Don't Settle for Low Yields

Wells Fargo brokerage recently instituted a policy that directs all cash in a brokerage account into its Wells Fargo Cash Sweep. Interest paid varies based on the total account value -- from 0.3% for little guys to 3.25% for big-money accounts. In the past, account holders could have the money swept into accounts paying higher rates. I'm a little-to-middle guy, and this will cost me nearly $1,000 per year if I don't actively move the cash. Wells Fargo says this is an industrywide change. Is that true? Is there anything I can do?

It's true. The trend started in 2000, when Merrill Lynch switched its customers' sweep accounts from money-market funds to lower-yielding, money-market bank accounts. Since then, most brokerage firms that own banks have made the change, says Peter Crane, publisher ofMoney Fund Intelligence.

With a price war in online trading cutting brokers' income from commissions, it's part of a campaign to increase revenue from other sources. "A bank can earn more by sweeping a customer's money into an account earning 1% and lending at 4% or 5% or 6%," says Connie Bugbee, managing editor of iMoneyNet. Early this year, the average brokerage sweep account for balances of $50,000 to $100,000 was earning 1.05%, says Crane, while the average money-fund account was earning 3.78%

But you don't have to settle for a measly 1%. You just need to make the effort to move your cash into a money-market fund. You don't even need to transfer your account. Wells Fargo has plenty of money-market funds and other cash options that earn higher interest. "This really is a penalty for laziness," Crane says.