Dear Mr. Berko: Charles Schwab is forcing all customers out of sweep money market funds and into bank accounts. My current sweep account pays 0.88 percent, and the bank account pays a lousy 0.1 percent. Schwab is giving us no choice in this matter. It claims it has something to do with the Dodd-Frank reforms, which were enacted eight years ago. On the phone, the manager claims there’s some regulation in effect now. Please write about this. Do Fidelity and others do this? By the way, you need to get a Gmail account. Yahoo is useless now. — BW, Kankakee, Ill.
Dear BW: Verizon Communications (VZ-$54) has a new division called Oath. Sadly, management assigned an unproven toady (Tim Armstrong) to head it. Oath consists of brands under the umbrellas of AOL, which was acquired in June 2015, and Yahoo, which was acquired in June 2017. I’m told that this guy Armstrong lacks the capability, the creativity, the employee support and the joie de vivre to run Oath. He certainly was a big-time loser when he was CEO of AOL, a great company with enormous potential that lost its cachet and was forced to be absorbed by a larger company to remain in business. Eventually, Yahoo will slowly disappear into the humors, vapors and ether just like AOL and become a relic of better times past.
Yes, today’s Yahoo functions like a cumbersome, arthritic remnant of the old internet. It’s enough to give you a migraine. You can Google “What are the problems with Yahoo?” and read pages of complaints. One of the complaints is the flood of sickly advertising that one must constantly click away to read the answers concerning the subject matter about which you inquired. And as you said, its email sphinx, too. I am very familiar with Google and wish I could change. However, there are so many folks out there who are familiar with my current email address, and a change would certainly put those readers in a high state of dudgeon, giving them agita, the shpilkes and a vexatious attitude. People don’t like change.
Charles Schwab (SCHW-$54) is an exceedingly well-managed, high-class, low-fee holding company engaged in wealth management just like UBS, Raymond James and J.P. Morgan. However, Schwab’s not involved in investment banking, in which brokerages sell their souls for business. Unlike those of other brokerages, Schwab’s employees are so darned nice and patient on the phone that they seem to be smoking left-handed Luckys or taking happy pills, but I’ve found that they’re just good people. Schwab has impressive numbers — strongly growing revenues, outstanding margins, good income growth and an improving dividend record — and a management team that makes it an attractive long-term investment at today’s $54 price.
Walt Bettinger is CEO of Charles Schwab, and the following is his response to your question: Schwab is moving client sweep cash from sweep money market funds (now being closed) into Federal Deposit Insurance Corp.-insured bank accounts that will pay lower interest. The interest rate will be more like what you could earn with an online checking account. Why? Because the features of the Schwab bank accounts are similar to those of a checking account, with free checks, free ATM withdrawals worldwide, free bill pay service, etc.
But Schwab suggests that clients not leave cash sitting in a bank account that they don’t intend to use within a short period of time — to pay for a trade, to pay a bill or just to write a check. Think of it this way. Few people would leave a large sum in their checking account. In the same way, you shouldn’t leave a large sum in this type of account at Schwab or anywhere else.
Cash you intend to hold on to for a while should be invested in the Schwab Value Advantage Money Fund, which has a seven-day yield of 1.2 percent for a minimum investment of just $1. You can invest online with just a click. Schwab also has a variety of the highest-yielding certificates of deposit from FDIC-insured banks across the country. Go to http://www.schwab.com/cash to find out more about Schwab’s options for investing cash.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at email@example.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.