Marie Reed of the Federal Savings and Loan Association sits next to a million dollars in cash.
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Wealthy investors and family offices are moving more of their money out of bank cash-balances and into treasuries, money markets and other short-term instruments, according to wealth advisors.
High-net-worth investors typically keep millions of dollars or even tens of millions in cash in their bank accounts to cover bills and unexpected expenses. Their balances are often way above the $250,000 FDIC insured limit. Following the collapse of Silicon Valley Bank and potential cracks in the network of regional banks, wealth advisers say many clients are now asking fundamental questions about how and where to keep their cash.
“Over [last] weekend there was a lot of worry,” said Michael Zeuner, managing partner at WE Family Offices, which advises wealthy investors and family offices. “The questions that I was getting directly on Saturday and Sunday from clients was ‘how is my cash deployed? Is it actually on the balance sheet of the bank?’ And these are very sophisticated, very successful investors and families who just never thought about that question before.”
Wake-up call
Adds Patrick Dwyer, managing director at NewEdge Wealth: “This was a real wake-up call to high-net-worth individuals who have cash around.”
The SVB crisis has only accelerated a broader push by wealthy investors over the past year to move cash out of bank balances and into Treasuries and money-markets. With the rapid Federal Reserve hikes, Treasuries and money-markets can now offer a 4% or 5% risk-free return — often double the yield on a savings or checking account. As a result, wealthy investors and family offices have been moving all but a small portion of their cash balances into higher yielding cash-like investments, which are typically not on the balance sheet of the banks.
At the same time, many big investors began to pull money out of stocks and other investments due…
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