Sweep not so sweet

Schwab ‘spread’ irks customer

Dear John: Charles Schwab is trying to pocket the spread between the higher rates for Treasury bills and the lower rate offered by Bank Sweep products.

A “valued customer” gets 15 basis points in a sweep product instead of the 1.23 percent offered by the US Treasury money fund.

Yes, I receive FDIC insurance. However, this guarantee is secured by the good faith and security of the US government. I think T-bills offer a similar guarantee.

Shame on Schwab! You pocket basis points against billions of dollars of customer accounts. Anonymous.

Dear Anonymous: The first thing I’m curious about is, why didn’t you give your name? I only use initials in this column, so I guess you are afraid that Schwab will know which of their “valued customers” has a gripe.

So I figure you didn’t complain to Schwab yourself, and you let me do your dirty work. OK, I’m up for it. Here’s what Schwab had to say: Hi John, “Thanks for contacting us and for the opportunity to respond to your reader’s note regarding cash solutions at Schwab. We believe cash plays an important role in any sound portfolio and that clients should have access to a wide range of cash options,” wrote a spokesman.

Then he says you have your cash in the wrong product.

“Clients should rarely leave money they intend to retain in cash for long periods of time in any sweep vehicle — whether it is a sweep money market fund or a bank sweep feature. Long-term cash should typically be invested in a purchased money-market fund for liquidity or in FDIC-insured certificates of deposit,” the spokesman continued.

“By comparison, purchased money-market funds will generally pay higher interest yields than any sweep vehicle. Ultimately, the choice of where to put uninvested cash is up to each client.”

So there you are. And I guess Schwab really is pocketing the point spread between what you are invested in and what government bills are paying. Luckily for them, people often make this kind of mistake and are afraid to ask.

Dear John: Please help me. For over 25 years I paid timely premiums to Travelers Insurance for a homeowner’s pol- icy, believing that I was protected.

Last September my house was vandalized by tenants to the point where the county declared my home “uninhabitable.” The contractor’s estimate for repairs, obtained at Travelers’ request, is $69,000.

My claim was denied. Travelers is avoiding honoring their commitment to me because I didn’t have a “renters” policy.

How could I know that I had the wrong policy?

I trusted my insurance professional. The original policy was written when I used my beloved home for my own use. Eventually I began renting it out. This has been a nightmare. BG

Dear BG Your story is far different from the one I’m hearing from Travelers.

The company says you were warned about the policy being the wrong one and that you didn’t change it.

It’s truly a “they said, you said.”

So I’m afraid your only recourse is to get a lawyer.

But this is a good lesson for others — not necessarily about insurance. If you rent out your house, whether for a year, a month or overnight, you could end up losing a lot of things that are valuable to you.

So, don’t screw with the insurance company that covers your house.

Good luck on this one.