Recently, while talking to a friend the question of changing and/or diversifying brokerage firms came up. He was just learning how to invest his money, and obviously he had some very valid concerns. Is it perfectly acceptable to have all your investments pegged with just one brokerage firm or should the investments be spread across several brokerage firms? The truth, however, is that there is no perfect solution and that everything does really depend on your personal situation. Please note that I am not talking about diversifying your portfolio. That is an entirely different kettle of fish. There’s a simpler answer to that; you have to diversify your investments.
Let’s simplify this a bit further and say early on why you should use only one brokerage firm. The reason why you might choose to do so is simplicity. By keeping things down to the one brokerage firm, you are having fewer accounts to peek in and you are simplifying the paperwork you will have to file when it comes to filing your taxes. 
Other than that, you can also easily see your total asset allocation at any one given time and you can also rebalance things as and when you need to with ease. Learning how to invest via brokerage firms and why to go with one or more than one brokerage firm is vital to your investment well-being.
The reasons for using multiple brokerage firms are many and compelling. The thing is though that none of these reasons might apply to you personally. For one, you might have crossed your Securities Investor Protection Corporation (SIPC) limit. That’s generally $500,000 per customer and cash in any one brokerage account is limited to $250,000 only. If you’re working elsewhere, it might make sense to spread your investment around.
Another scenario might present itself when you need to have immediate access to all of your investments. When that happens, it can take months for SIPC to replace the lost securities. At that point, it makes sense to have multiple brokerage firms on hand. It might also be a case of risk avoidance. That is perhaps one of the biggest reasons to use multiple brokerage firms. For instance, you might want to open accounts with both Vanguard and Fidelity. That’s because Vanguard boasts commission free access while you might also want to be able to purchase TIPS commission free in your IRA. Little things like this, and balancing it out, will decide whether you have multiple brokerage firms on the books or not.
Personally, I had IRA’s at a few different locations until recently. But I won’t diversify anymore than I already have. In fact, I use Vanguard exclusively now. The change in my cashback credit card rules means that I can deposit the bonus anywhere, so why not make the most of it? I don’t diversify, and I don’t fear the fact I don’t. But your mileage may vary, and maybe you need multiple brokerage firms.
