Business accounts create new opportunities for advisors to support clients


Last updated December 7, 2023

Estimated reading time: 5 minutes

key-takeaways@2x

 

  • Small businesses and nonprofits are underserved when it comes to options for managing their cash reserves – creating an opportunity for advisors
  • Our clients have opened thousands of Flourish Cash business accounts, from doctors and accountants to foundations and homeowners associations
  • 36% of Flourish Cash business accounts hold more than $250,000 in cash, demonstrating the need for increased FDIC insurance in this client demographic
  • By focusing on helping clients who manage businesses and nonprofits, advisors can
    • Add value for small business owners, where planning needs around cash often span both personal and business reserves
    • Help clients with non-profit organizations that are close to their hearts
    • Gain audiences with key executives at businesses and nonprofits managed by their clients, expanding their prospecting pool
    • Advisors who manage retirement plans can deepen relationships with the companies they serve beyond quarterly investment committee meetings

Taking care of a client’s whole financial life is central to the work of a fiduciary advisor, a task that becomes even more important – and challenging – when the client owns a small business or leads a non-profit organization. Accounts designated specifically for business cash reserves can be essential for entrepreneurs and small business owners, but their needs often differ from that of an individual client in distinct ways. And to make things more challenging, the options available to business owners are limited and are often characterized by dramatically lower rates than retail options, cumbersome account opening processes, and frequent restrictions on liquidity.

Advisors who support this growing demographic have the opportunity to build a deeper, stickier relationship with their business-owning clients and expand the potential of their own business in turn. 

Financial needs of small businesses

According to the U.S. Chamber of Commerce, a record-breaking 5.4 million new business applications were filed in 2021.1 Typically defined as a business with less than 500 employees, small businesses make up 99.9% of companies in the U.S.2 “Small businesses play an important role in our country and in the fabric of our society,” said Flourish CEO Max Lane. “They are more likely to be tied to their community and aware of its needs. However, when it comes to financial services, they are often underserved. Small businesses are often more complicated for banks to service than individuals, but don't hold the significant balances of major corporations to warrant an expanded relationship with the bank, creating a gap.”

The financial needs of a small business – from banking and financing to cash flow and tax management – can be vastly different from the financial needs of individuals. Small businesses and nonprofits typically lack the in-house financial expertise that is often central to the successful operation of large corporations. Their owners can struggle to find banking solutions tailored to their specific needs, often navigating this unfamiliar territory on their own. 

Effectively managing cash reserves can have a major impact on an organization, creating an opportunity for financial advisors to serve this growing demographic. With cash management solutions becoming an integral part of the toolkit of advisors today, advisors have the opportunity to address the financial needs not only for their clients as individuals, but also to extend additional support to clients who own a business or lead a nonprofit. Douglas Boneparth, a financial advisor and President of Bone Fide Wealth, works primarily with millennial clients, a group that represents twice as many entrepreneurs and small businesses owners as the previous generation.3 “It’s hard to view clients that own businesses in a silo,” said Boneparth. “The smaller the business, the more that business capital is often viewed as personal capital.”

Business accounts data

Because of the degree of interconnectedness between personal and business finances, advisors who are not serving the financial needs of a small business, in the end, may not be serving the financial needs of their clients.

Benefits of cash management

Implementing a cash-management solution for business cash reserves has the potential to yield an array of benefits for owners. “There’s a tremendous opportunity for services like Flourish Cash to help small businesses with their reserve cash, adding more protection and helping them earn a better rate,” said Lane. "We frequently hear from small business owners that the rates they earn on their business cash is a small fraction of the rates that they are able to earn on personal cash. While the rate for typical business accounts often can be below 3%, Flourish is proud to pay the same great rate to business owners as we do to retail customers, helping clients of all types achieve their goals."

Flourish Cash is used by thousands of businesses and nonprofits, from doctors and accountants to foundations and home-owners associations. A Flourish Cash business account has the potential to help owners:

  • Earn more with a competitive interest rate currently up to 5.00% APY§
    • This APY applies to the first $1,000,000 for a business account. Any additional cash earns 4.50% APY, as described in the rate tier summary. Tiered rates are subject to change.
  • Protect their business cash with 16x the FDIC coverage – up to $4M – through our Program BanksΩ 
  • Maintain access to funds with daily liquidity| and unlimited transfers
  • Avoid the cost of standard business accounts with no account fees or minimums 
  • Easily get started with a completely online account opening experience

A cash-management account can support the financial needs of businesses of all types and sizes, but could be most beneficial for businesses that align with certain use cases – in addition to the use cases we explored for personal account owners in The Cash Opportunity. Business accounts could be useful to hold: 

  • General reserve cash for small businesses
  • Endowments of nonprofits
  • Annual profit sharing contributions of medical practices, legal firms, financial firms, and more to earn interest on the funds before distributing 
  • Contributions to HOAs held for repairs, development, etc.
  • Quarterly tax payments
  • Short-term liabilities
  • Funds intended for business expansion
  • And much more

Additionally, helping small businesses and nonprofits improve their cash management can potentially provide a substantial source of additional income, as outlined in the next section. This benefit can help business owners increase the financial security of their business and, by extension, themselves – and with extra income and a stronger sense of security comes increased peace of mind.

Flourish Cash business accounts by the numbers

Business accounts comprise more than 12% of Flourish Cash assets under custody, which include LLCs, partnerships, corporations, and non-profit organizations. Businesses with a self-reported annual revenue under $10M hold an average of $172,560 in their Flourish Cash accounts, and those with over $10M hold an average of $471,517 in their accounts. At our current top rate of 5.00% APY,§ the business with under $10M in revenue would earn $8,628 in annual interest and the business or nonprofit with over $10M in revenue would earn $23,575 in annual interest.|| “Right now, there’s really no excuse not to get a higher yield. If you’re getting 1-2% on your cash, you’re losing,” said Boneparth.

More than 36% of Flourish Cash business accounts hold more than $250,000 in cash as of October 2023|| – the FDIC insurance limit for a typical checking or savings account. While the opportunity to earn a competitive rate has clear financial benefits, recent turmoil in the banking industry has brought FDIC concerns to the forefront, not least for business owners. “As our data shows, business owners are far more likely to need elevated FDIC insurance. Banking solely at one bank and only getting $250,000 in FDIC coverage often results in having a part of the balance unprotected,” said Lane. “With FDIC insurance coverage through our Program Banks up to $4M,Ω which is 16x the limit of a single standard checking or savings accounts, Flourish is a great way to insure a larger portion of the balance.”

How advisors benefit

Based on conversations with hundreds of advisors, we’ve commonly heard three key benefits to focusing on businesses and nonprofits:

  1. Deepen relationships with clients
    Advisors who provide financial advice to individuals who manage a small business or nonprofit aren’t necessarily involved in the financial and tax planning for that business. However, that doesn’t mean that the business’ finances are out of their realm of influence. Advisors should embrace the chance to help small businesses and nonprofits, even if they don’t have a direct relationship with the business entity itself, as a powerful opportunity to improve the relationship.

  2. Help the business, help the client
    Rather than viewing the small business or nonprofit as a distinct entity, advisors would be well served to see it as an extension of the client. “If you can help improve the business in some small way, it can only benefit the advisor who, of course, wants a deeper, stickier, more meaningful relationship with their client,” said Lane. Even if the advisor isn’t managing the wealth of that business directly, providing access to a business account serves as another touchpoint for the relationship and can have positive repercussions that deepen and improve the relationship.

  3. A powerful prospecting engine
    Offering business accounts can be a differentiator for firms and a potential growth driver: 
    1. Many advisors have found success with offering Flourish Cash invitations to prospective clients. Flourish Cash provides advisors with the ability to immediately add value – long before advisory agreements are signed and assets transferred over – while prospective clients will be reminded of your brand every time they log in to Flourish.
    2. By helping out businesses and nonprofits managed by current clients, for example, advisors may be able to secure audiences with key executives and board members that may turn into private wealth leads. 
    3. For advisors that manage retirement plans, offering Flourish Cash Business accounts can be a powerful way to increase mindshare with CFOs outside of quarterly investment committee meetings – while the ability to offer Flourish Cash personally can be a powerful way to start the private wealth conversation with key executives at the businesses you serve.

 

About Flourish

Flourish builds technology that empowers financial advisors, improves financial lives and retirement outcomes, and delivers new and innovative investment options to advisors. Today, the Flourish platform is used by more than 650 wealth management firms representing more than $1.5 trillion in assets under management. Flourish is wholly-owned by MassMutual. For more information, visit www.flourish.com.

 

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Flourish is an online platform through which investors can access financial services and products. Flourish’s offerings are provided by different entities and are subject to different terms, investor protections, and risks. Flourish Cash is offered by Flourish Financial LLC, a registered broker-dealer and FINRA member. Flourish Financial LLC is not a bank. Check the background of Flourish Financial LLC and its personnel on FINRA's BrokerCheck. Flourish Crypto is offered by Paxos Trust Company, LLC, a New York limited purpose trust company regulated by the New York Department of Financial Services that provides custody and execution services for the Flourish Crypto accounts, and Flourish Digital Assets LLC, registered in New York as a commodity broker-dealer and provides website and other services and support for Flourish Crypto accounts. Flourish Financial LLC and Flourish Digital Assets LLC are affiliates, but are not affiliates of Paxos. Please review the Legal section of our website, and the disclosures provided with each Flourish service or product, for further information. If you were introduced or invited to Flourish by an investment advisor or other third party, please be aware that, unless otherwise disclosed to you, they are not affiliated with any Flourish entity. The role of the investment advisor or other firm that invited you to Flourish may vary between different Flourish services and products, as further described in your terms of service. © 2023 Flourish. All rights reserved.

† A Flourish Cash account is a brokerage account offered by Flourish Financial LLC, a registered broker-dealer and FINRA member. Flourish Financial LLC is not a bank. Check the background of Flourish Financial LLC and its personnel on FINRA's BrokerCheck. The cash balance in a Flourish Cash account will be swept from the brokerage account to deposit account(s) at one or more third-party Program Banks that have agreed to accept deposits from customers of Flourish Financial LLC. The accounts at Program Banks will pay a variable rate of interest.

§ Flourish Cash currently has a tiered interest rate structure, as set forth in the rate tier summary. We deposit your cash with one or more of the Program Banks, subject to any Program Bank(s) you have excluded. You will earn the highest rate offered by Flourish up to the maximum deposit amount for each tier. Each annual percentage yield (APY) displayed here is effective as of 12/07/2023 and may change at any time. The Flourish Cash interest rate(s) could be lower than the rate that could be earned by opening a deposit account directly with a Program Bank.

Ω The cash balance in a Flourish Cash account that is swept to one or more Program Banks is eligible for FDIC insurance, subject to FDIC rules, including aggregate insurance coverage limits. FDIC insurance will not be provided until funds arrive at the Program Bank. There are currently at least 16 Program Banks available to accept deposits for business Flourish Cash accounts and personal Flourish Cash accounts, and we are not obligated to allocate customer funds across more than this number of Program Banks if there is a greater number of banks in the program. Customers are generally eligible for FDIC insurance coverage of $250,000 per customer, per Program Bank, for each account ownership category. Thus, business customers are eligible for up to $4,000,000 of FDIC insurance and personal customers are eligible for (i) up to $4,000,000 of FDIC insurance for an individual account or revocable living trust account and (ii) up to $8,000,000 of FDIC insurance for a joint account with two owners or joint revocable living trust(s). The total FDIC coverage for a two-person household is calculated assuming that each household member has an individual account and that both household members share a joint account. If the number of Program Banks decreases for a customer (for instance, because a customer chooses to exclude Program Banks from receiving their deposits), the amount of FDIC insurance through Flourish Cash could be lower. Typically, all of a customer’s deposits at a Program Bank in the same ownership category (including deposits held outside Flourish Cash or held through multiple Flourish Cash accounts with the same ownership category) count toward the FDIC insurance limit for deposits at that Program Bank. Customers are responsible for monitoring whether they maintain deposits at a Program Bank outside of Flourish Cash and should consider choosing to exclude that Program Bank from receiving their deposits to avoid exceeding FDIC insurance limits. Although Flourish Cash is offered through a brokerage account and cash held in brokerage accounts often has the benefit of SIPC protection, until such time as we offer securities products, customers likely will not have the benefit of SIPC protection. SIPC protection is not available for cash held at the Program Banks. Our current Program Banks can be found here. For additional information regarding FDIC coverage, visit https://fdic.gov/.

| For withdrawal requests submitted by the applicable deadline, the funds will generally be transferred to the requested external account by the next business day, except for withdrawal requests submitted on the weekend or on a holiday, which should be completed by the second following business day, but in some circumstances, withdrawals may take longer to complete, as further described in your account agreement.

|| Source: Flourish Financial LLC; data as of 10/03/2023, average balances calculated with respect to each business’ non-zero Flourish account balances across all accounts. 

1 U.S. Chamber of Commerce. “The State of Small Business Now.” April 10, 2023. 

2 Federal Reserve. “Access to Financial Services Matters to Small Businesses.” November 4, 2019.

3 World Finance. “The rise of the Millennial entrepreneur.”