Marketplace* delivers client value across all asset classes, including an increasingly important focus on cash. Given record levels of household cash and savings accounts balances, advisors have a unique way to attract and fully insure held-away cash, provide unique value to HNW clients, and positively impact communities across America.
We sat down with Eric Lansky, President of StoneCastle to find out more about FICA® For Advisors.
Tell us a little about your company and how you partner with Addepar/Acervus Securities.
Like Addepar, StoneCastle was born out of the 2008 Financial Crisis when institutional investors were seeking higher-yielding options for cash. Their goal was to avoid taking on principal or liquidity risk. Since then, StoneCastle has expanded support for the cash management needs of thousands of institutional clients, family offices and more than 500 RIAs and wealth managers.
Very simply, StoneCastle connects institutional and retail investors to banks. Our large bank network enables advisors to offer their clients up to $25 million in FDIC insurance per tax ID while keeping liquidity and earning a competitive rate of return compared to other cash vehicles.
What are some of the biggest challenges for investors and advisors in the cash space?
The biggest challenge right now is how to enable HNW clients to earn and protect more on historically high levels of cash. A majority of HNW cash sits in sweeps, money funds, or banks, where average rates are just one or a few basis points. Through Marketplace, advisors can proactively introduce a potentially higher-yielding cash option that protects more deposits. In the process, advisors can help capture held-away cash and provide immediate value for their clients at a time when adding value is critical.
How have you seen the cash market evolve?
The cash category has evolved dramatically even over the past couple of years. Not all cash is created equally and there are distinct differences and vehicles for transactional (sweep) and savings/investor cash. Traditionally, advisors have addressed only the transactional cash market. However new entrants like online banks and the robo-advisors have helped highlight the value of attracting savings/investing cash. Advisors have on average 5-7% of a clients’ cash whereas these same clients hold as much as 25-30% of their household assets in cash. Advisors can now go after this savings/investing cash with FICA For Advisors. Leveraging Marketplace to digitally connect this cash into the client relationship gives the advisor a more complete look into clients’ total household assets, which leads to more comprehensive recommendations that can benefit the end client.
With the quickly shifting market landscape, what are your observations and reactions to what that means for cash?
The quickly shifting market landscape shines a very bright light on cash from a combined safety, liquidity, and yield perspective. Given that some of the largest money fund sponsors are closing prime funds due to headline and potential liquidity/credit risks, and have closed treasury money funds to new investors to maintain a positive rate, investors have new questions as to what they are going to do with tens of billions of dollars that are being relegated to other uninsured money funds paying in the low single digits. FICA® For Advisors uniquely solves for this in that client cash becomes FDIC insured, has a much more competitive rate, maintains liquidity and keeps clients’ cash from drifting into non-cash investments like “cash plus” alternatives that introduce market, credit, duration, interest rate, principal, and liquidity risk. When it comes to client cash, the advisors’ responsibility is to ensure that it eliminates or minimizes these risks.
What are some top industry trends that you’re seeing right now?
A growing trend we see right now in the market, and through Marketplace, is the desire to do good with investments and with cash deposits. The country’s lockdown from COVID-19 and social injustice have wreaked havoc on small businesses, individuals out of work, and communities in general. Clients that are looking to have a prudent choice for their cash and make an impact can do both with FICA® For Impact, an option offered within FICA® For Advisors.
Once a client makes a deposit, it is automatically allocated solely to hundreds of community banks across the country that have a Community Reinvestment Act (CRA) rating of one or two (the highest possible ratings). These deposits go directly toward funding growth of local communities by supporting the building of homes and growing small businesses. It is a red-hot topic in the industry, and we are pleased that Addepar and its clients were one of the firsts to capitalize on this growing trend.
For more information about Marketplace and our partnership with StoneCastle, please reach out to email@example.com.
*Marketplace and all brokerage services provided by Acervus Securities, an SEC-registered broker-dealer and member FINRA/SIPC, an Addepar company.