Skip to main content
All Posts By

Donna Cournoyer

Donna Cournoyer
In Investment Strategy

How Custodial Service Providers Keep Your Assets Safe

As the bank tempest was hitting full force in March, a few clients did reach out to me to inquire about how the money that we manage for them is kept safe. Below is a summary.

Client assets managed by Moore Financial Advisors are typically custodied at Pershing LLC, and Shareholders Service Group is a broker that also acts in an administrative capacity for client accounts.

Client assets are kept safe through the following:

  • Segregation of Assets: client assets are segregated from Pershing’s (custodian) and Shareholders Service Group’s (broker) assets. Unlike with checking and savings accounts at your bank, which are obligations of the bank, the assets in brokerage accounts, Trusts, and IRAs are legally separate from the assets of the custodian and broker that oversee them on clients’ behalf
  • Financial Strength: Pershing is part of BNY Mellon. The stand-alone financial strength of BNY Mellon is high. Two of the major credit rating agencies, Moody’s and Standard and Poor’s, assign a “AA” credit rating to BNY Mellon. (The highest ratings tier is AAA.)
  • FDIC Insurance: uninvested cash in client accounts is typically held in the Dreyfus Insured Deposits program. Dreyfus is a subsidiary of BNY Mellon. Dreyfus Insured Deposits benefit from the $250,000 Federal Deposit Insurance Corporation (FDIC) guarantee.
  • SIPC Insurance: Investments in Pershing accounts are protected by Securities Investor Protection Corporation (SIPC) coverage of up to $500,000. Pershing also provides coverage in excess of SIPC limits from commercial insurers.
  • About SIPC Insurance: this covers investors if Pershing were to fail and client assets cannot be located due to theft, misplacement, or destruction.

If you have additional questions regarding the safe-keeping of your assets, please send a message to Susan or me and we’ll gladly address your inquires.

Donna Cournoyer
In Economy

Bank Turmoil is a Tempest, Not a Tsunami

The turmoil from the mid-March banking crisis seems to have calmed down in early April.

To get a better understanding of what’s going on and how concerned we should be, it can be helpful to hear an insider’s point of view.

It just so happens that the nation’s preeminent banker, Jamie Dimon, at the country’s largest bank, JP Morgan, discussed the matter in his latest letter sent last week to shareholders.

I’ve found Dimon’s communications to be refreshingly plain-spoken for a big-deal financial person, and he has the respect of his peers, as he was Treasury Secretary Janet Yellen’s first call when problems surfaced in mid-March.

Here are key points on the current banking crisis from the JP Morgan Annual Report, penned by Dimon, that provide a degree of comfort that the March tempest is unlikely to be a precursor to a 2008-style tsunami:

  • The current crisis was the result of regulatory shortcomings and risk-management failures at a handful of banks
  • The most prominent risks were hiding in plain sight, including interest rate exposure and uninsured deposits
  • The current crisis is not yet over, and there will be repercussions from it for years to come (tighter regulation likely will follow)
  • However, recent events are nothing like what occurred in the 2008 global financial crisis (which barely affected smaller banks)
  • Back then, the trigger was $1 trillion of consumer mortgages that went bad, held by many financial institutions, and included the accelerant of enormous leverage (excess debt)
  • Today’s crisis involves far fewer players and fewer issues that need to be resolved

If you’re interested in hearing his take on the recent bank issues, you can watch Dimon’s CNN interview.

From my perspective, to be confident that a banking crises has been resolved, we typically need to see three conditions met:

  1. Government support
  2. Resolution of failed entities
  3. Passage of time (with no additional failures)

We have seen significant government support through a new Federal Reserve lending program and the swift resolution of three of the failed entities – Silvergate Bank, Signature Bank, and Silicon Valley Bank. Also a large foreign bank, Credit Suisse, was taken over by its main competitor, UBS, following governmental intervention.

As for the third condition: if summer arrives without additional failures, I’ll feel comfortable calling “all clear”.

Donna Cournoyer
In Market Updates

March 2023 Recap: Two Good Quarters

Despite recent problems in the banking sector, stocks started the year on a strong note.

The US benchmark S&P 500 gained 7.5% in the first quarter of 2023. Foreign stocks also climbed, with the EAFE Index (Europe, Australasia and the Far East) up 9%. Technology stocks had a stellar quarter, rising by nearly 21%. Bank stocks were on the other end of the spectrum, falling by more than 17%.

And bonds participated in the rally, too. A near half-of-one-percentage-point drop in intermediate-term interest rates—despite short-term rate increases by the Federal Reserve in January and March—translated to a gain of 3.2% for the Bloomberg Aggregate Bond Index, a key gauge of the US bond market.

Here’s a recap of stock and bond performance by quarter, going back to the beginning of last year.

RK

Close Menu