In order to celebrate three years of three+one blogs we will be celebrating by posting three of our staff-picked favorites. Throughout our travels and from the conferences we’ve attended we’ve tripled the size of our list. That means that many of you will be reading these for the first time! Enjoy and stay tuned for more commentary, advice, and news. Today I will be addressing one the top questions the nation’s public and Higher Ed financial officers ask me as I travel across the country. Today’s question: “Are there opportunities to earn income on my operating cash while still staying safe and liquid?” This blog was written in 2016 just as interest rates were about to rise. It could be seen even as more relevant today as rates continue to rise.


Believe it: Short-term interest rates will go up by year-end! And I mean 2016!

Given the stronger economic conditions in the U.S. and the surprising lack of the Brexit fallout (despite what the press would have you believe), I see short-term rates increasing by 25 basis points, mirroring the actions taken by the Federal Reserve in 2015.


Safety, Liquidity, And Yield! --Really!


Does that mean you will earn more on your short-term cash deposits? That depends on whether you’re proactive or passive in managing your cash deposits.

Either way, as a fiduciary of other people’s money, you need to make sure that you keep the funds safe and liquid—while also determining the value of your deposits in the marketplace.

The number one question I hear as I travel across the country is “Are banks going to pay more on deposit accounts?”

No pun intended, my standard answer is “Don’t bank on it.” Please understand that this is not the fault of the banks, it is a matter of their playing “catch-up,” having weathered the low-interest-rate environment of the past eight years. Lending rates will go up, but catching up on deposit rates will likely take from three to six months.

You may ask, “Is there an alternative to bank savings and deposit accounts?”

Yes there is. And it’s one that will enable you to be safe, liquid, and deliver a higher interest rate on your cash.

The solution is to look outside of the “norm”, and look into a Bank Deposit Investment Account (BDIA). Instead of a traditional savings or money market account, a BDIA lets your bank serve as a custodian for direct investments in fixed income, managed by a nationally recognized Registered Investment Advisor (RIA).

A BDIA lets you still use a bank to provide the safety of your underlying dollars, while allowing your RIA to create an investment portfolio that takes advantage of any rate increases. The difference between a standard bank deposit account and a BDIA can be anywhere between 20 to 70 basis points (as of 2017 you could expect anywhere between .70-1.20%).

Why wait for the Fed to take action? The ability to see an increase in your interest earnings can start today.

Being proactive—taking advantage of three+one’s proprietary liquidity analysis and the help of an RIA—will provide a new source of income by the end of 2016. And you’ll likely see even more growth in 2017 as short-term interest rates are projected to continue rising.


See Us At These Upcoming Events and Conferences:
National GFOA in Denver – May 21
Ohio GFOA – September
GFOA SC – October
PA GFOA – October