Schwab Takes Over USAA Investment Accounts

Filed under: Financial tips

If you’re a veteran with a USAA account, this news will be important to you. The Charles Schwab Corporation recently purchased one million USAA investment accounts, and the merger is likely to affect customer returns.

The deal, which will close in 2020, relocates $7 billion in cash from USAA retail brokerage accounts (held in money market funds) in Schwab’s bank. Moving cash from money market accounts will lower cash yields for USAA clients, who keep on average 13 percent of investments in brokerage cash or managed money client cash balances.

As of now, cash in USAA client brokerage accounts is attributed to one of the three following funds:

  • USAA Money Market Fund, with a one-year yield of 1.93 percent and a 0.62 percent expense ratio
  • USAA Treasury Money Market Trust, with a one-year yield of 1.91 percent and a 0.35 percent expense ratio
  • USAA Tax-Exempt Money Market Fund, with a one-year yield of 1.11 percent and a 0.56 percent expense ratio

The Schwab sweep will give USAA clients a 0.26 percent annual yield, or 0.65 percent for those with over $1 million invested.

It’s not all bad news: The sweep will offer FDIC insurance on accounts, and features such as online bill pay, ATM access, and free checks. Schwab also offers lower trading fees than USAA; $4.95 on online stock trades, as opposed to USAA’s $8.95 fee.

You will have options. “The default for short-term transactional cash in Schwab accounts is Schwab Bank deposit, which provides our clients with FDIC insurance on their cash holdings. However, we will be consulting with those clients on their cash holdings, and offering them alternatives if that cash is part of their core investing strategy vs. transactional cash, in which case we can offer them a wide variety of higher yielding cash alternatives including purchased money funds, CDs, etc.,” said Schwab spokesman Glen Mathison

If you hold a brokerage account with USAA, you should receive a notice of the merge soon. Clients will have the opportunity to select options which provide a better yield.

Please Note: Though our newsletters do not emphasize an effort on our firm for Sales and Marketing, there are clearly issues in this transaction that will directly affect USAA customers. If you have a USAA account, we highly suggest contacting the office to discuss options and the potential impact to your accounts.

If you would like more information or have specific questions, please contact us using the following form. We would be happy to assist you.

This information has been provided by a licensed insurance professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting the insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax, trust and estate, or investment advice. Infinite Wealth Advisors is not an investment advisory firm.  Investment Advisory Services provided by NAMCOA® – Naples Asset Management Company®, LLC, a federally registered investment advisor, website: .