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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The Gardening-Leave Guide to Organizing Your Finances

Hit the road, Jack: Gardening leave is an ideal time to reevaluate your finances.

Hit the road, Jack: Gardening leave is an ideal time to reevaluate your finances.

Congratulations! You’re leaving your firm and embarking on a short paid vacation before starting a new role. During this gardening-leave period, you’re not permitted to work for your new company, and technically anything you produce still belongs to the firm you’re leaving. That means this is a perfect time to travel, read, and tackle the personal projects that you never have time to handle. Take this opportunity to make sure your finances are in order. Ideally your new job will mean you won’t have time to do this again for a while.

Here are some ways to get the most out of your gardening leave when it comes to financial organization.

 

– Documentation

Check that your will and the beneficiary designations on all your accounts are up-to-date, especially if you’ve had them for some time. Make sure you have a centralized list of all your accounts and benefits along with contact information. If someone had to call those institutions on your behalf, would they know how to reach the right person? It’s useful to keep a hard-copy “doomsday file” in a safe place for emergencies.

 

– Fee Review

What are your financial institutions charging you to manage your money?  Now is the time to look at the fees that you are paying for mutual funds, hedge funds, asset management, and credit cards, and banking. Don’t think you’re paying a fee? Consider what amount of money you have to keep with an institution to get “fee-free” services. Could that money be better invested elsewhere?

A new service called FeeX scans your retirement accounts, shows you exactly what you’re paying, and suggests similar products that cost less. Over time, money not spent on fees can compound into an important component of your portfolio.

 

-Legacy

Take a look at your charitable giving as a percentage of your income and consider whether it’s at the level you want. Also think about how you’re structuring your donations. Depending on your pace of giving, you may want to evaluate setting up a family foundation or a donor-advised fund, like Fidelity Charitable. This may allow you to maximize the tax benefits of your gifts.

Now is also a good time to think about your charitable involvement. Ask yourself whether you want to join a nonprofit board, or continue with one you’re already on. If you’re anticipating a lack of time with your new job, this may be the time to step back from volunteering or find a less time-intensive way to help.

 

-Asset Allocation

Review how you are allocating your assets among stocks, bonds, cash, real estate, and other investments. Look also at retirement and educational savings. Talk to your financial advisor about areas where you should rebalance.

Few investors think hard about their cash. This is money on the sidelines that could be working harder for you. Take a look at the yield your cash is earning in the bank. If you prefer to keep this portion of your portfolio liquid, consider online savings accounts, which pay as much as 10 times the national average in interest.

A MaxMyInterest membership can help you earn dramatically more: our members now earn about 90 basis points – 0.90% – more on their cash than the average of 0.09%. For a member with $1 million in the Max system, that comes to an additional $9000 or so each year in extra interest. Gardening leave is the perfect time to make sure you’re not leaving money on the table before you start your new job.

 

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