Alyssa Lane
LPL Financial offers a wide range of financial products and services to help financial professionals meet their clients' diverse needs. Among these offerings is the LPL Insured Cash Account (ICA), which is part of its automatic cash sweep program. This program takes available cash balances from eligible accounts and automatically deposits them into interest-bearing Federal Deposit Insurance Corporation (FDIC) insured deposit accounts. Accounts participating in the insured cash accounts program are protected by the FDIC up to $250,000 per depositor per depository institution, providing security and peace of mind for clients. LPL's commitment to competitive rates and low fees, along with its focus on account security and protection, makes it a trusted partner for financial professionals and their clients.
| Characteristics | Values |
|---|---|
| What is LPL Insured Cash Account (ICA) | As part of its automatic cash sweep program, LPL Financial offers two bank deposit sweep programs which take available cash balances (from securities transactions, dividend and interest payments, cash deposits, and other activities) in clients’ eligible accounts and automatically deposit them into interest-bearing Federal Deposit Insurance Corporation (FDIC)-insured deposit accounts at one or more banks or other depository institutions |
| Who is it available to? | Individuals, trusts (where beneficiaries are natural persons), sole proprietorships and entities organized or operated to make a profit, such as corporations, partnerships, associations, business trusts, and other organizations |
| Are there any limitations to the FDIC insurance? | Accounts that participate in the insured cash accounts program are protected by the FDIC up to $250,000 per depositor per depository institution, in accordance with FDIC rules, only when on deposit at the participating banks. Such deposits are not transferable, and such deposits are not guaranteed by LPL because LPL is not a bank |
| Are Outside Investments covered by LPL's SIPC Insurance? | No, LPL's SIPC membership provides account protection only to assets held at LPL. Assets held in an Outside Investments account may or may not be covered by SIPC or FDIC insurance. Questions about coverage should be directed to the Outside Investments sponsor |
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What You'll Learn
LPL's cash sweep programs
LPL Financial offers two cash sweep programs: the Insured Cash Account (ICA) Program and the Deposit Cash Account (DCA) Program. These programs are designed to "sweep" or transfer investors' cash from their IRA and non-IRA accounts into LPL bank accounts. The ICA Program is for non-IRA accounts, while the DCA Program is for IRA accounts.
The cash sweep programs are automatic and mandatory for LPL customers. The uninvested cash in customers' accounts is deposited or "swept" into interest-bearing Federal Deposit Insurance Corporation (FDIC) insured deposit accounts at pre-selected banks chosen by LPL. While the cash in these accounts generates interest, the majority of the interest goes back to LPL, with only a small percentage payable to the customers.
LPL has been accused of misleading customers and violating its fiduciary duty by acting in its own interests to maximise profits through these cash sweep programs. A proposed class action lawsuit, filed by alleged LPL customer Daniel Peters, claims that LPL pockets most of the interest generated in these accounts while paying only minimal interest to accountholders. Peters also alleges that LPL's disclosure materials on the cash sweep programs were misleading, stating that the fees it receives were "typically" higher than the interest clients earn, when in reality, LPL always receives more interest than its customers.
LPL has not publicly responded to the lawsuit or the allegations.
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FDIC-insured bank deposits
The Federal Deposit Insurance Corporation (FDIC) provides deposit insurance to protect your money in the event of a bank failure. FDIC deposit insurance covers money held in traditional deposit accounts at FDIC-insured banks, including checking and savings accounts, as well as Certificates of Deposit (CDs). Coverage is automatic when you open one of these accounts, and your deposits are insured for up to $250,000 per FDIC-insured bank.
The FDIC offers resources and tools to help consumers understand and manage their deposit insurance. Their Electronic Deposit Insurance Estimator (EDIE) helps you calculate how much of your bank deposits are insured and if any of your funds exceed the coverage limits. Additionally, the FDIC provides a Frequently Asked Questions page and a dedicated phone line to answer any specific questions about deposit insurance coverage.
It is important to note that not all financial products offered by banks are insured by the FDIC. Certain investments and services may not be covered, so it is essential to understand the specifics of your accounts and the FDIC's coverage rules. The FDIC provides resources to help bankers educate their customers about deposit insurance and ensure accurate information is provided.
By understanding the protections offered by FDIC-insured bank deposits, you can confidently manage your finances and ensure the safety of your money. The FDIC's resources and tools make it easy to verify your coverage and take advantage of the benefits of deposit insurance.
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Mutual fund dividends
Dividends are a portion of a company's profits that it pays to its shareholders. Mutual funds with holdings that include dividend-paying stocks, interest-paying bonds, or both, pass those profits directly to their investors. Mutual fund investors can choose to accept dividend payments in cash or reinvest them in additional shares of the fund. Mutual funds are required by law to distribute their accumulated dividends at least once a year, but some pay them out monthly, quarterly, or semi-annually.
High-dividend-yield mutual funds appeal to investors seeking regular income and long-term growth. These funds invest in high-dividend stocks and high-coupon bonds that offer shareholders income year after year. The income paid as dividends represents the investor's share of the fund's earnings from all sources.
Growth-oriented mutual funds may earn modest dividends as they focus on other means of producing returns for investors. Mutual funds that receive dividends from their investments are required by law to pass them to their shareholders. Mutual funds must distribute all net income to shareholders in the form of dividend payments, including interest earned by debt securities like corporate and government bonds, Treasury bills, and Treasury notes.
LPL Financial offers two bank deposit sweep programs: the LPL Insured Cash Account (ICA) and the LPL Deposit Cash Account (DCA). These programs automatically deposit available cash balances, including those from dividend payments, into interest-bearing Federal Deposit Insurance Corporation (FDIC)-insured deposit accounts. The FDIC insures accounts participating in the insured cash accounts program for up to $250,000 per depositor per depository institution, only when on deposit at participating banks.
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Account security and protection
LPL Financial offers two bank deposit sweep programs as part of its automatic cash sweep program. These programs, the LPL Insured Cash Account (ICA) and LPL Deposit Cash Account (DCA), are available to different types of client accounts. The ICA is available to individuals, trusts, sole proprietorships, and entities organised or operated to make a profit, while the DCA is only available to advisory individual retirement accounts (IRAs).
These programs take available cash balances from securities transactions, dividend and interest payments, cash deposits, and other activities in clients' eligible accounts and automatically deposit them into interest-bearing Federal Deposit Insurance Corporation (FDIC) insured deposit accounts. Accounts that participate in the insured cash accounts program are protected by the FDIC up to $250,000 per depositor per depository institution, in accordance with FDIC rules, but only when on deposit at participating banks. Such deposits are not transferable, and LPL does not guarantee them because it is not a bank.
Money market fund investments are not insured or guaranteed by the FDIC or any other government agency. Although money market funds may aim to preserve a value of $1.00 per share, investors can lose money in money market funds.
LPL also offers margin and bank-provided securities-based loans to serve clients' liquidity needs. LPL and its third-party partners are committed to keeping rates competitive and maintaining low or no fees. They also meet and often exceed minimum levels of account security and protection.
Account View may display securities or financial products that were not purchased through LPL or that LPL does not hold on behalf of the client. These Outside Investments may include mutual funds, fixed annuities, variable annuities, or alternative investments held directly with the Outside Investments sponsor. Outside Investments data displayed on Account View may be subject to limitations, including incomplete historical data, holdings or transaction details, and cost or return information. It may also inaccurately state the account type. Outside Investments are not covered by LPL's SIPC Insurance because LPL's SIPC membership only provides account protection for assets held at LPL. Assets held in an Outside Investments account may be covered by SIPC or FDIC insurance, and queries about this coverage should be directed to the Outside Investments sponsor.
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Outside Investments
It is important to note that Outside Investments data displayed on Account View is provided by a third-party source and has not been verified by LPL. While LPL endeavours to obtain reliable data, there may be limitations to the Outside Investments information presented on Account View. For instance, it may not include complete historical data, such as holdings, transactions, or cost details. Additionally, the account type may be inaccurately reflected. An Outside Investment account with joint registration may appear on Account View as an individual account.
Furthermore, when viewing Outside Investments on Account View, the position data may differ from that of the Outside Investment sponsor. This discrepancy can arise due to variations in how Outside Investment sponsors or third-party data providers implement calculation methodologies. LPL's SIPC membership does not cover Outside Investments. Therefore, it is advisable to direct any questions about coverage to the Outside Investments sponsor.
When considering the "cost basis" of transactions, LPL may not have received accurate or complete information for assets not purchased through an LPL account. Consequently, the cost basis displayed in Account View may differ from the trade confirmation or statement provided by LPL or the Outside Investments sponsor. If the cost basis information is unavailable, "N/A" will be displayed. It is important to refrain from utilising cost basis for evaluating the performance of a holding or an account.
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Frequently asked questions
The LPL ICA is a bank deposit sweep program that automatically deposits available cash balances from eligible accounts into interest-bearing Federal Deposit Insurance Corporation (FDIC)-insured deposit accounts.
The LPL ICA sweeps cash from eligible accounts, including securities transactions, dividend and interest payments, and cash deposits, into FDIC-insured deposit accounts at one or more banks or depository institutions.
The LPL ICA is available to individuals, trusts with natural persons as beneficiaries, sole proprietorships, and profit-making entities such as corporations, partnerships, and associations.
Yes, accounts in the LPL ICA program are protected by the FDIC up to $250,000 per depositor per depository institution. However, LPL does not guarantee these deposits as it is not a bank.
