Cash management platform gains appeal among advisers amid rising interest rates and frothy markets

The ever-frothy equity markets coupled with rising interest rates are starting to make cash look a lot more attractive to investors and financial advisers.

It’s a pattern that should play right into the hands of Gary Zimmerman, founder and CEO of MaxMyInterest, a cash-management optimization platform designed to capture the highest-possible FDIC-insured savings rates.

For financial advisers, the MaxMyInterest platform is being promoted as a path toward getting a better handle on the total household assets of clients, and potentially getting more of those assets under management.

As financial advisers scramble to find Federal Deposit Insurance Corp.-backed returns that provide liquidity while also beating the national average yield of 9 basis points, MaxMyInterest is offering yields in the 1.8% range.

That’s the selling point that resonates with investors sitting on lots of cash either for short-term savings or as a longer-term market hedge.

The Max platform is set up to give advisers read-only access to the client cash accounts, with the client’s permission.

Because the cash is being managed outside of the client assets custodied through their financial advisers, it would be difficult for advisers to justify charging a fee on the cash, which is a subject often debated in the financial planning space.

But the appeal for advisers is in being able to monitor their clients’ excess cash holdings and at the same time giving clients a recommendation on boosting returns for money that might be sitting in low-yielding bank accounts.

The Max platform, which claims affiliations with more than 500 advisory firms, make the case for knowing how much cash clients have sitting on the sidelines.

“The platform that we built for advisers is read-only, which means advisers can see those cash balances and incorporate that into the broader financial planning discussions,” said Mr. Zimmerman.

For a lot of advisers, who are familiar with having clients not disclose cash on the sidelines, the idea of being able to see how much cash is sitting on the sidelines helps with the overall planning picture.

“It’s actually very common for clients to have their own cash set aside for something, and a lot of times we’re not even aware of it, which is why Max has been so beneficial,” said David Lawrence, an adviser at Willow Creek Wealth Management, which has been linked to the Max platform for nearly two years.

The MaxMyInterest business model is as straightforward as it gets.

Individuals link their own bank accounts to the Max platform, which has no minimum-investment requirements and charges everyone the same 2 basis points per quarter, regardless of account size.

By applying regulatory laws for FDIC insurance, Mr. Zimmerman said the platform can provide up to $5 million worth of FDIC coverage per couple.

This is accomplished primarily by dividing larger accounts into $250,000 increments and spreading the accounts across multiple banks.

For smaller accounts, the platform simply searches for the highest-yielding participating banks and regularly reallocates to the highest-yielding bank.

Mr. Zimmerman refused to disclose the total number of accounts or assets on the Max platform, but did say account balances range from $20,000 to $6 million.

Mr. Lawrence said, while he doesn’t charge his clients for the amount they have in cash, the benefit of being able to monitor cash balances helps him do his job as a financial planner.

“Being able to see the cash helps with the conversations about how much cash clients really need,” he said. “We’re a full blown financial planning firm so we always try to look at the big picture. Sometimes we will ask a client if they really need $800,000 in cash, when maybe $300,000 would be enough to allow them to sleep at night.”

Helping advisers to better oversee client cash balances was a driving force behind Dynasty Financial Partners’ recent decision to add the Max cash-management option to its platform used by 45 advisory firms and about 150 financial advisers.

“As interest rates have risen cash management become a pain point for some advisers that are in our network around the yield and FDIC insurance,” said Joseph Dursi, director of investments at Dynasty.

“This is a way for advisers to help clients and deliver incremental alpha, because many clients will hold cash in other places,” he added. “Knowing how much cash is there lets the adviser talk about other investment opportunities, and it gives the adviser the ability to bring more assets under their purview.”