Many years ago, I succumbed to a mailing from Games Magazine. For a limited time, I could subscribe at a reduced rate and get a second year free.
It was close to Christmas, a perfect stocking stuffer for Mr. H., and a steal of a price.
The following summer, we received a letter stating the magazine had gone out of business and its residual assets were sold to a new company that would not honor any remaining issues. Mr. H’s stocking stuffer turned into a lump of coal.
Not long after, we bought a 35” TV. The store had a great promotion and pushed hard for us to add the extended warranty. We didn’t bite, especially when the salesman started touting how we’d get a second extended year gratis for a total of three “piece of mind” service free years.
Sure enough, not eight months later, the electronics store went belly up.
Fast forward to the present. It’s been all over the news how Etrade has gotten itself into a sub-prime mortgage mess. Recently the company has been offering all kinds of incentives to retain current customers and attract new ones. I’ve received at least three unsolicited mailings in the last two weeks.
Today I read at Blueprint For Financial Prosperity that Etrade has upped the ante by offering an entire day of commission free trading next week.
I hope things work out for Etrade but the company will have to improve a lot before I’ll entrust them with my money.
What’s even more concerning is how many opinion pieces I’ve read where the authors wanted to reassure Etrade customers with discussions of the in and out’s of how their accounts are insured. It’s especially galling when bloggers misidentify the charter of the SIPC as somehow being the same as the FDIC. The FDIC is a government entity. The SIPC is not.
Per the SIPC,
SIPC is neither a government agency nor a regulatory authority. It is a nonprofit, membership corporation, funded by its member securities broker-dealers.
Do you really want to risk being trapped in an equity you can’t sell or be prevented from hitting the buy button when a stock from your watch list has finished its bottoming pattern all because your trading account might be in limbo, waiting for restitution from the SIPC?
Not me. No amount of insurance would lull me into keeping my portfolio at a brokerage house with such public credit crunch issues.