For Advisors, New Technology Brings More Cash Into View

Max brings more cash into view.

Max brings more cash into view.

After eight years of near-zero yields, clients are eager to earn higher returns. Financial advisors want to deliver greater returns without taking on more risk. Advisors are using a novel technology, called Max, to achieve both of these goals, helping clients earn more while growing assets under management.

Which asset class can generate an incremental 0.90% of return, without taking on risk or sacrificing liquidity? The answer lies in a forgotten corner of client portfolios: cash. Most investors are earning little to no interest on their cash held in their bank or brokerage accounts. Since yields have been so low for so long, most financial advisors don’t spend much time thinking about cash.  Instead they focus on higher-return asset classes like stocks, fixed income, or alternative investments.

But how much clients earn on cash can make a significant difference to the overall performance of their portfolios. Here’s the math: the average high-net-worth investor holds 23.7% of his or her net worth in cash, according to the 2015 CapGemini/RBC Wealth Report. Earning an extra 0.90% on that cash means the portfolio as a whole will earn 0.21% more. Because it’s cash in the bank — FDIC-insured — this incremental return is risk-free.

Max is an intelligent cash management service that automatically allocates clients’ cash between their existing checking or brokerage account and a portfolio of higher-yielding FDIC-insured savings accounts at the nation’s leading online banks. Most Max clients are earning more than 1.00%. By contrast, many bank or brokerage accounts pay only 0.01% or 0.02%.

How does Max help clients earn more on cash? By capitalizing on the efficiency of online banks. These institutions don’t have branches, and their lower cost structure allows them to pass along more yield to clients who deposit cash with them.

For financial advisors, offering Max to clients has the effect of bringing held-away cash into view. Over time, clients migrate cash towards Max, where they can grant their financial advisor read-only access to their balances through the Max Advisor Dashboard (a free service for financial advisors.) With the ability to see the cash that clients are holding, advisors can spark a new conversation about portfolio allocation, and often nudge some of this cash into higher-beta asset classes.

Max is not a bank, nor does it provide financial advice.  Max is a technology-driven tool that automatically optimizes a client’s cash balances among accounts at online banks held in the client’s own name. Clients retain direct access to their funds, maintain their relationship with their primary checking-account bank, and can continue to use all bank services like notaries and tellers.

Learn more about the Max Advisor Dashboard and how to invite clients to Max by visiting MaxForAdvisors.com. Or contact advisors@maxmyinterest.com with questions.

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