In times of economic and financial uncertainty, investors often lean on cash for some stability. The stock market may take a chunk out of their investments' value, but at least their checking account won't decline. Of course, their bank account won't go up much, either, with near-zero interest rates.
The trouble with cash is it's both an investor's first recourse during economic downturns but also the first trigger the Federal Reserve pulls when it needs to stimulate the economy. When your clients crave cash most is often when cash pays the least.
Enter companies like MaxMyInterest, a cash management solution for investors and advisors that works behind the scenes to optimize the interest rate your clients earn on their cash.
We spoke with Gary Zimmerman, CEO and founder of MaxMyInterest, to learn about how the company is helping financial advisors help their clients earn more interest on their cash balances. Read edited excerpts from the interview below.
How does MaxMyInterest work?
MaxMyInterest ("Max") helps individual investors earn more on their cash in the bank while benefiting from increased Federal Deposit Insurance Corp. insurance. Max can be used to help people earn more on a set amount of cash, or can be connected to a depositor's existing checking or brokerage account where Max's automatic sweep feature can help maintain a constant checking account balance each month.
Max monitors interest rate changes daily and helps money flow automatically to the bank or banks that offer the best rates while keeping balances below the FDIC insurance limit at each bank. Several banks on the Max platform offer preferential rates exclusively for Max customers.
Other features include account aggregation, automated maximization of yield and FDIC insurance coverage, automated monthly cash sweep, one-click intelligent funds transfers and consolidated tax reporting. In addition, we also offer a solution for nonprofits, foundations, limited liability companies, residential corporations, trusts and business accounts.
What impact does a service like Max have on a financial advisor's business?
It's an easy return on investment calculation, since Max is entirely free to advisors. Many advisors tell us the benefits of Max are threefold: Clients earn dramatically more on their cash without sacrificing safety or liquidity; advisors gain visibility into held-away assets, which help grow assets under management; and lastly, advisors earn goodwill from their clients by delivering a highly differentiated solution for cash that's entirely focused on what's in the client's best interest.
Our product also integrates with many of the leading reporting platforms used by advisors, making it easy to report on Max balances and provide more holistic advice to clients.
There is no cost to the advisor, but Max costs clients 0.02% per quarter. Does it make sense to pay a fee on your cash?
The Max service costs just 0.02% per quarter. By contrast, most money market funds charge fees of at least 0.16% while delivering less yield. Max also offers preferred rates and terms available exclusively to Max customers. For most customers, the preferential rates alone more than offset the cost of using Max. It's easy for advisors to explain Max to their clients since clients using Max hold funds directly in their own bank accounts where they are FDIC-insured.
What sets you apart from your competitors?
We consider our biggest competitors to be lack of awareness, inertia and apathy. Before learning about Max, most advisors and clients tell us they weren't aware that such a high yield could be earned on cash, and they tell us that Max is a no-brainer.
Max is highly differentiated since it is not a fund company or a broker-dealer and does not cross-sell other products or sell client data. Max is also not an intermediary and never takes custody of funds. Instead, Max simply acts as a communications platform, telling your banks when it's time to move funds between your own accounts so that you can continue to earn the highest yield, even as rates change.
By contrast, other marketed cash options are often just investment funds or "brokered deposits," which are fraught with conflicts of interest. With brokered deposits, it's harder for clients to ensure their funds are fully insured or access their funds the same day. With these other cash solutions, clients must read the fine print to ensure that their funds do not inadvertently end up over the FDIC limit. And none of these solutions come close to being able to offer the high yields that Max can deliver.
What installation is required? Do you provide technical support to advisors and clients?
Max works in any web browser, so there's nothing to install, and can be accessed from any device, whether it's a laptop, tablet or mobile phone. Max delivers white-glove customer support to advisors by phone and email and offers mainly online support to clients, including personalized email support.
What is the most important trend influencing your business right now?
With equity and fixed income markets experiencing significant volatility, we're seeing a lot of interest from advisors and clients seeking safety, liquidity and a competitive yield on cash. The recent rate reductions by the Federal Reserve have also highlighted the fact that online banks can offer higher yields than other options, such as brokered deposits which are typically tied to the fed funds rate.
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