Make your broker your banker
with an asset management account
By Michelle Samaad • Bankrate.com

Banks and brokerages are always eager to cater to cash-flush clients. So, to make life a little easier for busy folks with big bucks, they offer what are called cash management accounts or sometimes asset management accounts.

Whichever you call it, the premise is the same: It's an all-in-one account that conveniently combines a checking account with a money-market fund, a credit or debit card, and a brokerage account.

People sign up "for the convenience of having the banking and brokerage in one account," says Donna Smart, a spokeswoman for First Union, who adds that the accounts give customers a complete picture of their holdings. A good cash-management account is "tailored to the lifestyle of those who either don't have the time to manage their money or want total hands-on involvement," says Susan Thomson of Merrill Lynch, the financial powerhouse that inaugurated the accounts in the 1970s.

You can open an account at a brokerage or choose a bank with a brokerage service. But step carefully. These accounts are intended for people with a lot of money, and while the swings can go higher, the roundabouts can also go faster. But, just like money in a bank, the money you put into an account at a brokerage is insured. If you're thinking about using a broker as your bank, Bankrate.com's survey gives you the latest details about accounts offered by major players.

All together now
The bottom line is that, whether you use a brokerage house or a bank, you can meet all your cash-investment needs under one roof -- and have them summarized in one monthly statement.

Cash-management accounts aren't for everyone: Most banks and brokerages set high minimum balances that keep away the everyday public. If you savor the aroma of the buttery Connolly leather in your driver's seat, and if you can contribute cocktail-party chatter about the merits of various airlines' first-class service, you might find a worthy refuge in a cash-management account.

Putting a brokerage account together with traditional banking services requires discipline, savvy and a very healthy account balance.

"Like any personal finance decision that will immediately impact your hard-earned money, you have to do your homework and ask a lot of questions," says Ron Meier, a certified financial planner with the College for Financial Planning in Greenwood, Colo.

Like a faithful butler, a cash-management account sweeps daily. That is, any cash coming in -- from stock dividends, maturing certificates of deposit, bond interest payment, sales of securities -- is "swept" (transferred) into a money-market fund so you don't have to wait a whole day to start gaining interest.

And like a social secretary, a cash-management account keeps track of comings and goings. In this case, the account notes the travels of your cash, in categories such as mortgage, medical expenses, insurance, interest, child care and so on, based on codes that you put on your checks as you write them.

Those basics don't include the bells and whistles that banks and brokerages fling at profitable patrons. First Union refunds ATM fees to customers with cash-management accounts and gives them discounts on stock trades, a free safe-deposit box and a no-annual-fee Visa gold card, among other goodies. Other financial services firms offer similar perks.

The features and the fees
Before signing on the dotted line, it's a good idea to compare fees, features and the interest rate on the money-market account. Most important, ask how much you'll be penalized if you fall below the minimum balance amount.

A word of caution: Don't sign on with a firm that charges for extra bells and whistles you won't use. And don't be surprised if after opening an account, you immediately start receiving lots of literature suggesting you purchase other products, services, stocks and so on.

"Don't be swayed by them into buying or investing in anything you don't want or don't understand," Meier suggests.

Some experts say the biggest drawback to these combo accounts is keeping tabs on cash flow. For instance, if you need a loan, you generally can get a preferred loan rate or a line of credit, based on your assets. Unless you're careful, you could use your debit card and go through your cash holding and then on into your credit line -- perhaps without even realizing it.

Do some up-market comparison shopping
The check-writing features at a bank and a brokerage house are generally the same but some brokers restrict the number of checks that can be written each month -- if any.

The interest earned on a brokerage checking account is generally much higher than a bank checking account. Likewise, balance requirements vary but stiff fees can be tacked on if you don't keep the monthly cut-off point.

Also, customers should keep in mind that some or even most fees for the banking arm of the bank/brokerage package are waived if you keep a certain balance. Cash withdrawals may be limited, if access to automated teller machines is even an option.

First Union calls itself the first bank to offer asset-management accounts. It began offering what it calls CAP accounts in 1985 to prevent customers from defecting to brokerage houses. Now, a spokeswoman says, about half of CAP accounts bring in new assets -- money that otherwise probably would have gone to brokerages.

Banc One and Wachovia Bank are among the many other banks that offer a bank/brokerage package. Banc One's OneInvest allows transfers to checking accounts, automatic sweeps to money-market funds, as well as trades of stocks and bonds. Likewise, Wachovia's Investor asset-management account combines checking and brokerage transactions in one consolidated statement.

Experts say the best way to make your choice is to narrow down a list of three to eight banks and brokers you're interested in, then call each for an information packet. Read it over and learn it, just as you would for a company in which you're considering investing.

To comment on this story, please e-mail the Bankrate.com editors
Holden Lewis also contributed to this report.

-- Posted: Dec. 14, 1999