Western Independent Banker - January/February 2009 - (Page 24)

By Anne K. Scully, WIB Service Corporation President FDIC-Insured Sweep Accounts Offer More Coverage, Net Deposits BOOSTING NET DEPOSITS through innovative products and personalized services will give a competitive edge to financial institutions battling a perfect storm of market turbulence, client fear and fierce competition. One such product is the FDIC-insured sweep account, a longsought-after solution designed to blunt disintermediation by retaining clients’ money market assets. Institutions offering these accounts yield multifaceted benefits—clients gain extended FDIC protection while financial institutions profit from a reduced cash outf low to money market mutual fund managers. Double-duty money market sweep accounts are making significant inroads of late, as fi nancial institutions look to add deposits from clients seeking protection in trying economic times for assets in excess of the limitation which recently increased from $100,000 to $250,000. Traditionally, those deposits were invested in money market mutual funds to garner the liquidity and competitive yield. However, there’s another alternative where clients use a brokerage sweep account which will spread their funds across a network of deposit institutions to maximize FDIC insurance coverage. Each depository in the network establishes a single money market demand account which has a targeted deposit level. The deposits for each client are then sent to a number of accounts to provide an adequate amount of FDIC coverage until the target level has been achieved, returning deposits to each fi nancial institution participating in this investment service. For the client, the brokerage statement compiles the transactions, balances, earnings and location for the deposits at each of the depository institutions. The sophistication of the record keeping and sub-accounting platform provides extended levels of FDIC coverage for clients while reducing the outflow of cash balances for the fi nancial institutions. “The value is twofold,” said Brett Bowers, MidFirst Investment Services vice president and program director. “The product gives the investor another sweep option inside their brokerage account to manage their idle cash, dividends and interest payments. Previously, our clients were only able to choose money market mutual fund options. Now we can offer another option that includes FDIC insurance coverage. And, for the bank, another benefit is becoming part of a selected group of banks that will receive deposits back to their institutions, so it’s a real win-win situation.” Financial institutions can choose from several variations on this theme, depending on their broker-dealer’s offerings. Some just want their risk-averse clients to have access to additional FDIC coverage. Others are interested in accessing deposits from an expanded geography or clientele. Regardless of the initial strategy, all fi nancial institutions are interested in flexibility of options in this dynamic money market environment and ways to make this easy for their clients to understand. Tenuous times make security and assets paramount for clients and fi nancial institutions, respectively, making FDICinsured money market accounts a natural fit in the marketing mix. “In these challenging times, we’re excited to provide our clients and prospective clients with another vehicle to maximize the safety of the FDIC,” said Bowers. “First and foremost, this product allows us to better serve our clients, but the bank also benefits by receiving deposits through the program from other participating banks.” Doing what is best for both parties is sound practice in any economic climate, but it’s even better when there’s a solution that helps you do it easily in tough times. The new-look FDIC-insured sweep accounts are proving to be one of those solutions—a timely solution that appeals to a wide range of clients and fi nancial institutions. Jayson Hron is with PrimeVest Financial Services in St. Cloud, Minn. He can be reached at jayson.hron@primevest.net. For information on PrimeVest’s offerings, please contact Travis Wavrin at (800) 2450467, ext. 64058. Institutions offering FDIC-insured sweep accounts yield multifaceted benefits—clients gain extended FDIC protection while financial institutions profit from a reduced cash outflow to money market mutual fund managers. 24 www.wib.org Western Independent Banker http://www.wib.org

Table of Contents Feed for the Digital Edition of Western Independent Banker - January/February 2009

Western Independent Banker - January/February 2009 Contents A Message from the President & CEO Managin Liquidity and Funding During a Recession Staying Liquid in a Time of Regulatory Sea Change Managing Liquidity in a Volatile Rate Environment Regulatory Outlook for Brokered Deposits Deposit Growth and Branch Network Effectiveness Turbo Charging Account Acquisitions FDIC-Insured Sweep Accounts Creating a Contingency Funding Plan WIB Service Corporation Report WIB Calendar New Members Index of Advertisers advertiser.com

Western Independent Banker - January/February 2009

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