Should You Have Multiple Brokerage Accounts?

In investing, as with much in life, complexity is generally avoided. So why own more than one brokerage account, which means having multiple passwords, balances, interfaces, and tax forms?

Well, it's complicated. But it doesn't have to be. While you may be among those with more than one account, good reasons exist to simplify. Keeping more than one account generally isn't that compelling a strategy for the average investor when balanced against the benefits of simplicity.

When Less Is More

How do people end up with multiple brokerages? Sometimes it happens for the same reason they have more than one credit card—they saw an offer to open the account and jumped. Maybe one brokerage was offering a better return on the cash savings portion or dangled something consumer-friendly like bill payment. Brokerages often frequently offer a cash bonus for opening an account as well. Others may have more than one account through a marriage that has joined a couple's finances together.

Whatever the reason, having multiple brokerage accounts means more management: more emails, logins, tax forms, and more. You may want to ask yourself if this is really worth whatever benefits you're getting. Most online brokerages offer similar features like selling and buying stocks and bonds, investor education, research tools, and bill paying, minimizing the need for bouncing from one platform to the next. Streamlining may be in the best interest of the average investor.

"It's just more work," Shari Greco Reiches, co-founder of wealth management firm Rappaport Reiches Capital Management in Skokie, Illinois, said in an interview. "Investing is complex as it is, and having multiple broker accounts means it's harder to track overall allocations, investments, tax strategies, dividends, capital gains. It's just more work."

Multiple steps are involved in opening and managing an account. There is also the issue of security and passwords. For every account, you must construct a secure password and of course remember it. This gets more difficult with each account added to your financial life.

When More Is More

Multiple accounts and the added work they bring may have benefits for a narrow group of investors, said Reiches, who is also a behavioral finance expert whose book Maximize Your Return on Life was published June 25, 2021. Cryptocurrency is one example of an investment that not all platforms trade and a crypto-first brokerage like Coinbase is probably a better place to trade cryptocurrency than a mainstream brokerage. E*TRADE, for example, doesn't offer individual crypto trading. Fidelity offers crypto trading, but with limitations compared to a crypto-specific platform.

Alternative investments like private investments and gold coins may also require an account with a specialized brokerage, according to Reiches. 

Not all firms offer the same investment vehicles. For example, one may offer more international exposure, while another may have some esoteric investments not offered by another. Fees may also vary slightly. These are things to research. Still, for the average investor, those minor differences may not be compelling enough when considering the added work from managing multiple accounts.

The Bottom Line

Few advantages are bestowed to the average retail investor by having multiple brokerage accounts. One needs to focus on investing, and more than one account may be an unnecessary, costly, and time-consuming distraction. Most large brokerages will have a wide range of stocks, bonds, exchange-traded funds (ETFs), and other funds required by the average investor. Still, if you want to take advantage of small differences in fees and platforms, or if you want to trade cryptocurrencies and esoteric investments, go ahead and explore multiple platforms.