A behind-the-scenes look at the FDIC coverage increases
November 9, 2023
Estimated reading time: 2 minutes
Since the start of September, Flourish has doubled the amount of FDIC coverage through our Program Banks, resulting in up to 16x the FDIC insurance limit of a single checking or savings account available to our clients.Ω In this article, we share what prompted the change and what it means for the program.
In the spring, the banking system experienced unprecedented turmoil after the collapse of Silicon Valley Bank, quickly followed by the failure of Signature Bank and First Republic Bank. The instability underscored the importance of programs like Flourish Cash,† which can ensure the safety of funds by providing access to a network of Program Banks. As we’ve described, the ability to diversify deposits across banks allows sweep programs to quickly and efficiently shift funds as needed, resulting in the ability to provide:
- increased FDIC insurance coverage compared to a typical checking account
- continuous access to client funds
- resilience during periods of market turmoil
Historically, most advisors haven't regularly tracked and maintained visibility of their client's held-away cash. However, the current rate environment – in addition to a heightened awareness of FDIC insurance coverage following the bank failures – have caused many advisors to realize that they have an important role to play when it comes to cash. Throughout 2023, advisors have invited over 20,000 clients to Flourish Cash, adding more than $2B to the program, as an increasing number of advisors have made helping clients with cash a core part of their offering.
Because we exclusively work with the clients of RIAs, approximately 15% of the Flourish client base is comprised of higher-balance depositors who need more FDIC insurance than provided by the typical bank account, including high net worth individuals, businesses, and nonprofits. Following the events in the spring, Flourish received requests from numerous advisors to provide clients with even more FDIC insurance coverage, allowing them to better serve some of their most important clients. Our roadmap is directly shaped by feedback we receive from advisors and from clients, and so we set about to meet this need.
Since March 2023, Flourish has made two critical enhancements to the program in response to expanded client needs.
- New banks: Since March, we’ve welcomed nine to the Flourish Cash program. These new banks provide us with increased capacity, flexibility to move funds quickly and efficiently, and ability to deliver even more FDIC coverage.
- Backend program flexibility: Flourish Cash is built around an allocation algorithm that spreads deposits across our underlying Program Banks, balancing daily deposits and withdrawals, individual bank level capacity and rates, FDIC insurance coverage, and more. Over the past few months, we’ve heavily invested in this underlying allocation algorithm to make the system more flexible than ever, moving away from a “tier-based” allocation process to a system that allows us to flexibly allocate any individual client’s deposits across any combination of underlying Program Banks.
The result has been that Flourish has been able to increase FDIC coverage, attract more banks to the program, strengthen our network of banks, and ultimately create a better program for clients. We are proud to now offer up to $4M in FDIC insurance coverage to individual and business accounts and up to $8M for joint accounts. In addition to a highly competitive rate of 5.00% APY§ in the top tier as described in our rate tier summary, the Flourish Cash program has reinforced its commitment to providing solutions for financial advisors to support their clients’ financial futures.
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 700 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.