Flourish Cash increases FDIC coverage, interest rate to meet advisor demand

investmentnews.com:

Flourish Cash, a division of fintech company Flourish that provides registered investment advisors with access to cash management, announced Friday it is increasing its top-tier annual percentage yield as well as the amount of assets protected by FDIC insurance.

Advisors can now use Flourish, which is owned by MassMutual, to earn 5% on the first $500,000 in individual and business accounts, and the first $1 million in a joint account. The remaining assets will receive 4.5%. Flourish also increased its Federal Deposit Insurance Corp. coverage to $2.5 million for individual and business accounts, and $5 million for joint accounts.

A household of two could keep as much as $10 million in an FDIC-protected account with Flourish, but do financial advisors really want to keep that much of a client’s assets in cash? The yield offered is 11 times higher than the national average offered at savings accounts, but still well below performance of the S&P 500 in 2023.

“Most of my clients’ cash management needs can be met with CDs and T bills,” Catherine Valega, a certified financial planner and founder of Green Bee Advisory, said in an email. “Not sure I would add another offering to my list, which works fine.”

However, high-net-worth investors often hold more cash than financial advisors are even aware of, said Max Lane, CEO of Flourish. HNW individuals hold an average of 30% of their net worth in cash, according to the 2023 Capgemini World Wealth Report. A separate study by Betterment, which recently increased its return on cash to 5.5%, found that 75% of all investors have increased their cash holdings in the past year.

There is also an emotional component, with 62% of Americans indicating they would rather have money sit in cash