5 Reasons You Need an Account at Multiple Brokerage Firms and 1 Reason You Don’t

There’s a reason for the many different brokerage firms. Market demand has increased competition, and advancements in technology have made it easier for brokers to launch new investing apps into the market. Some brokers specialize in certain types of investments or services, while regulations limit the market reach of others.

Chances are you won’t find everything you need at one broker anyway. While one platform might have the best research tools, it might not have the most diverse lineup of tradable assets. Or its trading platform is outdated and cumbersome.

Traders and investors can maximize their strategies and potentially optimize their portfolio’s performance by having an account at more than one brokerage firm. And since most brokers don’t have minimum deposit requirements and you can withdraw your money at any time without penalty, there’s no reason you shouldn’t leverage the advantages of multiple brokers, right?

Here are five compelling reasons why you need an account at more than one brokerage firm and one reason it may not be a good idea.

1. Brokers aren’t immune to website crashes

Just as diversifying your investment portfolio across different asset classes mitigates risk, having accounts at multiple brokerage firms can provide a form of diversification. It ensures that your assets are not concentrated in one place, reducing the impact of potential issues with a single broker.

A 2022 study by Eaton et al. looked at Robinhood and traditional retail brokers to examine the impact of brokerage outages and found at least “96 separate outages in which at least 200 users report outages” during the study’s January 2019 to June 2021 sample period. The median length of the outages in the sample was 30 minutes. While the outages may typically be short, if it’s your broker that’s affected, it could mean you miss out on an opportunity to react to the market. The markets can move a lot in 30 minutes.

2. Get the best of both worlds — access different features

Different brokers offer varying features, trading platforms and tools. The big brokers, Fidelity, Charles Schwab and E-Trade, offer the most robust trading platforms. You’ll find everything from advanced analysis and screening tools, technical indicators and charting studies to top-tier third-party research and extensive educational resources. But their mobile trading apps can hardly compete with the Robinhoods and Publics of the space. These mobile-first brokers prioritize the user experience, offering a pleasurable investing experience.

By having accounts at multiple firms, you can access a broader range of quality features. This can let you choose the platforms and tools that align best with your preferences and trading style.

3. It could make your investing more cost-efficient

Depending on your trading activity and the fee structures of different brokers, having accounts with multiple platforms can lower your overall trading costs. Take advantage of one broker's low-cost options, but stick with another’s commission-free stock and exchange-traded funds (ETF) trades to do the majority of your investing. Beginners or investors with little to invest can also take advantage of different signup bonuses across multiple platforms to help kickstart their portfolios.

A growing number of brokers are also starting to roll out IRA matches. So, you might keep your IRA at a broker that matches your contributions and your brokerage account elsewhere.

4. Some brokers offer specialized services

Some brokers specialize in particular types of investments or services. For instance, one brokerage might excel in options trading, while another is known for its robo-advisory services. Perhaps you want a financial advisor to manage your investments earmarked for retirement but want to dabble in speculative trades with another broker.

Having accounts at different firms lets you leverage specialized services tailored to specific investment strategies.

5. Test platforms to find the broker that’s right for you

Maintaining accounts at multiple brokerage firms lets you test the best trading platforms without fully committing. While most brokers let you withdraw money to your bank without fees, you’ll usually need to pay an outgoing account transfer fee if you want to transfer assets to another broker.

Having an account with multiple brokers lets you evaluate the user interface, features and overall experience before investing, helping you decide which platform aligns best with your needs.

But having multiple brokerage accounts means more account maintenance

While there are advantages to having accounts at multiple brokerage firms, managing these accounts responsibly and staying organized is essential.

Tracking investments and monitoring your portfolio’s performance becomes more challenging when dealing with multiple platforms. There's a higher risk of making errors, such as executing the wrong trade or mismanaging assets. It also may result in a fragmented view of your overall portfolio. When your assets and information are spread across multiple brokers, it can be challenging to assess your asset allocation and risk exposure accurately.

Bottom line

Ultimately, the decision to have multiple brokers should align with your investment goals, preferences and the specific benefits each platform offers. If you’re comfortable managing multiple accounts, you could leverage the benefits of different brokers to maximize your investment strategy.

Matt Miczulski is an investments editor at Finder. Matt dissects and reviews brokers and investing platforms to expose perks and pain points, explores investment products and concepts and covers market news, making investing more accessible and helping readers to make informed financial decisions.

Before joining Finder in 2021, Matt covered everything from finance news and banking to debt and travel for FinanceBuzz. His expertise and analysis on investing and other financial topics has been featured on CBS, MSN, Best Company and Consolidated Credit, among others. Matt holds a BA in history from William Paterson University.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.