Rising interest rates have reminded investors of the attractions of holding cash in certain circumstances. Our US correspondent talks to a variety of wealth managers and specialist firms about cash and what people are doing.
Thanks to rising interest rates, cash is no longer an afterthought for financial advisors.
“No one was talking about cash a year ago; now clients are talking about it all the time,” said Michael Durso, chief executive officer at Shorehaven Wealth Partners.
“As yields keep tacking up, you have to do something with that money.”
“Cash is now its own asset class,” according to Pat Nerney, vice president of investment solutions for Dynasty Financial Partners.
“We’ve added over 150 advisory firms to our platform this year and have doubled our assets under custody year to date,” said Flourish CEO Max Lane.
The company, which describes itself as a “fintech platform,” and also has a cryptocurrency business, launched in 2018 and was bought by MassMutual in 2021. It now works with over 600 RIAs according to Lane and has approximately $3.4 billion in assets under custody.
Compared with interest rates paid by traditional bank savings accounts and money market sweeps from custodians, high yields are the primary attraction of accounts from Flourish, MaxMyInterest and StoneCastle.
But interest from high net worth clients was also spurred by the crisis brought on by Silicon Valley Bank’s uninsured deposits this spring, said Chuck Cooper, managing partner at StrongBox Wealth.
“SVB was a real catalyst because it shined a light on what can happen if you have too much money in uninsured cash,” Cooper explained.
Flourish insures deposits up to $10 million for a two-person household; MaxMyInterest insures an account from a couple for up to $8 million and StoneCastle insures accounts up to $25 million.
Flourish does business with over two dozen banks and makes money
on the spread between the gross yield and what it pays out to
clients. MaxMyInterest describes itself as “a service that
proposes optimal allocations of cash among your clients’ own bank
accounts and then sends funds transfer instructions to their
banks on their behalf.” Clients pay a fee of 0.04 per cent per
quarter; advisors aren’t charged.