“I use Fidelity for my daughter’s 529 account,
and it is nice that I can do a transfer to that
account instantly,” Parker says. “If I had my
primary brokerage account with Fidelity, it
would be the same way.”
CONS
—Interest rates have dropped. The financial
industry is currently in a low-rate environment,
meaning interest rates on deposit accounts
are particularly low at the moment. Several
CMAs that launched in recent years had notably
high interest rates at first, but they dropped
significantly in mid-2020 after the start of the
COVID-19 pandemic.
OTHER THINGS TO CONSIDER
—FDIC insurance is usually only available
through third-party banks. Since brokerage firms
aren’t banks, they typically have to partner with
banks to offer FDIC insurance. Brokerages sweep
customer funds into FDIC-insured accounts
behind the scenes so that they’re covered.
—CMA customer service is typically online-only.
Most CMA providers offer only remote customer
service because they don’t have branches. As
a result, customers who open an account will
need to be comfortable with service options
that aren’t in person.
CAN A CASH MANAGEMENT ACCOUNT
MAKE IT EASIER TO INVEST?
When it comes to investing, timing can be
critical. For example, missing a day or two of
having your cash in the market — say, the
amount of time it takes to transfer cash from