As a practicing Spokane financial advisor, I see a common misconception that having accounts at multiple institutions brings diversification. This thinking misses the point. When discussing diversification, it applies to investments, not the institutions that hold them. On the contrary, there are some negatives for having many different institutions. Having investment accounts scattered across multiple institutions may add complexity for no benefit. We mainly see this when clients enter retirement and may have had numerous retirement plans throughout their careers. Simplicity is a powerful tool. Here are five compelling reasons to bring investments under one roof.
1. Simplified Portfolio
Juggling multiple accounts can make keeping track of your portfolio’s overall performance and asset allocation challenging. Suppose you are drawing from your portfolios and have multiple accounts. In that case, keeping your asset allocation in check makes it difficult because you cannot easily rebalance or monitor your allocation with multiple institutions. Consolidation lets you see the big picture more clearly, ensuring your investments are correctly aligned with your financial goals so you’re never too risky or too conservative. With everything in one place, you can easily monitor progress, rebalance your portfolio, and make informed decisions.
2. Cost Efficiency
Managing accounts across different institutions often involves overlapping fees— account maintenance charges, trading commissions, or advisory fees. Consolidating your accounts can eliminate these redundancies and potentially unlock cost savings. Many financial institutions reward larger account balances with reduced fees or preferential treatment, so bringing your accounts together can make your money go further. We always recommend using a fee-only advisor who doesn’t receive any commissions. Or if you’re doing DIY, know precisely what you’re paying. Find the balance between investment quality, fees, and customer service.
3. Tax Efficiency
Tax time can be a headache when investment accounts are spread out. Consolidation simplifies reporting by minimizing the number of tax documents you’ll receive. Additionally, it becomes easier to implement strategies like tax-loss harvesting or managing required minimum distributions (RMDs) when all your accounts are centralized. This saves time and reduces the risk of missing critical tax deadlines. As financial advisors, we know it takes more effort to follow our recommendations with scattered accounts. Making life simpler increases the likelihood of financial planning strategy follow-through and reduces stress.
4. Streamlined Estate
Consolidating your accounts doesn’t just make life easier for you—it also simplifies matters for your loved ones. If you were to pass away, having fewer accounts means fewer institutions for your beneficiaries to contact and fewer death claims to process. Estate settlement is already an emotional and complex process; reducing the administrative burden can be a thoughtful way to support your heirs during grieving.
5. Stronger Planning
If you’re using an advisor, when your financial advisor has a comprehensive view of all your investments, they can provide better guidance. Consolidation enables them to design a holistic plan that considers all aspects of your financial picture. This helps you stay on track toward your goals while avoiding conflicts or gaps arising when accounts are scattered. As a financial advisor, we’ve encountered instances where a client will reveal another account not held with us years later, dramatically affecting our tax strategy.
Final Thoughts
While consolidation offers many benefits, evaluating your unique situation before making changes is essential. Consider the costs of transferring accounts, potential tax implications, and the services provided by your chosen institution. A trusted financial advisor can guide you through the process and ensure consolidation aligns with your long-term goals. If you want to consolidate your 401k, check out our article: I retired- What are my options with my 401k?
To get help simplifying your life with consolidation, schedule a no-cost, no-obligation discovery call with one of our Spokane financial advisors.
About the Author
Amy Drury CFP® is a financial advisor in Spokane, Washington, specializing in helping couples with 401k five years from retirement.
- Fiduciary. No commission, no products
- Investment management and financial planning
