E-Trade reassures customers
NEW YORK – E-Trade customers had some needless hand-wringing this past week, worrying about the brokerage’s financial problems and whether they might jeopardize the safety of 3.7 million accounts.
The New York-based online broker told account holders their money was safe due to government protections and additional insurance. E-Trade Financial Corp. even took out a full-page advertisement in the Wall Street Journal to assuage broader fears of a collapse after its stock plunged due to the credit market turmoil.
E-Trade, like other financial institutions dealing with credit problems, faces defections as customers pull accounts without realizing that their assets are protected. Some investors have even opened accounts at other brokerage firms to spread their money around.
“Until the smoke clears, we reduced our holdings tremendously,” said Steve Kaloroplos, a retired small business owner from South Carolina. “We like E-Trade, but we’re just not willing to risk our money. We don’t want assets tied up while there is a problem.”
That scenario was confirmed by E-Trade Chief Operating Officer Jarrett Lilien, who said some clients “have moved some of their money aside.”
He expects the move might be temporary – similar to investor angst during height of the market turmoil in August. And the possibility of E-Trade going bankrupt is remote.
Even in the worst-case scenario, rivals would offer to buy E-Trade’s accounts, or the company would be sold entirely, before accounts suffered any problems. Experts say most investors can rest easy.
Ric Edelman, a financial adviser and personal finance author, suggests customers who are worried might diversify their money into safe investments like Treasury bills until they feel more comfortable. Though he doubts a worst-case scenario, financial companies facing hardships might have temporary, short-term restrictions on emptying accounts.
“I don’t believe that it’s doomsday for E-Trade or anybody else for that matter,” he said. “But, if you’re awake at night worried about this, then just move your account someplace else.”