High Yield Brokered Liquid Deposit Account?

[Communicore1991]

Has anyone heard of what this is? I received an offer from a bank I have a relationship with to open such an account. It requires a minimum $100,000 opening deposit but offers a 5.2% APY. It sounded like a CD except for the fact that I can withdraw money from the account and get cash same day as well. I am trying to understand what the benefit of this type of account would be over a HYSA.

 

[firefly_ris]

Pardon my ignorance but is it different than a Money Market account? We recently opened one of those with 5% APY with a 20k minimum.

 

[MyDogTink]

Is this product offered through the FDIC insured bank or the bank’s brokerage affiliate? The word “brokered” has me thinking it’s an investment product.

 

[Pinnochio]

Has anyone heard of what this is? I received an offer from a bank I have a relationship with to open such an account. It requires a minimum $100,000 opening deposit but offers a 5.2% APY. It sounded like a CD except for the fact that I can withdraw money from the account and get cash same day as well. I am trying to understand what the benefit of this type of account would be over a HYSA.

sounds like a money market account.... the benefit is that it is liquid....and that's a very good rate......

 

[Anthony1971]

The benefit for Wells Fargo is to sell you product and move you to a paid advisor if you don't have one already. Otherwise they are fine as they are FDIC insured. Money Markets are NOT FDIC insured but have a very very very..... low chance of losing money but there is still risk. I will not suggest against anything but my experience with big name branch banks etc that offer special rates eventually go away and you will need to open a new account elsewhere. In the case of Brokered account you will need to call to have the money transferred not an online transaction so you will get a sales pitch. If you plan on keeping your cash as cash there are some very close online bank CD rates to what is offered.

 

[barkley]

Money Markets are NOT FDIC insured

since when are money market accounts not fdic insured? mine are at my current financial institution as they've been at the ones i've previously used.

 

[NYCgrrl]

Sorry, never heard of it but there are a few words that seem to tell part of the tale. Since it’s an account opened/managed by a broker I’d be looking to see what fee, if any, you’ll be charged. The 5.2% interest rate is pretty decent and on par with what commercial banks are offering clientele. The 100K minimum is a bit high for the interest rate. A few months back I opened an account with Marcus for 50K at that rate. Finally, it sounds like a money market fund; best I can say.

 

[_19disnA]

I would be less concerned about what the product is called and more about whether it is FDIC insured and the timeframe for that sort of yield. You can buy a variety of products on that treasury direct website with maturity dates varying from 4 weeks to 30 years. Depends how long you want that money tied up or how liquid it needs to be. I can recall a couple of years ago where 'high yield' money market accounts were paying something like 0.25%, so the name of the product doesn't mean much.

There are also many websites that compare current rates. With rates where they are, it seems like a good time to lock in a longer duration product since those will disappear if rates decline sometime this year as most forecasts seem to indicate.

 

[NYCgrrl]

I would be less concerned about what the product is called and more about whether it is FDIC insured and the timeframe for that sort of yield. You can buy a variety of products on that treasury direct website with maturity dates varying from 4 weeks to 30 years. Depends how long you want that money tied up or how liquid it needs to be.

There are also many websites that compare current rates. With rates where they are, it seems like a good time to lock in a longer duration product since those will disappear if rates decline sometime this year as most forecasts seem to indicate.

Just a heads up..if OP is receiving this offer from their bank, it is covered by FDIC, up to 250K, in general.
Agreeing on your time frame oinion.

 

[barkley]

i just found this (identical wording, minimum deposit and rate) being offered on wells fargo's site-

it is fdic insured
if you are an existing brokerage client 50% of the initial (and any future) deposits have to be from an outside source
$10,000 minimum subsequent deposits

from what i can tell this is another name for a 'brokered cd', the difference between it and a traditional cd being-

with a brokered CD, to withdraw money early, you have to sell the CD. There’s no penalty for doing so, but selling involves some risk, since a CD may lose value when sold. This is especially true when interest rates for new CDs are on the rise, generally because there will be less buyer demand for the CD you bought at a lower rate (with less return) than newer CDs with higher rates (and more return).
Being able to trade a brokered CD is not a guarantee since the secondary market can be limited based on market conditions and availability.

With rates where they are, it seems like a good time to lock in a longer duration product since those will disappear if rates decline sometime this year as most forecasts seem to indicate.

i'm feeling this too. last year we managed to snag some 60 month cd's at 5% with a one time bump option. for a heartbeat the rate jumped to 5.30% so we bumped the existing cd's up (and opened a few more b/c i would rather have 20 $5000 cds vs. 1 $100,000 just in case i need to tap into the money-much less of a penalty). have not seen rates at a brick and mortar like that for that term since. i can withdraw any accrued interest without a fee or penalty (same day) but i prefer to see it compound.

we have one local place that has a cd with a locked rate that you can make monthly additional deposits to (up to $5000 per month) but the rates are not the greatest (2.27% or 3.56% depending on the term) and with a 270 day's dividends penalty if you need to make ANY withdrawl it's not attractive.

 

[_19disnA]

I agree, several factors to consider based on one's financial situation. Locking in a higher rate for 3+ years is a good plan when rates seem to have peaked IF you don't expect to need the money for other reasons. Everyone's situation is different so you can't really provide generalized investing advice.

 

[Anthony1971]

since when are money market accounts not fdic insured? mine are at my current financial institution as they've been at the ones i've previously used.

You are talking about a product offered by some banks with a set interest rate that has very limited transactions associated with it. A brokerage firm does not offer this type of product although the same name it is buying mutual funds rather then a sort of hybrid between a checking/savings. Some companies also offered Money Markets as a loan to the company which was recorded as a payable to the company such as what was GE capital plus that was a hybrid like what bank offered but paid a much higher rate also not FDIC insured being it was a loan to the company although very safe being it was a payable making it priority debt if GE was to go bankrupt. With Money Market you need to read what type of account it is. For this the title was about brokerage not banks.

 

[NYCgrrl]

Pardon my ignorance but is it different than a Money Market account? We recently opened one of those with 5% APY with a 20k minimum.

Gaining knowledge is never ignorant

Found this at NerdWallet and think it answers your question readily:

”CD: The difference. Money market accounts (MMAs) and certificates of deposit (CDs) are types of federally insured savings accounts that earn interest. But their rates and ease of access differ. CDs tend to have higher rates than money market accounts and give no access to your money until a term ends.Nov 9, 2023”

 

[tvguy]

Gaining knowledge is never ignorant

Found this at NerdWallet and think it answers your question readily:

”CD: The difference. Money market accounts (MMAs) and certificates of deposit (CDs) are types of federally insured savings accounts that earn interest. But their rates and ease of access differ. CDs tend to have higher rates than money market accounts and give no access to your money until a term ends.Nov 9, 2023”

Unless something has changed, you always have access to your money. I think what this leaves out is "access without penalty". First, you have to keep your balance above the minimum balance, $100,000 in OP's case. Second, the penalty is you lose the interest on the money withdrawn going back to day one of the CD being opened. I paid my College tuition that way. Everything was in a 5 year CD which netted me a higher interest rate. I would withdraw what I needed, lost the interest on that money back to the day the CD opened. But I was money ahead overall because of the high interest rate.