June 28, 2022

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Why MassMutual is acquiring a cash management fintech for RIAs

Even insurance companies are jumping on the cash management bandwagon.

Mass Mutual Life Insurance Company is acquiring Flourish, an advisor fintech firm, from Stone Ridge Holdings Group for an undisclosed amount. The fintech is best known for Flourish Cash, which allocates client cash to a network of FDIC-member banks to earn a higher annual interest rate — 0.70{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} —, than the national average of 0.05{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}.

MassMutual is also acquiring Stone Ridge Securities, the broker-dealer arm of Stone Ridge that offers Flourish Cash.

Insurers are looking to tap into advisors’ growing demand for downside protection products, says Scott Reddel, head of North American wealth management at consulting firm Accenture. Last year, MassMutual signed a deal to bring Commonwealth’s Advisor360 software to the 9,000 advisors in MassMutual’s broker-dealer in order to strengthen its captive sales channel, Reddel says.

With Flourish, which works with 350 RIAs who collectively manage $600 billion in assets, MassMutual gets a springboard into the RIA market, Reddel says.

“The convergence of insurance and wealth management is a fundamental force globally,” Reddel says.

Why cash management? Flourish expands MassMutual’s existing product suite and strengthens the company’s ability to deliver digitally enabled, holistic financial planning, says Chelsea Haraty, a media relations professional with MassMutual.

The company declined to provide additional comment.

High interest rates can act as eye candy that advisors can use to attract new clients, says Sophie Schmitt, a senior analyst with research firm Aite Group.

“For advisors working with clients on ideally everything — total personal finance — having a savings solution that offers an attractive yield adds to their ability to implement a financial plan,” Schmitt says.

But offering cash management is quickly becoming commonplace across wealth management. Besides Flourish, fintech companies like MaxMyInterest and StoneCastle Capital Management are helping advisory firms offer banking capabilities. Carson Wealth, for example, launched checking and savings accounts in 2019.

Robo advisors also pivoted towards cash management in 2019 and are using algorithms to automate and optimize how a client’s assets are split between cash and brokerage accounts.

If advisors want to turn yield-chasers into long-term clients, they’ll need to offer more than just a high interest rate, she adds.

“I think the value is in the integration [of cash] to the rest of the financial plan,” Schmitt says. “Yield might get you in the door, but advisors are going to have to be continually managing the entire financial picture to make that savings account valuable.”