Is Cambridge Investment Research Safe?
Although not well known, Cambridge Investment Research, Inc. is a broker-dealer that is used by many investment advisor representatives. For the full scoop, take a look at our research.
Cambridge Investment Research Background
Cambridge Investment Research was founded in 1981. Today, it is one of America’s largest broker-dealers that primarily provide services to independent financial advisors (Cambridge has more than 3,800 at last count). These advisors are located throughout the United States. Cambridge is headquartered in Fairfield, Iowa.
The company also operates its own investment-advisory business. Called Cambridge Investment Research Advisors, Inc., this entity is a smaller part of the company’s operations.
In total, Cambridge oversees about $144 billion in client assets, and this treasure chest results in more than $1 billion in annual revenue.
Is Cambridge Investment Research Legitimate?
Cambridge is registered with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) as both an investment-advisory firm and a broker-dealer. These two financial watchdogs help to keep an eye on America’s securities firms by enacting rules and enforcing them. Both departments of Cambridge Investment Research are subject to these regulations.
Cambridge’s ID numbers with FINRA are 134139 as an investment firm and 39543 as a broker-dealer. Over at the SEC, the registration numbers are 801-63930 as an advisory firm and 8-48740 as a broker-dealer.
On the company’s FINRA profile, we see 14 disclosures since 1995. In one instance, Cambridge Investment Research failed to safeguard customer records and information. It paid a $250,000 fine to the SEC.
In a more recent case, the SEC charged the advisory arm of Cambridge Investment Research with “failing to disclose material conflicts of interest and breaching its duty of care related to its selection of mutual funds and wrap accounts for clients.” More specifically, the SEC found that Cambridge Investment Research Advisors failed to disclose that it was putting clients into mutual funds and sweep funds that generated revenue for its broker-dealer sister company. No fine has been issued yet on this complaint.
Is Cambridge Investment Research Insured?
In addition to FINRA and SEC memberships, Cambridge Investment Research is also a member of the Securities Investor Protection Corporation (SIPC). This organization protects cash and securities held at Cambridge. SIPC guarantees each separate capacity up to $500,000, half of which can be for a free cash balance.
Cambridge also offers an FDIC-sweep program for uninvested cash balances. Although this option may or may not be available with a particular financial planner, if it is utilized, FDIC protection on the swept cash will be automatic.
The FDIC protects a free cash balance up to $250,000 at a single bank. But Cambridge uses multiple banks in its FDIC-sweep system, and this setup results in protection up to $1.5 million per individual account. Citizens Bank, American Express, Bank of China, and Pacific Western Bank are examples of program banks.
If an account is not eligible for the FDIC-sweep program for any reason, the free cash balance will be invested in the Federated Hermes Government Reserves Fund, which would be protected by SIPC up to $500,000.
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Custody and Clearing Services
Cambridge Investment Research Advisors uses three firms for custodial services: Cambridge Investment Research (its own broker-dealer), National Financial Services, LLC (an affiliate of Fidelity Investments), and Pershing, LLC. The latter two have their own registrations with FINRA and the SEC (stretching back to the 70’s and 80’s). They are also both members of SIPC, meaning that when assets from Cambridge accounts are being held by these custodians, they are protected up to SIPC limits.
Pershing and NFS also serve as clearing brokers for Cambridge. This means they perform a lot of back-office work like trade confirmations and account statements.
Cambridge Investment Research BBB
Because Cambridge primarily works with independent registered investment advisors, there isn’t much of a direct history with the public. As a result, the Better Business Bureau has no profile for Cambridge.
It does have a profile for one of Cambridge’s custodial/clearing firms. National Financial Services has a BBB profile with a grade of A+. This is BBB’s highest possible rating. Two complaints leveled against NFS have been resolved by BBB in the last 3 years.
Is Cambridge Investment Research Safe Verdict
Cambridge Investment Research is a legitimate company with business connections to other legitimate firms. Nevertheless, it does have a mild history of securities violations (not uncommon in the industry). Potential clients of Cambridge and its affiliated investment advisor representatives should be aware of the histories of both Cambridge and the representative selected.
Cambridge Investment Research Review
Having come to the conclusion that Cambridge Investment Research is a legitimate operation, we will now look at what exactly it offers—and at what price.
Broker-Dealer Operation
In the appearance of Cambridge Investment Research, the company acts as a broker-dealer. In this capacity, it will custody the funds of its independent financial advisors’ customers. Because services, products, and fees will depend quite heavily on the policies of the individual financial planner, it is not possible to produce an exact schedule for all accounts that use Cambridge. Nevertheless, we do know the general range of commissions on these accounts and what financial vehicles might be available.
Possible investment classes include:
- Stocks
- Options
- Bonds and other fixed-income vehicles
- Mutual funds (over 23,000 of them)
- ETFs and ETNs
- UITs
- Interval funds
- Variable and fixed annuities
- Variable universal life insurance
Alternative investments, including:
- direct participation programs (DPPs)
- real estate investment trusts (REITs)
- managed futures
- limited partnerships (LPs)
- 1031 exchanges
- Special purpose acquisition companies
- precious metals
- hedge funds
- business development corporations (BDCs)
- private equity
As with asset classes, the potential account types will vary by the financial professional chosen. Possibilities include individual, joint, IRA, 403(b)(7), individual 401(k), flexible profit-sharing plans, and many more.
Cambridge Investment Research Fees and Commissions
Trades of stocks will have a commission of 3.5% of trade value. It could be higher or lower, depending on the policies of the specific financial professional employed. Options and bonds will have a similar commission.
Alternative investments cost anywhere from 1% to 5%, depending on the specific asset purchased.
Mutual funds and interval funds cost anywhere from 1% to 5.25% (the upper end of this range sounding like a class A mutual fund).
Unit Investment Trusts have a commission scale that starts at 1.5% and ends at 3.5%. Variable annuities cost between 1% and 5.5% and have additional fees that range from 0.25% to 2%.
Retail accounts that use Pershing as the clearing firm will be subject to a $35 inactivity fee (this is reduced by 50% for accounts that hold only mutual funds). Retirement accounts have a $43.50 maintenance fee (reduced to $12.50 for accounts with only mutual funds).
Closing an account costs $143.50 ($100 for retirement accounts).
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If you are looking for a professional money management service in your area, you can
find a Financial Advisor on the Wiser Advisor
(or read
Wiser Advisor review).
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Cash Management
Through Pershing, it’s possible to acquire some nice banking tools. Debit cards and check writing are available. These, however, have a variety of fees. The card has an annual fee that varies from $25 to $250, depending on the package it’s connected to. Like so many other fees, the financial advisor can waive it.
The first order of checks through Pershing is free. ATM withdrawals at PNC Bank or on the Allpoint network are also free.
Advisory Operation
Cambridge Investment Research Advisors has a clearer fee schedule for the investment-advisory service it provides.
There are eight potential programs. They are:
- WealthPort Wrap
- Retirement Plan Strategies Management Platform
- Cambridge Managed Account Platform (CMAP)
- Flexible Managed Account Platform (FlexMAP)
- Retirement Plan Advisory and Consulting Services
- Recommendation of unaffiliated third-party investment advisers
- Annuity management
The WealthPort Wrap program costs either 2.25% or 2.15% per annum, depending on how exactly the account is managed. There can be an additional setup charge of up to 3% of account value just to get started in the program. The minimum required investment is just $5,000, quite low by industry norms for a full-service advisory program.
Financial-planning services not covered by the asset-based fee can cost as much as $500 an hour, not to exceed $25,000.
The other seven programs will have similar, but not exact, fees and minimums. Large accounts may get discounts on the management fee, and it is often negotiable even for small accounts.
Margin
Cambridge offers margin investing in some account types. Fees and policies should be disclosed at the
point of account opening.
Cambridge Investment Research Review Judgment
Cambridge Investment Research offers a great deal of products and services, albeit at high cost. A managed account opened through an independent financial advisor will deliver a lot of guidance and assistance for people who need it. Inexperienced investors will especially benefit from this model, while investors without a lot of money can open some account types, although they will pay the steepest fees. Cheaper online options are out there, although they don’t offer as much as Cambridge does.
Updated on 10/7/2024.
Chad Morris is a financial writer with more than 20 years experience
as both an English teacher and an avid trader. When he isn’t writing
expert content for Brokerage-Review.com, Chad can usually be found
managing his portfolio or building a new home computer.
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