Michael Zeuner in CNBC: Where Family Offices Are Putting Their Cash After SVB Collapse
March 17, 2023
High-net-worth families typically keep millions of their assets in cash in their bank accounts to pay bills and cover any unexpected expenses. However, their bank account balances often significantly exceed the $250,000 FDIC insured limit. Now, after the recent collapse of the tech-heavy Silicon Valley Bank (SVB), many family offices are growing skeptical of placing large amounts of cash in regional banks. To learn more about where family offices should keep their cash following this crisis, CNBC turned to WE Family Offices Managing Partner Michael Zeuner for insight.
“Over [last] weekend there was a lot of worry. The questions that I was getting directly on Saturday and Sunday from clients were, ‘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,” Zeuner tells the publication.
These thoughts did not just arise following the SVB crisis; rather this event accelerated a broader push by affluent families over the past year following concerns over rising rates and a potential recession.
“For so many years, cash was just not an interesting investment,” says Zeuner. “It was paying zero, so people weren’t really paying attention to cash. Over the last year, as rates came up, and as the fear of a recession kicked in, a lot of families started to take some risk off the table. It went into cash. So, cash, from an investment perspective, [has] all of a sudden become a much more important part of the portfolio.”
For family offices concerned about their cash deposits, Zeuner suggests asking two simple questions: How is the cash being deployed, and is it on the bank balance sheet? If the cash is invested in Treasuries and other financial instruments, Zeuner says, it is likely not on the bank balance sheet and therefore not at risk in the event of a bank run.
“What you want to know is, to the extent that something happened to the bank, do I have access to my funds?” Zeuner concludes.