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I had read recently in the WSJ about an upcoming change in how brokerage cash is managed by Fidelity.
Once this change is effective, the cash balances held in your core transaction account option will be redeemed, and the proceeds of that redemption will be reinvested in FCASH. Any interest paid in your core transaction account on or after this change is effective will be paid in cash and reinvested in FCASH. Further, any other cash in your account will also be invested in FCASH.
Why does this matter? The return today on my Fidelity cash balance
(SPAXX) is around 4%. After this goes into effect, it will be around 2%. What can I do about it? Make sure I have a minimal cash position in my brokerage account.
Anybody have a better idea?
Shame on Fidelity for deliberately relying on the inattentiveness of their customers to profit at their expense. Vanguard doesn’t do that, but the quality of their website and customer service has declined significantly in recent years.
Shame on Fidelity? The author said Fidelity sent him an email explaining the changes. I don’t see the problem.
Fidelity is a for-profit company and has to satisfy the needs of the family that owns Fidelity. This should not be surprising.
As clarified below by Chris a rush and in the article from Olin, this change only applies to advisor-run accounts, so no need to do anything. But even if it did apply to individual investors, you don’t need to minimize your cash position, just minimize what’s in the sweep account. Fidelity has several good yielding money market funds, including SPAXX that’s your current core account. Whenever you have cash come in from dividends or deposits, you can just move it over to the MM fund or spend it. This is what I do in my cash management account where the sweep account yields around 2% (though it is FDIC insured). There’s occasionally a little money in there, but not for long. In practice all my cash is in a money market fund.
Whew! Thanks for the heads up. My accounts are not advisor run.
I’ve held cash in Fidelity’s FNSXX. 7-day yield as of 1/10/2025 4.34% https://fundresearch.fidelity.com/mutual-funds/summary/31607A109
Switch to Vanguard’s Federal Money Market Fund (VMFXX) returns are: 1 year 5.23%, 3 year 3.94%.
Benchmark (US Money Market Government Funds Average) 4.73%/ 3.51%
Expense Ratio 0.11%
All of the earnings go to the investors, no skimming of returns for Fidelity profits!
Thanks for alerting us to one more cost associated with having Fidelity accounts!
I need to pay closer attention to Fidelity fees vs. the more investor-friendly Vanguard.
Here is an interesting article on hidden Fidelity costs.
Family FirstHow the owners of Fidelity get richer at everyday investors’ expense
https://www.reuters.com/investigates/special-report/usa-fidelity-family/#:~:text=Fidelity%20Investments%20is%20owned%20by,the%20private%20venture%20capital%20arm.
NB the FCASH issue does not apply to individual investors (see comment below).
Could you provide a link to the WSJ article?
Ok, I’ll say it: Switch to Vanguard?
It seems that only independent financial advisors will be forced to use FCASH for the money they manage with Fidelity as the custodian. Regular folks with a brokerage account don’t have to worry about this.
This article on ThinkAdvisor might be the same thing you read.
https://www.thinkadvisor.com/2024/11/27/fidelity-to-switch-advisor-custody-accounts-to-fcash-as-only-core-sweep-option/
I have not read that specific article, but it tells a similar story. I also received an email from Fidelity today with a general explanation of the changes. Thanks.