As 2023 draws to a close, we wanted to share some perspectives on the past year and some thoughts on what the year ahead might hold.
Why Max Exists
Max was founded in response to the Global Financial Crisis. In March 2009, as some of the largest banks in the country were on the verge of failing, it became clear that then-current approaches to cash management were fundamentally flawed. For years, large banks and broker-dealers had relied upon cash sweep programs (known in the industry as brokered deposits) as a means of convincing customers to keep all of their money in one place. The reality is that brokered deposits are fraught with risk, both for banks and depositors, and are also plagued by conflicts of interest. These cash sweep programs now serve primarily as a means for brokerage firms to profit off of clients’ cash, at the expense of the client. We knew there had to be a better way to manage cash, and so we set out to create Max, with a simple focus: your best interest.
The Year in Review
As a leader in cash management for more than 10 years, we’ve devoted ourselves to creating a safer, more liquid, higher-yielding approach to managing cash. It turns out that depositors can be best off simply by keeping their money in their own bank accounts — so long as they select the right banks. By holding money directly in your own name, you retain full transparency and same-day liquidity, with no intermediary custodian and no single point of failure.
The importance of the simplicity of Max became abundantly clear in March 2023, when large banks again began to fail and people worried whether their funds were safe. Max members slept soundly, knowing exactly where their cash was, confident that their money was safe and sound in their own FDIC-insured bank accounts.
Beyond the primary importance of safety and liquidity, the other big story of 2023 was yield. Interest rates rose dramatically, surpassing 5%. Certainly, those who kept their cash in online banks in 2023 earned considerably more than those who kept their money in brick-and-mortar bank or brokerage accounts. But with rates changing so frequently, it’s hard to keep tabs on which banks are offering the best rates at any given point in time. Again Max excelled, helping our members earn substantially more than they would have elsewhere by keeping an eye on rates and helping our members reallocate their cash to whichever banks were offering the highest yield each month. Max’s current top rate of 5.36% is about 1.00% higher than the leading online banks, and more than 11x the national savings average (a paltry 0.46%, according to the FDIC).1
A Culture of Innovation
Our team worked hard in 2023, continuing to innovate and build new features for the benefit of our members.
- We added support for more high-yield savings banks on the Max Common Application, making it easy to open additional accounts and increase your FDIC insurance coverage with just a few clicks.
- We upgraded Max Checking, partnering with a new bank to provide faster funds transfers and superior service.
- We migrated all Max settings onto a single page, making it easier to set custom bank-by-bank limits, so that you remain in full control of all your money.
- We simplified how members set their target checking account balance, and added clarity to how to request funds transfers. You can expect more improvements to this interface in 2024.
- We pioneered a multi-bank savings goal feature, making it easy for you to set and monitor progress towards goals directly from your Performance page.
- We added more integrations, making it easy for your financial advisor to incorporate your Max balances into your financial plan.
In 2024, we’ll accelerate our product development efforts to serve you even more fully. Correspondingly, we’ve been busy investing in our team and technology platform to make Max even better, faster, and simpler.
Member Feedback
We appreciate those who took the time to complete our Max Member Survey. We’re pleased to report that our members gave Max its highest-ever Net Promoter Score, putting Max just ahead of Apple and Google in terms of customer satisfaction. We’re proud of our product and member services teams. Our aim is to delight every customer, and we’ll work hard to incorporate your feedback into our product plans for 2024.
The Year Ahead
Many have been speculating on what might happen with interest rates in the year ahead. We don’t have a crystal ball, but ever since the start of the pandemic, we’ve consistently held the view that fiscal and monetary stimulus would lead to significant inflation, which in turn would necessitate higher interest rates. In February 2021, when interest rates were still set at 0% and the Fed was indicating that inflation was “transitory,” our view was markedly different. Witnessing the 35%2 growth in commercial bank deposits during the pandemic, we concluded that rates would likely end up in the 5.5%-6.0% range. Our rationale was pretty simple: with such a large boost to the money supply, absent a change in the velocity of money, inflation was inevitable. Even to this day, we’ve only experienced 19.2% cumulative inflation since March 20203, suggesting that there’s more inflation in store before we can get back to an equilibrium. Despite the market’s optimism of rate cuts in 2024, we may be in a “higher for longer” environment in 2024, at least until such time as the influx of fiscal and monetary stimulus is fully absorbed into the economy. With much of the remaining inflationary pressures seeming to come from excess consumer demand, it may be that a recession is necessary to ‘reset’ consumer expectations and get prices under control. Time will tell.
Regardless of the rate environment, and no matter your outlook for whether rates are poised to rise further or fall, Max is here to help you make sure you’re earning the highest rates. Over the past 10 years, Max has delivered the highest yields in the market. Our back-testing analysis has demonstrated that Max members have outperformed in all market environments.
We are grateful for the trust that you have placed in us. We’re proud to serve the clients of more than 2,500 wealth management firms across the country, as well as self-directed investors who are looking out for their own best interest.
We wish you and your family good health, happiness, and success in the year ahead.
Sources:
1FDIC National Savings Average as of 11/17/2023.
2St. Louis Fed FRED Total Deposits, All Commercial Banks.
3US Inflation Calculator as of 12/12/2023.