How to Make Cash-Heavy Clients’ Portfolios Work Harder

After managing multiple savings accounts of his own at various financial institutions, Gary Zimmerman realized there was an easier way to strategically invest the cash portion of his portfolio by utilizing, of course, technology.

The CEO of MaxMyInterest said he added an extra $40,000 in incremental interest income to his portfolio just by managing savings accounts manually.

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“Right now, people are insured [through the Federal Deposit Insurance Corp.] up to $250,000 per depositor per account type per bank charter,” Zimmerman explained. “If you open multiple accounts at multiple banks, you can get much more FDIC insurance.”

That’s the principle behind MaxMyInterest. Max links investors’ savings and checking accounts and allocates up to $250,000 above a target set by the investor to the highest-yielding savings account. The next $250,000 are deposited in the account with the next highest yield, and so on.

Max will automatically reallocate the balances in accounts as banks adjust their interest rates so that the maximum insured portion is invested in the highest-yielding account. It also generates a consolidated 1099 statement investors can share with their accountant.

“Clients tend to hold a lot more cash than most advisors think,” he told ThinkAdvisor. He pointed to research from Capgemini that shows the average high-net-worth household in the U.S. is holding close to one-quarter of its assets in cash.

“Modern portfolio theory tells you that you should hold 3% in cash or 5% in cash,” he said. “That’s where theory differs from reality. The reality is that clients like to hold more cash for a whole host of reasons.”

For example, a large cash allocation can make clients feel more secure or that they have more control over their lives, he said.

Zimmerman was an investment banker for 14 years. He founded MaxMyInterest a little more than four years ago after realizing the software he built for his own use could be valuable to individual investors.

“If I could take this strategy and make it secure and private and scalable, many more people could benefit from the same approach to managing cash,” Zimmerman said.

Max was initially created to serve individual investors, Zimmerman said, and is “decidedly high-net-worth.” Most customers link between $50,000 and $5 million, but there’s no minimum to link an account.

Although the software was initially created for individuals, Zimmerman said it received a “very warm reaction from the RIA community.” Advisors can use the tool to see cash held across their clients’ accounts.

“If the advisors can see all of the clients’ cash, not just the portion that’s in the portfolio, then they can provide better, more holistic advice,” he said.

Max is free for advisors to use and can be branded for their firm. It has an integration with Laser App to streamline the onboarding process, and Zimmerman said he’s working on “integrations with portfolio accounting systems so that all of this data can be delivered directly into the advisor’s existing technology.” The firm has built APIs to integrate Max with advisors’ CRM systems.

Investors are charged 0.02% per quarter on the cash being optimized. Max doesn’t take referral or listing fees from the banks that can be linked on the platform. “We designed the system to be a pure fiduciary system,” Zimmerman said. “There are a bunch of bank interest rate comparison sites out there, and they’re all just advertising platforms.”

Max can be linked with accounts at major banks such as Bank of America, JPMorgan Chase, Citibank, Wells Fargo, Fidelity, Charles Schwab Bank, First Republic Bank, TD Bank, PNC Bank, Capital One, SunTrust, US Bank and USAA, as well as online banks like Barclays, Ally Bank, American Express, GS Bank and UFB Direct.

--- Read 44% of Americans Don’t Know When the Fed Last Raised Rates: WalletHub on ThinkAdvisor. 

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