we ran into a problem ... like many of you probably have.
According to Robinhood -
"We don’t currently allow users to name a beneficiary, and we don’t offer automatic transfer on death registration. In the event of a death, we’ll work with the executor of the estate to collect proper documentation and dissolve the account appropriately."
For more information check out - Robinhood Beneficiary.
I'm sure everything would eventually work out in the end if something were to happen to me ... but I can't sleep at night knowing my wife would have to do a bunch of extra work upon my death to get access to our $40,000 of assets in our account.
I closed my Robinhood account for the simple fact that naming beneficiaries is not possible.
Would I Recommend Robinhood to New Investors?
Overall I think Robinhood offers a good tool for investing at a very low cost.
However, as competition has grown with brokerage accounts ... I don't see as much value of opening a Robinhood account as I once did. Many other low cost brokers now offer free trades like Fidelity, M1 Finance, etc.
In addition, many of these same brokers are offering fractional share trading ... making it possible for small time investors to get started in building their portfolio.
Would I try and talk someone out of opening up a Robinhood account ... say like my kids? Not necessarily ... although I believe there are better options now compared to 5 years ago.
I would certainly caution anyone from opening an account with Robinhood if they were concerned about adding beneficiary information though. And to keep in mind that if one day you change your mind (after opening up an account) ... you may need to pay to have your assets transferred to another broker.
We just paid $75 to transfer our assets from Robinhood to Fidelity ... but at least now I can sleep at night knowing my family can get to those assets if something happened to me.
Do you or anyone you know have a Robinhood investment account? What has your experience been? Have you had the same experience with trying to setup beneficiary information in Robinhood?