Cash management accounts are better for large balances than FDIC accounts at banks for the most part. Since the brokerage abstracts where the balances are actually stored they split your large balances over a number of FDIC accounts and you get up to $1.5M in FDIC cover at some places instead of $250K. If you’re thinking of Robinhood they just did a bad job of execution, and shockingly thought SIPC alone would do, and that’s what angered the SIPC head.

You misunderstand, the cash in these accounts are kept in an FDIC sweep, so it's FDIC insured.

It's often true that the funds aren't covered until they're in the custody of the partner bank. This is the case for some of the neobank cash accounts. Not sure about Schwab tho.

These accounts are FDIC insured. They're real bank accounts.

The FDIC accounts that Fidelity advertises are with real banks[1] which are not Fidelity per se. They're just tightly integrated.

This all seems very like "why don't you just use the cloud instead of an old fashioned server?"

[1]https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBa...