Why cash still matters to clients

This is the first article in a two-part series. Read why cash still matters to advisors. 

The steady stream of rate increases and bank instability in 2023 made cash a hot topic. According to one advisor we work with, the media coverage of how investors can maximize their returns with high-yield cash accounts meant she no longer had to initiate a conversation about cash with clients herself – they were bringing the subject up on their own. Clients started recognizing the truth in their advisors’ words: cash matters.

As rates have remained steady and the banking industry is no longer a leading news story, cash might not be top of mind for clients, meaning advisors may need to proactively bring up the topic with clients. Here are a few reasons why it’s worth spending a few minutes to set your clients up with Flourish Cash:^†

1. Rates matter always

The Wall Street Journal reported that investors missed out on more than $291 billion in interest between 2019 and 2023 by leaving their cash in low-paying checking or savings accounts.¹ When interest rates started rising in 2023, the potential earnings were compelling enough that some clients tuned in to the opportunity of competitive rate accounts, earning $235 billion more in interest that year.² But not everyone has made the switch and low rates at the largest U.S. banks have persisted despite rising rates overall, creating a unique opportunity for advisors.

Whether high-yield cash accounts offer a rate comparable to Flourish’s current rate of 5.00% APY^§ or something lower in the future, it will almost certainly be more than what a client can earn from their standard bank savings account. While it might seem inconceivable that, in 2024, every single investor hasn't found their way to a high-yield solution, the reality is that the vast majority of deposits into Flourish come from money center banks that pay virtually nothing on deposits. The ability of competitive yield accounts like Flourish Cash to pay exponentially more than the national savings account average – currently 10x more^# – leads to higher returns for clients.

How big is the opportunity for your clients? At Flourish, clients with a self-reported net worth of $1-2M have an average household balance of $194,716,^|| so the difference in earnings can be considerable. In fact, the amount of interest earned on the average Flourish account balance could pay for a vacation or offset more than half of the typical advisory firms’ fees.

2. Creating long-term behavior

While it often can take several reminders to spur clients to move their funds from a low-interest bearing account to a high-yield cash account, the efforts against client inertia pay off, especially in the long term. At Flourish, we’ve seen that clients tend to stick around once they open an account. Our 2024 client retention rate is over 99%, implying an average customer tenure of approximately 10 years! With clients able to earn significantly higher returns with a competitive yield account, the year-over-year benefit can truly compound.

Flourish gives advisors the ability to view both current Flourish Cash balances and balances of instantly-linked bank accounts.^∆ With this information, it can be beneficial to periodically review client lists to discover if even existing clients have significant amounts of cash sitting on the sidelines. If they do, this can be a prime opportunity to help them easily start earning considerably more on their cash reserves.

3. The need for FDIC insurance

Regardless of the rate, clients need a cash solution that gives them confidence that their money will be safe and available when they need it. The banking turmoil that unraveled in spring 2023 spurred a flurry of activity as advisors and their clients sought to ensure that their funds were secure. They turned to programs that were able to offer FDIC coverage well beyond the $250,000 offered on a typical single checking or savings account. In response to this increasingly important requirement, Flourish expanded the amount of FDIC coverage offered through our Program Banks to the current levels of $5M for individual and business accounts, $10M for joint accounts, and up to $20M for two-person households.^Ω

Even though FDIC isn’t making headlines today, it’s imperative for advisors to know where their clients are holding cash and to ensure that every dollar is covered. When the next crisis rolls around, your foresight could make all the difference.