March 15, 2023
Louis Diamond Quoted
By Sergei Klebnikov
Amid the uncertainty of the last few days, many of the big banks and wirehouses have seen billions of new dollars coming in from small and regional banks as people seek what they perceive to be safer places to keep their money. When Forbes contacted banks including UBS, Wells Fargo, JPMorgan Chase and Bank of America Merrill Lynch, all declined to comment.
For small businesses, keeping high balances at one institution can be beneficial, in terms of added services–a key explanation about why so many start-ups were keeping all their funds at SVB. “I believe that if I didn’t keep all of my funds at my bank,” says one New York City entrepreneur with account balances above $250,000, “my banker would have not been so eager to help me apply for PPP during Covid.” (PPP, of course, was the federal program of forgivable loans designed to encourage businesses to keep workers employed. In the early days of the program, there were widespread complaints that banks were processing their best customers’ applications first, before the money ran out. Eventually, Congress added more money to the PPP pot.)
Still, many affluent clients already keep accounts at multiple financial institutions, observes Louis Diamond, president of Diamond Consultants, a New Jersey-based firm that works with advisors. While some people are newly worried about deposits in excess of $250,000 and could move money to other institutions, he considers that something of “knee-jerk reaction” to the negative headlines. Morningstar analyst Eric Compton agrees, pointing out that most wealth assets are not bank deposits, and therefore aren’t insured by the FDIC and not subject to similar bank-run risks.
