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With the Federal Reserve’s benchmark lending rate hovering around 5% to 5.25% and the possibility existing that figure will be higher by the end of this year, it’s not surprising that some clients want to discuss options for stashing cash.
It’s not just talk. Investors are walking the walk when it comes to realizing elevated yields on cash and data confirm as much. Just look at the massive amount of money that’s flowed into money market funds since the start of the year.
“Total money market fund assets increased by $36.63 billion to $5.46 trillion for the week ended Wednesday, June 7,” according to the Investment Company Institute. “Among taxable money market funds, government funds2 increased by $18.01 billion and prime funds increased by $15.78 billion. Tax-exempt money market funds increased by $2.84 billion.”
As advisors know, cash isn’t a glamorous asset class. It never has been nor will it ever be, but its relevance is high today, particularly among high-net-worth clients.
Proof Is in Cash Pudding
Following the regional banking calamity that rocked markets earlier this year, many millionaires want the FDIC to raise protection limits on bank accounts. That currently resides at $250,000 per depositor, per FDIC-eligible bank, per account category.
“Most millionaires — 63% — support Congress raising FDIC coverage limits following the recent failures of Silicon Valley Bank and Signature Bank earlier this year,” according to a new CNBC survey.
Alright, so advisors know that clients would like more protection on their cash. They also know that while the Federal Reserve has wantonly raised interest rates since the start of 2022, many banks haven’t followed suit. Interest rates on basic checking and savings accounts remain scant. Combine those factors and advisors need to have options for clients.
Enter StoneCastle Cash Management (“StoneCastle”). StoneCastle’s FICA for Advisors offering is ideal for advisors servicing high- and ultra-high-net-worth clients that want a modest uptick in yield coupled with efficient protection. In this case, how is “efficient protection” defined? Consider a hypothetical example in which a client has $20 million cash. To get FDIC protection on that sum, it would require 80 accounts. However, StoneCastle’s FICA for Advisors provides up to $25 million in cash protection through a single account.
That level of efficiency is sure to delight advisors because it reduces record keeping and clients who don’t want to endure the leg work of opening dozens of new bank accounts on their own.
StoneCastle Meaningful Today
StoneCastle Cash Management is pertinent for registered investment advisors today on multiple fronts. For starters, today’s clients, particularly through with substantial assets, are more sophisticated than ever before. They want solutions beyond prosaic ideas such as opening more accounts or adding beneficiaries to gain more FDIC protection.
Second, StoneCastle is relevant here and now because the FDIC isn’t likely to raise its insurance levels despite the aforementioned banking crisis. The last time a raise happened was during the global financial crisis.
Point is those increases are rarities and advisors can’t wait for the government to provide solutions for clients’ cash stashing needs.