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. 

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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.

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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. 

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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 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.

 

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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.

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/.

† 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.