Bloomberg

APRMAYAUG
28
201120122014
13 captures
28 May 2012 - 29 Oct 2016
About this capture
Gold1,580.40+0.59%
EUR-USD1.26070.4150%
Nasdaq2,837.53-0.07%
DJIA12,454.80-0.60%
S&P; 5001,317.82-0.22%
FTSE 1005,351.53
Market-Wary Investors Seek Ways To Insure Millions In Cash
By Margaret Collins - 2011-08-12T16:40:00Z
U.S. investors seeking safety in cash amid the market turmoil can take advantage of several methods to insure millions above the Federal Deposit Insurance Corp.’s $250,000 limit.
A husband and wife could each have $250,000 in individual bank accounts, the maximum covered by FDIC insurance, and $250,000 each in retirement accounts such as IRAs invested in bank products rather than mutual funds or annuities. They also each can set up $250,000 trust accounts naming each other as beneficiaries and deposit another $500,000 in a joint account, where each co-owner is insured up to $250,000.
Enlarge image
“A lot of our customers have more than $250,000 that they want to insure,” said Robin Loftus, chief operating officer for Security Bank in Springfield, Illinois. Photographer: Andrew Harrer/Bloomberg
Play Video
July 6 (Bloomberg) -- Federal Deposit Insurance Corp. Chairman Sheila Bair talks about the agency's accomplishments during her tenure, the state of the U.S. banking industry and financial regulation. Bair, who will leave the FDIC at the end of the week, speaks with Peter Cook on Bloomberg Television's "Bottom Line." Bloomberg's Mark Crumpton also speaks. (Source: Bloomberg)
Sponsored Links
American Express—Savings
High Yield Savings Account With No Fees And Competiti...
AmericanExpress.com/Pe...
Wells Fargo Advisors Est...
Download a free toolkit and understand the essentials...
WellsFargoAdvisorsInfo...
Annuities with 7% Annual...
Compare today’s top recommended annuities in a free, ...
www.AnnuityFYI.com/rat...
Buy a link
“That total comes to $2 million fully insured,” said FDIC spokesman David Barr.
Investors are holding onto cash amid concern the U.S. economy may lapse into another recession. Cash held by U.S. banks surged 8.4 percent to a record $981 billion during the week ending July 27, the Federal Reserve said in an Aug. 5 report.
“The key is to try and maximize the productivity of that cash,” as yields are approaching zero on some money-market funds and bank products, said Tom Dunn, who specializes in cash management for clients with at least $1 million to invest in federally insured programs. Dunn is senior vice president of investments for First Financial Equity Corp. in Dallas.
For those seeking insurance above the FDIC limits at one bank, the Promontory Interfinancial Network LLC will split up a large amount of cash among several banks to stay under the cap. The Arlington, Virginia-based company has been offering this service, known as a certificate of deposit account registry service, or CDARS, since 2003.
CD Network
A customer with $1 million who uses one of the participating banks may have the cash placed in CDs at five different banks, said company spokesman Phil Battey. Each CD is worth less than $250,000 to make sure any interest earnings are also insured, he said.
The network includes about 3,000 banks and savers can insure up to $50 million through CDs in multiple banks. The average holding for individuals using the service is about $925,000, said Battey. Fees for the service are embedded in the offering rates.
Similar services exist that split large deposits into money-market deposit accounts at multiple banks to stay under FDIC limits. Money-market deposit accounts may be FDIC insured while money-market mutual funds, even if sold at a bank, are not, said Barr, the FDIC spokesman.
Deposits Rise
Institutional Deposits Corp. provides an interest rate of 0.3 percent to investors and has $745 million in money-market deposit accounts through its network of 184 banks, said Bill Burdette, president of the Miami-based company.
Deposits through the Federally Insured Cash Account, which offers up to $20 million of FDIC insurance at a current rate of about 0.40 percent, increased 7 percent in the last week, said Eric Lansky. Lansky is a director at StoneCastle Partners LLC in New York, which runs the FICA program. Both FICA and IDC primarily serve businesses and nonprofits, and some high-net- worth investors.
“A lot of our customers have more than $250,000 that they want to insure,” said Robin Loftus, chief operating officer for Security Bank in Springfield, Illinois. The community bank participates in the CDARS and IDC programs because some affluent customers want CDs and others prefer money-market savings accounts for quicker access to their funds, she said.
Low Rates
Consumers who use the networks should make sure they don’t have other accounts at banks where the money is placed that may push them over the insured limits, said Greg McBride, senior financial analyst at Bankrate.com, a unit of Bankrate Inc.
Savers who want to put their money in CDs should do so now because rates will continue to drop, said Dan Geller, executive vice president of Market Rates Insight in San Anselmo, California. “It’s inevitable as long as the current economic conditions remain,” he said.
JPMorgan Chase & Co. (JPM) lowered its yield in the last week to 1.75 percent from 2 percent for a new five-year CD with a minimum deposit of $10,000, Tom Kelly, a spokesman for the New York-based bank, said in an e-mail on Aug. 10.
The national average yield as of Aug. 10 on three-year CDs is 0.91 percent and 1.54 percent on five-year CDs, according to North Palm Beach, Florida-based Bankrate.com. The top yielding online, FDIC-insured savings accounts are returning 1.1 percent, Bankrate.com data show.
‘Problem With Cash’
The seven-day compound yield of the average taxable money- market fund was 0.02 percent as of Aug. 9, according to IMoneyNet, a research firm based in Westborough, Massachusetts​, that tracks money funds.
“That’s the problem with cash,” said Greg Peterson, director of research at Ballentine Partners in Waltham, Massachusetts, which advises clients who typically have a net worth of at least $20 million. “It’s not going to yield much because interest rates are so low.” The average rate of inflation this year through June was 2.8 percent, according to Bloomberg data.
Peterson said his firm started selling stocks and purchasing lower-risk assets in May and has recommended short- term, investment grade corporate bonds for those that need income. Investors should have a six-month reserve of cash and bonds, he said.
Deposit Fees
Banks may start charging retail customers for large deposits because they’re already holding so much cash, said Geller of Market Rates Insight. That’s because deposits cost banks money for FDIC insurance assessments while loan demand remains weak, Bankrate’s McBride said.
Unusually high cash deposits prompted Bank of New York Mellon Corp. (BK), the world’s largest custody bank, to impose fees of 0.13 percent on some institutional clients.
“Some clients during these times of market volatility have moved out of equities and are sitting on cash or in general want to keep their powder dry to get back in,” said Ram Subramaniam, head of products for TD Ameritrade Holding Corp. (AMTD)
Brokerages including TD Ameritrade and Charles Schwab Corp. (SCHW) offer FDIC-insured CDs, known as brokered CDs, from various banks. A one-year brokered CD bought through Schwab is yielding 0.5 percent, said Jeff Morley, vice president of portfolio consulting at the San Francisco-based firm.
While yields may be “slightly higher” on some brokered CDs, they’re not without risk, said McBride of Bankrate. That’s because it may not be as simple to get out prior to maturity by paying a penalty as with a traditional CD, McBride said. Brokered CDs are sold on the secondary market and “what you get is what an investor is willing to pay for it,” he said.
‘Kick Yourself’
Investors may have uninvested cash in brokerage accounts “swept” into FDIC-insured accounts, earning 0.01 percent, at TD Ameritrade and Schwab. Clients may get a higher yield on those funds if they move them into a Schwab high-yield checking or savings account that pays as much as 0.4 percent, said Morley.
Diahann Lassus said she’s raised the maximum cash allocation in her clients’ portfolios in the past couple of weeks “to build an extra cushion because of the volatility in the market, and so we can sleep at night.” Investors shifting some of their assets to cash should consider money-market accounts, Treasury bills, bank CDs or bank savings accounts, said Lassus, who’s president of the fee-only advisory firm Lassus Wherley in New Providence, New Jersey.
“If you sell everything and go to cash you’re going to kick yourself,” she said. “It’s very hard to get back into a market once you’ve done that.”
To contact the reporter on this story: Margaret Collins in New York at mcollins45@bloomberg.net​.
To contact the editor responsible for this story: Rick Levinson at rlevinson2@bloomberg.net​.
More News:
U.S.  ·
Funds  ·
Finance  ·
Insurance
COMMENTS
QUEUE
HEADLINES
MOST POPULAR
RECOMMENDED
Advertisement
Key Rates
MORTGAGE
HOME EQUITY
SAVINGS
AUTO
CREDIT CARDS
See today's average mortgage rates across the country. Source: Bankrate.com
TypeToday1 Mo
30-Year Fixed3.80%3.85%
15-Year Fixed3.09%3.07%
5/1-Year ARM2.65%2.71%
3/1 Year ARM2.69%2.64%
1-Year ARM3.54%2.78%
30 Year Jumbo4.38%4.45%
15-Year Fixed Jumbo3.61%3.66%
5/1-Year ARM Jumbo2.90%2.91%
Rates may include points.
View rates in your area »
Sponsored Links
Job SearchPost a Job »
Accountant jobs
Financial Advisor jobs
Financial Analyst jobs
Attorney jobs
Chief Executive Officer jobs
Vice President Finance jobs
Financial Management jobs
Investment Banking jobs
Private Banker jobs
Chief Financial Officer jobs
Finance Manager jobs
Search All Jobsjobs by
Advertisement
Advertisements
Sponsored Links
BLOOMBERG.COM
News
Opinion
Markets
Personal Finance
Tech
Sustainability
TV
Video
Radio
Archives

ABOUT
About Bloomberg
Careers
Advertising
Press Room
Trademarks
Terms of Service
Privacy Policy

SUPPORT AND CONTACT

STAY CONNECTED
BLOOMBERG TERMINAL
Professional
Anywhere
RELATED BLOOMBERG SITES
Bloomberg Markets Magazine
Bloomberg Open Symbology
Bloomberg Link
Bloomberg Blog
Bloomberg Press
BLOOMBERG PREMIUM SERVICES
Bloomberg New Energy Finance
Bloomberg Sports
MOBILE APPS
Bloomberg
Bloomberg Radio+
Bloomberg TV+
Bloomberg Businessweek+
©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Jobs by Indeed Rate this Page Made in NYC
Ad Choices
MARKET SNAPSHOTDJIAS&P; 500NasdaqSTOXX 50FTSE 100DAX NIKKEITOPIX HANG SENG
Our CompanyProfessionalAnywhere
HomeBloomberg HomepageMobile AppsBusinessweek.comInsights SeriesBloomberg BlogQuickNewsTop HeadlinesMost PopularExclusivePoliticsLawEntrepreneursLeadersArts & CultureEconomyEnvironmentScienceSportsBloomberg Markets MagazineRegionsU.S.ChinaEuropeAsiaU.K. & IrelandAustralia & New ZealandCanadaIndia & PakistanJapanAfricaEastern Europe More Regions MarketsCommoditiesCurrenciesBondsStocksEnergy MarketsMunicipal BondsEmerging MarketsFunds More Markets IndustriesEnergyTechnologyReal EstateFinanceHealth CareTransportationInsuranceRetailMedia More Industries OpinionEditorialsColumnsOp-EdsBusiness ClassEchoesThe TickerWorld ViewMarket DataStocksStock FuturesWorld IndexesGainers & LosersRegional IndexesEarningsRates & BondsGovernment BondsCorporate BondsKey RatesCommoditiesCommodity FuturesEnergy PricesCurrenciesWorld CurrenciesForeign Exchange RatesETFsMutual FundsEconomic CalendarForex Trading VideosIslamic FinancePersonal FinanceNews & VideosSaving & InvestingRetirement PlanningReal EstateTaxesFinancial AdvisersInsurance & HealthMoney GalleryThe Real CostPortfolio ImpactCalculatorsPortfolio TrackerTechTechnology HomeSocial MediaMobile & WirelessWebEnterprise TechTV, Games & MoviesAppleTech DealsTech BlogSlideshowsVideosSustainabilitySustainability HomeEnergyCorporate SustainabilityPolicyNatural ResourcesHealth & PopulationSlideshowsVideosBlog: The GridTVLive TVChannel FinderPersonalitiesiPad AppShowsThe MentorBloomberg WestGame ChangersEnterprise More Shows ScheduleU.S.AsiaEuropeVideoMust SeeLatestMost WatchedInterviewsRadioLive RadioShowsSchedulePersonalitiesPodcastsFirst WordSurveillanceTaking Stock More Podcasts