Banks & Brokerages: The Main Differences

Banks and brokerages are both financial institutions that offer services to manage and grow your money, but they have distinct differences in their primary functions, services, and insurance protections.

PRIMARY FUNCTIONS OF BANKS

Banks primarily focus on everyday financial transactions and services. They offer checking and savings accounts, provide loans (such as mortgages and personal loans), and facilitate basic money management tasks. Banks are designed to be a place to store your money while providing easy access for daily use. Generally, most banks are insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC provides insurance coverage up to $250,000 per depositor, per FDIC-insured bank, per ownership category. This means that if your bank fails, the government guarantees you'll get your money back up to the insured limit.

PRIMARY FUNCTIONS OF BROKERAGES

Brokerages, on the other hand, specialize in investment services. They facilitate the buying and selling of securities such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Brokerages are designed to help you grow your wealth through investments rather than simple savings. Brokerage accounts are not FDIC insured. Instead, they are protected by the Securities Investor Protection Corporation (SIPC). SIPC protection is fundamentally different from FDIC insurance: 

• SIPC protects against the loss of cash and securities - such as stocks and bonds - held by a customer at a financially-troubled SIPC-member brokerage firm. 
• SIPC coverage is limited to $500,000 per customer, including up to $250,000 for cash. 
• SIPC does not protect against the decline in value of your securities due to market fluctuations 

At Lodmell & Lodmell, we believe that diversifying your accounts is ideal from an asset protection, which is why we would highly advise to ensure that you open both a bank and brokerage account in the name of your Limited Partnership. For further information about banking with your asset protectino plan, click here.

If you have any questions or concerns, please do not hesitate to reach out to [e-mail]