11 Tips for Helping Clients Worried About Their Cash: Advisors’ Advice

2. Maximize FDIC Coverage

There's a client with more than $250,000 cash in a single savings account who asked me how much of his cash would be protected if the bank failed. Even though the Treasury with the support of Fed and FDIC can guarantee all of a bank’s deposit by declaring a “systematic risk exception” for a failing bank, the insurance coverage has not been formally increased, and there is no guarantee that next time depositors will be made whole.

The FDIC’s standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. So, if a depositor has more than $250,000 cash in one account, the safest thing to do may be to either diversify the cash to multiple FDIC insured banks or to different account ownership categories in the same bank in order to maximize the protection coverage.

— Jiayi (Kristy) Xu, founder, Global Wealth Harbor

3. Question the Cash Cache

Many people are asking, “Are my bank deposits safe?” and in almost all cases the answer is either an unqualified “yes” or easily resolved by moving money so that your deposits are fully insured by the FDIC.

If their cash exceeds FDIC insurance limits, this prompts two questions: 1. Where will you move excess deposits so that they are fully insured? 2.Why do you have so much uninvested cash, and is it earmarked for a specific purpose, for example, like buying a home, large purchase, etc.?

— Jeremy Bohne, financial advisor and founder, Paceline Wealth Management

4. Give Several Choices

I advise my clients to use high-yield savings accounts — search on BankRate.com for best current offers — [like] short-term CDs, so they can pull out money if needed, as well as government money market funds. These are money market funds that invest in very liquid investments, namely, cash and government securities. That makes them safer than alternative money market funds.

— Alexis Hongamen, founder and president, Total Financial Planning

5. Watch Their Bank's Stock

Most banks are fine — they practiced sound management and have a diversified base of clients — something that was ignored at SVB and Signature.

If the concern is still there, look up the stock price of the bank. If the stock price stayed within 5% of the range around mid-March, I would not worry. Investment firms are double-checking their portfolios, especially banking stocks.

But if there was a major stock price drop over 15% around mid-March and it has not recovered, then consider moving your funds to a larger bank that is subject to more stringent rules or a credit union, depending on your banking needs.

And consider breaking up your accounts at different banks or credit unions to no more than the insured amount of $250,000 each.

— Paul K. Doak, financial advisor and planner, I.D. Financial

6. Review & Consider Shifting Funds in Bank Accounts

In the wake of SVB, clients are worrying about the safety of their savings in banks.

Most clients are OK if their accounts are structured to maximize FDIC insurance. For example, a husband and wife can each have up to $250,000 insured in individually titled accounts. They can also each have an additional $250,000 insured in a joint account —$500,000 total for the joint account. As long as a couple has less than $1,000,000, they can spread out their funds at one bank and have it all FDIC-insured.

If a couple has more than $1,000,000 in cash, it may be wise to spread the funds across more institutions.

— David A. Fowler, president and financial coach, founder, High Mountain Financial Coaching

7. Revisit Financial Plans

For clients who have had concerns around the current landscape of the banking system and are looking for alternative options for storing cash, we've been revisiting their financial plan to help direct us toward the right strategies.

One option that has been recommended is a money market account or a treasury ladder strategy. These options still offer higher levels of liquidity with differing protections than FDIC insurance in the use of SIPC insurance (Securities Investor Protection Corporation) and potential for higher yields than traditional savings accounts at banks.

— Michael R. Acosta, owner, financial planner, Genesis Wealth Planning

8. Recommend Treasurys

Almega Wealth Management runs a complementary cash management program for individual clients. Businesses who utilize our cash management program are charged a low 0.10% advisory fee on the average balance. The program rolls 2-, 4-, 6- and 8-week U.S. Treasury bills and has been successful at generating yield in excess of almost every bank savings account rate lately.

U.S. Treasury bills are backed by the full faith and credit of the U.S. government, and the interest earned is free from state income tax requirements. Our best clients tell us they really value this program and subsequently have not had the concern about having money at levels above FDIC insurance.

— Bryan Wisda, president, Almega Wealth Management

9. Reach Out for Details

Whether or not clients express concerns about moving their money, recent bank failures are top of mind for everyone. Although my clients have yet to express this concern, this is a great time to reach out to clients and discuss the importance of where your clients keep their cash.

Often, money is making less than 1% interest, yet high-yielding savings accounts yield upwards of 4%. While discussing the best place for their money, besides considering investing it, earning more interest or eliminating debt, I mention FDIC coverage rather than wonder if they are concerned about it.

I explain that depositing their money into an account with an FDIC-insured bank provides automatic deposit insurance coverage for up to $250,000, protecting it in the event of bank failure. Higher net-worth clients with trust accounts will also appreciate conversations about the impact of the FDIC's new deposit regulations amendment effective April 1, 2024 (to simplify deposit insurance rules for trust accounts).

— Alissa Krasner Maizes, founder of Amplify My Wealth, licensed attorney and registered investment advisor

10. Dig Deeper

Most clients either aren't aware or don't fully understand what FDIC insurance is. My job is often just educating. I'll get questions about investing in commodities such as gold. While gold may be part of a portfolio, it never is my recommendation for emergency savings.

For the clients that do have more than $250,000 in their bank account, the first thing we do is assess why and if they need all that money in a cash position. Often it is because they got a big purchase coming up and combined with emergency savings, it is pushing them over the limit.

I'll get questions from couples about re-titling accounts and adding individual accounts or joint accounts so they can stay at the same bank. The issue with this is taxes and re-titling possibly constituting as a gift.

— Nathan Mueller, financial advisor and financial coach, BlackBird Finance

11. Help Them Stay the Course

As advisors, our primary role is to help clients stay the course. When it comes to their cash, this starts by educating them about the frequency of bank failures. Between 2008 and 2012, 465 banks failed, with over 90% of these failures occurring after the market had already begun to recover.

We can be grateful that the FDIC has a well-established method for handling bank failures. Waiting for a definitive sign of safety will cause many investors to move money around unnecessarily. If fear is allowed to set in, they could take things a step further and miss the market’s recovery. Our clients are advised to stay below the FDIC insurance limits and press on, regardless.

— Russ Kefauver, financial advisor, Kefauver Financial Planning & Wealth Management