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Thought Leadership in Action

Easing Client Fears About Their Bank

Recent bank failures, including at Silicon Valley Bank and Silvergate Bank, have made many depositors worried about the safety of their assets. There’s also been a renewed focus on ‌deposit insurance policies offered by the Federal Deposit Insurance Corporation (FDIC).

Those bank failures were the first in more than two years, although there have been over 500 bank failures since 2009 in the U.S. Financial advisors can offer perspective and reassurance for their clients about the state of the U.S. banking system while helping them allocate their assets wisely. Learn more about how to communicate with clients about their banking fears.

Educate Clients About FDIC Coverage

            One of the most important actions you can take to help clients is to educate them about the relatively low risk to their bank deposits, and the protections afforded by the FDIC. The FDIC’s deposit insurance covers $250,000 per depositer, per insured bank, per account category. Eligible account categories are:

  • Checking
  • Negotiable order of withdrawal
  • Savings
  • Money market deposit
  • Certificate of deposit
  • Cashier’s checks and money orders

            Help your clients understand their asset holdings to uncover holdings that might exceed the FDIC limits. From there, educate them about their options. For some people, adding a joint owner to the client’s FDIC-insured account is an option, as it effectively doubles their coverage to a per-person limit of $250,000 instead of only $250,000 overall.

In other cases, clients can reallocate excess assets into different account categories, or they might open up additional accounts at other financial institutions. Spreading cash assets across banks reduces individual exposure and increases the overall amount guaranteed by the FDIC.

Remind clients that certain asset classes aren't FDIC-insured, such as stock investments, U.S. Treasury bonds, mutual funds and cryptocurrencies. Those asset classes have their own levels of risk, and advisors can help clients determine their level of comfort based on their financial goals and desired rate of return.

Give Them Perspective About Banking Risk

            Despite ‌recent high-profile banking failures, most U.S. banks are fundamentally sound, and the biggest banks are highly scrutinized by U.S. regulators. Pulling deposits can actually add risk for many clients. After all, cash is FDIC-protected when it’s held at an eligible financial institution, but not when kept at home.

            Some clients might need education about the risks facing particular financial institutions, especially if they don’t recognize the difference between banks, brokerage firms and other entities. Finally, remind clients of their long-term investing goals. Show them how their financial planning accounts for short-term market fluctuations and disruptions, even bank failures like those seen at Silicon Valley Bank.

Offer Reasonably Safe Alternatives

            For clients that want to get away from banks, help them find reasonably low-risk alternatives that offer some level of return. Short-term U.S. Treasuries are one such option, particularly for clients whose current cash holdings exceed FDIC limits and who want to diversify their exposure. Other clients might benefit from moving money into mutual funds or brokerage firms. Any such decision-making should address the client’s individual circumstances and rely on personalized advice from their financial advisor.


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