If commingling is not secure, why is it so common...?

Here are a few reasons a 1031 QI might commingle accounts:

1. Cutting Corners
It’s easier and cheaper to manage one account with a lot of money than a hundred accounts with a smaller amount of money in each. And with varying amounts in each account!

2. GREED, Baby!
One account with $10 million essentially earns more interest than 100 accounts with $100k in each. Most QIs want the lion’s share of that interest, so they will pay their clients a nominal interest they might have earned in their small, separate accounts, and skim off for themselves the majority of the interest they actually earned with the one big account. Everyone goes home ignorant and happy—until something happens.

Let’s say there's only $5 million in the commingled account that’s supposed to have $10 million. Clearly, something was mismanaged. But who’s to say that Joe’s $100k is in the cash that’s safe, but Fred’s $100k is among the missing?

This problem would not exist if each client had a TRULY separate account for their exchange funds.

--The Experts