This content is from: RIAIntel
Google Checking Won’t Help. But a New, Exclusive Cash Solution for RIAs Can.
Cash management for RIA clients is only the beginning at Flourish.
John Abusaid, the president and chief operating officer at Long Beach, Calif.-based Halbert Hargrove, an RIA that manages $2.3 billion for about 700 households, was skeptical when an asset manager proposed that his firm should try using its new cash management solution for clients.
Stone Ridge, an alternative investment manager with $15.8 billion, was founded in 2012 specifically to cater to RIAs and was humming. But while working closely with advisors, it began to learn their headaches and see other business opportunities.
The first idea Stone Ridge dedicated resources to was Flourish Cash, a cash account that leverages partnerships with a group of FDIC-member banks to offer an interest rate of 1.65%, far higher than most checking and savings accounts. There are no account balance minimums or fees, users can make an unlimited number of account transfers, and it takes less than five minutes to create an account.
“I know there’s a catch,” Abusaid said to himself.
Years ago, Halbert Hargrove jumped at the opportunity to use MaxMyInterest, or Max, a cash management solution similar in essence and purpose; using a group of banks Max also enables users to earn better interest rates. But, at the time, the user experience was clunky.
“We pissed off a client because we made them sign I don’t know how many agreements with different banks,” Abusaid said.
Gary Zimmerman, the founder and CEO of Max, remembered working with Halbert Hargrove and was thankful for the feedback that helped the young company. Max has since improved its sign-up process, in part by creating a common application accepted by most of its bank partners, he said.
But Abusaid has already moved on and said Flourish Cash is “phenomenal.” He and other employees at Halbert Hargrove opened accounts, tested it, and have used it extensively with clients since it launched in January. “You have full confidence the clients will think this is awesome. I’m a personal user, of course.”
The RIA does not make any money from Flourish Cash, which can be white-labeled (Max also white-labels its platform). Although, the goodwill shown by helping clients find better interest rates with ease has more than paid off for the wealth manager.
One Halbert Hargrove client created a $1 million war chest for a coming real estate project that would have earned effectively no interest in a checking account. Instead, the RIA put the money in a Flourish Cash account and the client accumulated about $30,000 until the client used the funds. Relatively speaking, it wasn't an enormous gain but it impacted the scope of the project and the client was thrilled.
There are, of course, many high-yield savings accounts available now, including some that pay more. Goldman Sachs’ Marcus savings account currently has an interest rate of 1.90%. Used to the fullest, Max users can earn 2.18%, according to the company.
But Kelly Brewster, head of Client Strategies at Flourish, is quick to remind inquirers that there are benefits to opening a single account with his company. Flourish Cash partner banks don’t see client balances, which garner valuable data.
Often, clients who have the most to gain from a better interest rate, for whatever reason, have a lot of cash and the banks take notice. Like wealth managers, banks are working to offer a holistic service to customers and capture wallet share. When they see a new customer with as much as $250,000 in cash, they explore other ways to work with them, almost without fail.
To Philip Huber, the chief investment officer at Huber Financial Advisors, a $1.5 billion RIA in Chicago, Flourish has deepened relationships with clients, skirted the hazard of other wealth managers stealing them, and recruited new ones.
Only RIAs affiliated with Stone Ridge had access to Flourish Cash before this year. However, clients of the RIAs can refer outsiders to open accounts. When the brother of a Huber Financial client sold his business, he needed a place to park his windfall until he came up with a plan for it. After a referral and using a Flourish Cash account, the brother ended up becoming a client of Huber Financial.
“Often yesterday’s differentiators are tomorrow’s table stakes. It used to be offering planning in addition to investment management was a differentiator,” Huber said.
In addition to private clients, Flourish launched Cash Institutional for organizations on Tuesday, something Abusaid and Huber said their firms have been looking forward to since the secret was shared with them that it was in the works.
Abusaid has sat on several nonprofit boards and said opening multiple bank accounts would be a mundane task for those organizations. Opening a single account is a “game changer.”
“There are millions of dollars sitting in the banks collecting nothing month in and month out” and advisors can make sure that doesn’t happen, he said.
Brewster did not share the total amount of deposits with Flourish Cash, but deposits are growing an average of 40% each month this year. About 150 RIAs have clients who use it and about half of them are also clients of Stone Ridge, he said.
The cash management business is just the first of other “modules” that Flourish is working on or has in mind, Brewster said. The company is exploring what might be called “Flourish Home” to enable investors to unlock equity in real estate they own, and “Flourish Gift,” a tool investors can use to explore charitable causes and donate to. Brewster did not share any specific timelines for the release of other modules.
“The vision for Flourish is really a platform for advisors upon which fit a number of different apps or modules that enable advisors to do all sorts of different things.”
There are more than 40 people who work full-time on Flourish as well as about 20 software developers who also work with Stone Ridge.