Diversifying Bank Exposure: Exploring Alternative Cash Options Amid Shifting Market Conditions

Our team has compiled an overview of alternative options to holding cash in light of recent events in the banking sector and overall market conditions.1

Options that a depositor may want to consider for diversifying bank exposure include:

  • FDIC and SIPC insurance programs for banks and brokerages
  • Money Market Funds
  • Treasury bills 
  • A Federally Insured Cash Account (FICA)

FDIC and SIPC Insurance Programs For Banks and Brokerages

Federal Deposit Insurance Corporation (FDIC)

Banks maintain FDIC insurance of $250,000 per account holder per insured bank for each ownership category, and $250,000 for certain retirement accounts deposited at an insured bank. These amounts include principal and accrued interest. FDIC insurance provides for $250,000 of coverage per individual ownership category.

  • In the case of a joint account, the coverage would be $500,000.
  • For a trust with multiple beneficiaries, each beneficiary would be covered at $250,000 each. For example, if a trust had five beneficiaries, it would be covered for a total of $1,250,000 for the trust, regardless of the number of accounts.

Securities Investor Protection Corporation (SIPC)

Protection for securities and cash by the SIPC for brokerages are insured by SIPC in the event of broker-dealer failure. SIPC provides up to $500,000 or protection for brokerage accounts held in each separate capacity (e.g., joint accounts or sole owner), with a limit of $250,000 for claims of un-invested cash balances. Commodity interests and cash in futures accounts are not protected by SIPC.

Consider Treasury Money Market Funds

The yields on money market funds (MMFs) have come up significantly over the last several months and are much more competitive than traditional savings vehicles at banks.

An option is to use treasury money market mutual funds (which trade like traditional mutual funds and have a T+1 trade settlement), which are yielding ~4.53% (as of April 28, 2023).2 MMFs are held in a client’s brokerage account and are another way to diversify cash. Many banks and brokerage firms offer treasury money market fund options.

U.S. Treasury Bills

Backed by the U.S government and exempt from state and local taxes, treasury bills provide a safe way to earn additional yield. With varying maturities, consider building a laddered portfolio which aligns with your cash needs. Treasury bills are liquid and you may sell them before they mature in the event you need access to capital.3

Federally Insured Cash Account (FICA)

A FICA is an insured high-yield cash account offered through your financial advisor. The account links with your checking account, providing flexibility to contribute and withdraw capital easily.

Request an introduction to speak with a Geller Wealth Advisor and discuss what options may make the most sense for you.  

  1. Regulatory Disclosures
  2. Yield shown is net of fees
  3. Treasury bills are subject to mark to market losses (or gains) if sold prior to maturity