Smart Money: Take this to the bank
William C. Fisher
I recently met many CEOs while speaking at the Aging Services of Washington annual conference. The CEOs shared many similar concerns revolving around the need for money, low census rates, concerns over Medicare and Medicaid rates, new and pending legislation, and the challenges of setting strategic long-term plans, among other issues.One skilled nursing facility in Washington had a reverse problem: It had weathered the financial storm these last few years and had experienced a solid turnaround both in operations and financially. The biggest challenge it has is addressing its latest auditor's report stating it had too much money in one bank.
The latest FDIC rules state any account is insured up to $250,000. When the FDIC takes over a bank, the principal is guaranteed, not the interest. And while banks are usually taken over seamlessly from an investor's perspective, the FDIC has the option of liquidation and delayed payouts.This particular facility has millions with a bank that tries to meet all its financial needs. The auditors reported a concern over “excess cash with a local bank” with accounts that “had balances in excess of the FDIC insurance coverage.” The CEO also is challenged with a couple of board members loyal only to the local bank. This and the concerns from the FDIC are a very common problem for senior living organizations across the country.
Many banks will tell clients they can spread the accounts out and diversify the risk. Investment advisers often have a bigger perspective than a local bank. Experienced investment advisers can provide more diversification with the investments beyond the local area. They also can help decide when the investments should be fully invested in the market, and when buying CDs is a good strategy.Remember the timely and proven message: Diversify your investments and do not put all your “eggs” in one basket.
William C. Fisher is president of Investment Advisory Group LLC, a business development company partnering with some of America's leading financial companies to provide independent financial services to nonprofit organizations.