When I moved to Boston in 2000 for my job, I became a Boston Private Bank customer. It started out as a checking account for me but, over time, included our condo association checking and a trust checking account. I had a fantastic banker (Sara) who helped me when needed, and I felt they had a solid digital platform. When Silicon Valley Bank (SVB) Financial Group acquired Boston Private in 2021, I really didn’t think much about it. My wonderful banker had left before the deal, but the local team in the Back Bay office was responsive, and I enjoyed working with them. But last month, I learned how much my checking account mattered. Here are my lessons learned.
Lesson #1: Know your FDIC limits and titling of your cash accounts. Every advisor I know has talked more about FDIC insurance in the past month than they have in their entire career. Here is a good overview of what FDIC insurance is and what is protected. All my account balances were well below the limit when SVB bank was shut down on March 10th, 2023, by regulators, but I now needed to find a new bank.
Lesson #2: Define the criteria to determine the best banking partner. Why was I banking at SVB? The service level was high. The bank branch was close to where I lived. Fees were low. Online access was good, and bill-pay was efficient. As I searched for a new bank, these priorities helped me identify the right new partner. For now, I am keeping both checking accounts open because the transition to making sure I have everything set up correctly is taking a lot more time than anticipated
Lesson #3: Have a cash management strategy. That Friday in March, I suddenly had to worry about how I would get cash and pay my bills. The cash part was easy. I got cash from an ATM machine on both Friday and Saturday, even after the bank was shut down. But my high-yielding savings account at another bank has no ATM option. This experience had me rethink how much cash I need to have access to and what is in my wallet. Here is an interesting WSJ article on this topic. This cash conversation also reminded me that in today’s markets, what interest rate you are receiving on your cash account matters. Most banks still pay almost nothing in interest, while my high-yield savings and even the money market fund in my investment account are paying 4%. I’ve added another step to my year-end financial checklist: review my cash levels at various banks and the interest rate they pay to ensure my cash is working for me.
Lesson #4: Know what bill-pay accounts are linked to your checking account. The second problem I encountered with the SVB website being inaccessible from Friday to Monday morning was that I couldn’t pay any bills. Over 80% of people are paying bills online today. What was due? I realized I didn’t have a list of all the bills I was paying online. In fact, I also realized all my bills were now electronically being delivered to me via my bill pay platform, and therefore I could not even access the latest bills to retrieve my account numbers. Fortunately (thank you, Janet Yellen), when Monday morning rolled around, it was a seamless re-entry to the bank’s website. The first thing I did was print out a list of all the bill-pay vendors. The second thing I did was shift from paying all my bills from my bank’s bill payment platform to setting up auto payment with my most frequent bills (condo fees, electric, and cable). Now I can access my accounts via the vendor and change payment methods more easily.
Bank failures happen. Not often, but there have been more than 550 banks shut down between 2001 and 2023. Washington Mutual was the largest in 2008, but SVB was the second largest (until this week with First Republic.) While I have highlighted some lessons learned above, I now have a few more steps in my annual year-end personal finance checklist. If you are interested in learning what my other steps are, check out another blog of mine, “What is Your Number” or schedule a call with me to discuss it further.