In a new episode of the Financial Planning Podcast, Gary Zimmerman explains how a personal banking struggle led to him helping others to maximize their cold hard cash.
Zimmerman, the founder and CEO of New York-based
In that role, Zimmerman — who also worked as an investment banker at Merrill Lynch and SG Barr Devlin — spent time in Europe, the Middle East and Asia advising funds with more than $5 trillion of assets under management. He also led Citigroup's cross-border M&A business in Japan, advising multinational corporations, financial institutions and private equity funds on their strategic ambitions overseas.
But it was stateside in the late 2000s when MaxMyInterest was born with security and stability in mind. As markets collapsed, he became concerned for the well-being of not only the bank that employed him, but for all of the money he kept in an account with them.
"And it occurred to me that if the bank were to fail, every dollar I kept there that was above the FDIC insurance limit would leave me as an unsecured creditor. And that was a fairly scary position to be in, so I was really just looking for a way to keep my cash safe," Zimmerman said.
During his conversation with FP Podcast host and lead editorial producer Justin L. Mack, Zimmerman discusses how that concern led to a fintech-integrated today with platforms like Envestnet, Morningstar, Orion and Redtail; the power MaxMyInterest gives to advisors; and why using it could bring into the conversation information and assets typically hidden by clients.
Listen to the new episode — as well as all future and past episodes — by subscribing to the FP Podcast on
(Disclosure: Zimmerman is married to American Banker editor-in-chief Chana Schoenberger)
Transcript:
Justin L. Mack: (
Good morning. Good afternoon. And good evening. Welcome to the Financial Planning Podcast. I'm your host, Justin L. Mack, wealthtech reporter with financial planning. And it is my pleasure to introduce this week's guest, Gary Zimmerman, founder and CEO of MaxMyInterest. Gary, thanks so much for joining us this week,
Gary Zimmerman: (
Justin, thank you for having me. It's a pleasure to be here.
Justin L. Mack: (
Absolutely. Now, Gary brings to this episode decades of industry experience. He's worked as an investment banker at Citigroup where he was a managing director and global head of strategic solutions for sovereign wealth funds, responsible for advising these funds on their direct investment activities globally. In that role, he spent time in Europe, the Middle East and Asia, advising funds with more than $5 trillion in assets under management. He also led CitiGroup's cross border M&A business in Japan, advising multinational corporations, financial institutions and private equity funds on their strategic ambitions overseas. Gary's also worked as an investment banker at Merrill Lynch and SG Barr Devlin. But today (on the podcast) we're gonna be talking about cold, hard cash and how Gary wants to help investors make the most of their money via MaxMyInterest, a fintech born from a real life hurdle he needed to clear and integrated today with platforms you know and love like Envestnet, Morningstar, Orion and Redtail. We'll get into all that in much more on this week's episode. But Gary, let's start at the most appropriate part of the story. The beginning. Founded in July 2013, launched in April 2014, MaxMyInterest is now almost 10 years young. But tell me a little bit about the real life problem you needed to solve when this idea came.
Gary Zimmerman: (
Well, thank you, Justin. And thank you for the kind introduction. This is really an accidental company. I was not looking to start a company at all. But the genesis of the idea really dates back to the financial crisis. So as you mentioned, I was working as an investment banker. I happened to be in Japan at the time. And as the financial crisis hit, the bank where I worked all of a sudden found itself in peril. And this was a big surprise to many people, because it was one of the largest banks in the world. And so I found myself concerned not only for the welfare and well-being of the bank where I worked, but also for all the cash that I kept in a bank account there. And it occurred to me that if the bank were to fail, every dollar that I kept there that was above the FDIC insurance limit would leave me as an unsecured creditor. And that was a fairly scary position to be in. So I was really just looking for a way to keep my cash safe.
Justin L. Mack: (
Absolutely. So an accidental entrepreneur. I kind of like that. That's a nice thing to trip and fall into. So tell me a little bit about how you set out to solve that problem. Of course, you solved the issue that existed and the environment of the financial crisis that we were undergoing then. And well, one we're kind of undergoing now. It really hits hard for a lot of people. How did you figure out a way to make that work, and how does MaxMyInterest do that for clients and investors today?
Gary Zimmerman: (
Well, when I became concerned about all this cash that was above the FDIC limit, the bank pitched to me the sort of typical broker deposit solution that many people are familiar with. This is sort of the way that brokerage firms have helped clients protect cash for more than a decade. And I guess I'm a little bit nerdy. So I studied it in great detail because, you know, when I think about cash, I think about safety and liquidity. And the more I dug into these broker deposit products, the more I became concerned that they were not necessarily safe and not necessarily liquid either. So I was looking for a better solution. And the simplest thing I could think of was to open more bank accounts directly in my own name. And that way there was no intermediary. There was no broker. It was just me and my own bank accounts.
Gary Zimmerman: (
And that way there was no single point of failure in the system. If one bank were to fail, I would still have access to and liquidity over my accounts at other banks as well. And so it was a pretty simple idea and I just went to go open more bank accounts. The problem is that because I was in Japan, I couldn't just walk around the corner and open up other brick and mortar bank accounts. So I went online and I discovered the sort of early beginnings of online banking. And these are not, you know ... this is not your existing brick and mortar bank with an online portal. These are banks that were built from the ground up to be online only. And what struck me about the online banks is that really what they were selling was a commodity, which is an FDIC-insured savings account. And because of the equalizing effect of FDIC insurance coverage, it didn't matter whether the bank had a physical branch or not. I was protected effectively by the federal government, regardless of where I kept those deposits. And so I spent an afternoon opening as many of these online savings accounts as I could, and then started sending money in all directions so that I would have sort of greater diversity in where I held cash.
Gary Zimmerman: (
And what was sort of interesting about that is that in the process of looking for better safety — more FDIC insurance coverage — I stumbled upon the fact that the online banks paid higher yield as well. And so I was actually getting paid more to keep my cash safer, and that felt really good to me.
Justin L. Mack: (
Definitely a nice double whammy to get in searching for a solution you find: hey, this works really well. It kind of addresses the issue I have of my location being in Japan and being limited in what I can do as far as brick and mortar, but I'm also seeing, you know, stronger interest in what I'm doing. And you start to see the layers of that accidental company starting to be revealed over time. So what was the next step for you when you saw, I'm getting a good return on what I'm doing. My approach, the digital banks are working for me and providing me safety that I feel I don't have because of what's going on in the country. What was the next step for you? How did you actually say, let's make this something bigger?
Gary Zimmerman: (
Well you know, early on it didn't really occur to me that there was anything bigger here. It was just me and my own bank accounts. But I found myself logging into each bank each month to sort of check the balance and make sure that accrued interest hadn't put me over the FDIC limit. And as I was doing that, I noticed that the banks were changing their rates all the time. And I said, well, wait a minute, these are all a commodity, right? An FDIC insured savings account is an FDIC insured savings account. And if one bank is willing to offer me a higher yield than another bank, I should move my money from one bank to another. And so I found myself every month, logging in, checking the balances, checking the rates and then moving funds from bank to bank. And in doing so, I was able to earn higher yield.
Gary Zimmerman: (
And this went on, actually I'm a little embarrassed to admit it, but this went on for about three and a half years. Every month. Log in, check the balances, transfer funds. And I'd moved back to New York. And I was sitting in my apartment one Sunday doing this and I thought, what a colossal waste of my time. I have so little free time, why am I spending it managing these bank accounts? And I was about to stop. And I looked back and I realized I had picked up an extra $40k or so of incremental risk free return. And as someone who'd spent his whole career in finance, you're sort of always looking for that arbitrage opportunity or alpha. That incremental return without incremental risk. And here it was plain as day through an asset class, you know, no more complicated than a regular bank account. And I thought, gee, I wanna keep earning this higher return. But I don't wanna spend my Sundays doing this. I wonder if there's a way to automate what I'm doing. And that was really the kernel of the idea for Max.
Justin L. Mack: (
Fantastic. And yeah, the time you put into it. Even when you describe how it worked, when you were, again, just trying to solve a problem that presented itself in your everyday life, it sounds like a great deal of work and research. And you talked about the nerdy nature of wanting to look more into it, but what kind of time commitment was that for you just in your, you know, day to day life? Trying to figure this out, trying to solve this problem, keeping an eye on things and moving money around through digital banks. Any idea on hours spent doing that each week?
Gary Zimmerman: (
Oh gosh. I must have spent several hours a month doing it and, you know, the return was real. But we all have better things to do with our time, right? And it's very logical that people prioritize spending time with family or friends or working on their career rather than managing, you know, their dollars in the bank accountants. So we thought, why don't we build a robot that can do that for you? And that's what we built in building the MaxMyInterest interest platform. But it turned out there were several big problems we had to solve. And the first one was actually what we think of as sort of our three biggest competitors. Which are awareness, apathy and inertia, right? So awareness is, oh, I didn't realize I could be doing better. A lot of people just take whatever interest rate they're given by their bank or brokerage firm, and just assume that that's, you know, market. But it's not. We found that sustainably, we can generate returns that are much higher than what most people are accustomed to earning.
Gary Zimmerman: (
And we can do so without taking on any risk. So it really is sort of the purest arbitrage we've found in all of financial markets. And it's a multi-trillion dollar market, so there's just a massive opportunity there. So the first is awareness, helping people understand that they could be doing better. The second is apathy because there are a number of people who say, OK, I know I could be earning more, but I just don't care. And we sort of pause and say, really? You really don't care? Because last I checked, you know, you probably negotiated the price of your last car. Last I checked when you picked an S&P 500 index fund, you looked at the expense ratio. So you do care about returns. But it's really the third one, which is inertia.
Gary Zimmerman: (
And this is actually the biggest impediment because people have better things to do with their lives. And so we knew we had to create a system that made it really easy to get set up and really easy to manage your cash on an ongoing basis. And this has been a process. The early version of Max was clunky, took a lot of work to get set up and we knew we could do better. We didn't know how, but we knew we had to do better. So we've spent the last several years working very closely with banks and financial advisors and other experts in the industry trying to figure out how can we take out every last little bit of friction so that anyone who wants to earn more on their cash can do so really easily. And one of the things that we built along the way, and this was actually the subject of our second patent, is something that we call the Max common application.
Gary Zimmerman: (
And it was modeled after the way that students applied to college these days. So I'm a little bit too old. When I applied for college, I had to fill out paper forms for each school. But nowadays, if any of you listening have kids who have applied for college, now you go online. You fill out a single online form, you sort of check the box next to the schools to which you'd like to apply. And they take your, you know, SAT scores and address and name and send it off to all the schools that you're interested in. And we took that same concept and we applied it to opening bank accounts. So today, you can come on the MaxMyInterest website. You can open up four or five new high yield savings accounts in under two minutes, end to end, no logins, no passwords, no trial deposits. We've dramatically streamlined the entire setup. And for financial advisors, we've made it even easier where the advisor can actually pre-fill the forms for the client. So we've just tried to take all that friction away because we don't want anything to stand between people and their ability to do better with their cash.
Justin L. Mack: (
Absolutely. And doing so while giving people back that time that they would lose doing this manually or doing it the way that, well, you did it for quite a while before you created a solution to help people do it a little bit easier.
So we want to thank everyone for tuning in so far, and we're gonna continue the conversation after a quick break and a word from our sponsors, but stick around for more of our conversation with Gary Zimmerman of MaxMyInterest. When we get back into the conversation, we're gonna talk about how this tool is a powerful one for advisors, and maybe any other ideas Gary might have about ... fintech coming in and solving those real life problems a little bit easier than you could on your own. So stick around, be right back after a break.
Justin L. Mack: (
And we are back on this week's edition of the Financial Planning Podcast. We are chatting with Gary Zimmerman, founder and CEO of MaxMyInterest, talking about finding easy ways to help investors make the most out of their hard earned money and how he accidentally fell into that. We talked about that in the first half of the conversation, but let's transition now and talk about how MaxMyInterest is a powerful tool for advisors. In your experience, what's the best way advisors can put this to use to make the most of their client experience and maybe grow their business along the way?
Gary Zimmerman: (
Well, we stumbled upon the advisor community actually quite accidentally. When we launched the Max business, we originally thought that the target audience was, you know ... bankers, lawyers, traders, business owners, consultants, et cetera. And what we found is that, of course, a lot of those people are smart enough to have chosen financial advisors to help them with their planning. And so rather than market Max direct to the consumer, which we don't. We've actually never done any advertising. Instead, what we did is create a way for advisors to lead the conversation with their clients. We want advisors to take credit for this idea and really gain that additional sort of trust and brownie points from their clients for helping them do more on an asset class that probably no one has ever talked to them about. And the way that we stumbled upon this was, we started going to financial advisor conferences. And we weren't there to sell anything.
Gary Zimmerman: (
We didn't even have our product for advisors. And even to this day, we don't charge advisors for the service. But when we went to that first conference, it was really quite instructive because the first conference we went to was a NAPFA conference. And the great thing about NAPFA is these are, you know, registered investment advisors. They're fiduciaries. They care very deeply about their clients. And one of the founders of NAPFA came up to our booth, which was probably pretty pathetic looking at the time, and she said, who are you? And why are you here? And what do you do? And we explained Max to her and she said, this is the single best idea I've heard in 30 years. And she grabbed our little brochures and she ran around, handing them out. And next thing we knew we were five advisors deep for the whole rest of the conference.
Gary Zimmerman: (
And that was a wonderful opportunity for us because, again, we weren't there to sell anything. We just wanted to meet with advisors and understand how they work with clients and whether there was a way that we could be helpful. And there were two things that came consistently. Two things that we heard over and over again. The first was, this is a total no-brainer as an advisor. As a fiduciary. Now that I know about this, I can't not use it. That's a double negative. But you know ... this is clearly great for my clients. This makes a lot of sense. But the second comment that we got over and over again was actually much more instructive and helped ultimately lead the strategic direction of our firm. And that second comment was, gee, this makes all the sense in the world. But my typical client portfolio is only 3% allocated to cash.
Gary Zimmerman: (
So why does it matter? And that, Justin, was the big "aha" moment for us, because all of our research to date had shown that the average high net worth household in America kept about 23% of their assets in cash. So if the portfolio is 3% in cash, where's the other 20%? And the answer is that it's held away. It's sitting in an old brick and mortar checking account, and it's sitting in an old brokerage account that the client's not using anymore. And our view was, you know, as an advisor, couldn't you give better advice to your clients if you could see all of that cash. It may not be in the portfolio and clients don't bring it to the portfolio because they know whatever they bring to their advisor, their advisor is going to fully invest. But clients are much more risk averse than they let on. And they typically hold pretty large balances on the Max platform. We're typically seeing clients with, you know, several hundred thousand to a few million in cash. And as an advisor you might say, oh, that's crazy. No one keeps that much in cash. But in reality, there's a lot more cash out there than you might think.
Justin L. Mack: (
Definitely. And all of that you mentioned. That hidden away cash that the advisors don't know about. I imagine that also is something that if the advisors know about that additional 20%, like you mentioned, it might help not only ... of course, helping clients make the most out of that money that's hidden away in the brick and mortar doing nothing for them. But by being able to open that conversation. Does that help foster, I guess, closeness between client and advisor? Because if a client now feels comfortable telling the advisor about that other 20% and letting them make the most of it, that probably eliminates another barrier that might exist between advisor and client. Have you seen or heard any of that feedback from advisors using Max?
Gary Zimmerman: (
Yeah, absolutely, Justin. And that's exactly the whole point: is that MaxMyInterest enables an advisor to do better by their client and grow AUM at the same time. And the way that happens is really simple, right? We'll have an advisor say, I think my client has $200,000 in cash. And then they'll introduce their client to Max. And two weeks later, we get a call back from the advisor saying that client had $800,000 in cash. I had no idea. And that opens up a broader conversation. Is the client planning for something that the advisor wasn't aware of? Are they more risk averse than they had led on? And might there be other financial products that could actually serve the client better? Cause the funny thing about our business is, we are not proponents of cash as an asset class.
Gary Zimmerman: (
We're not trying to convince people to hold cash. We know they hold cash anyway. The top 4% of the population, which is any household with more than a million dollars of investible assets, which is basically, you know, anyone advised by an advisor collectively. Those six to eight million households nationwide are holding four and a half trillion dollars in cash today. So we don't need to convince anyone to hold cash. We don't think they should be holding as much cash in many cases. And so the beauty of their relationship with the advisor is, we can help advisors uncover held away assets. And then the advisor can have a much more meaningful planning conversation with the client. And in many cases help migrate some of those assets into higher beta asset classes. And so the client can earn more, not only on the amount they choose to keep in cash. But also on the amount that they're able to diversify into other investments.
Gary Zimmerman: (
The advisor grows AUM and gets huge brownie points from their client at the same time. And we've even had advisors call us up and say, you know, I was headed into what I thought was gonna be a difficult fee conversation with my client. I currently charge this client $10,000 a year and I was gonna raise their fee to $20,000. And when I told the client that they were raising, you know, the advisory fees the client said, yeah. But you put me onto Max and it's made me an extra $30,000 already. So yeah, no problem. You've earned your fee. So this is why there's such a, a strong symbiotic relationship with advisors because it's good for the client and it's good for the advisor and everyone is made better off.
Justin L. Mack: (
Yeah. And, and just like you said, knowing more about what the client is doing is so good for advisors for so many reasons. It's funny. It's almost like the advisor is that concerned parent talking to a teenage child. It's like, hey, if you go out, what you're doing with your friends, I don't know what you're doing, but I'd rather you do it at home. So we can make sure that you're doing it responsibly. And same thing here. You know people are gonna hold cash. You don't advocate that they do it, but they're gonna do it. So please do it the right way. Do it responsibly and make the most out of it. Don't just do it and have it do nothing for you. So like you said, makes a good opportunity to have some real conversations and maybe get to know folks on a different level.
Justin L. Mack: (
If you are an advisor and working with someone for years and suddenly find out they're holding a lot more cash than you ever knew existed in their portfolio ... so moving on to something that strikes me is your accidental foray into fintech. And now being integrated with all the platforms that are household names for advisors. Orion, Redtail, Envestnet, you name it. Max is there and you've been, you know, going to conferences and kind of very much part of the fintech family. Not something you set out to do. Just wanted to get your thoughts on, one, entering the fintech space. But more importantly, you're a great example of fintech and everyone says the best fintech solutions are born from solving a real life problem. We described how you did just that. How's it been entering that space? Did you expect to be there? And what's it like being in that space during all the rapid innovation we're seeing today?
Gary Zimmerman: (
Well, you know it's funny, Justin. I think when we started Max, I wasn't even aware of the term fintech. So, you know, the industry has evolved pretty quickly and pretty rapidly since then. We were just trying to solve a problem. And I was originally trying to solve it for myself. And then as I chatted with more of my friends and colleagues, I realized that almost everyone, you know, didn't have a good solution for cash. They were just sort of passively taking whatever their brick and mortar bank gave them. And I was really curious. I guess I'm sort of inherently curious and I like to learn new things. And what made me curious is how is it possible that, you know, here's an $18 trillion market that is so grossly inefficient and could we make it more efficient. And that was really the prime motivating factor be behind starting the company.
Gary Zimmerman: (
I wasn't trying to start a company. I wasn't seeking venture funding. I wasn't doing any of those things. It was really, here's this inefficiency, can we solve it? And what's so gratifying about it now, as we're eight and a half years (or) nine years into it, is that we are actually moving the market and we're moving the market in a really demonstrable way. And what I mean by that is, at the outset, our idea was very simple. We had seen what online shopping and e-commerce had done to the retail industry, you know. Bezos in founding Amazon had a very simple idea, which is a textbook is a commodity. And if I can sell a textbook online rather than through a brick and mortar storefront, I can take advantage of the operating efficiencies and sell at a lower price. And with that lower price point, I'll be able to gain market share.
Gary Zimmerman: (
And he was right. And the reason he started with textbooks by the way is that, one of his board members told me this ... they said that Amazon started with textbooks because people who read are open to new ideas. And I thought, oh, that's like so profound, but it's true. And you know, then they realized that wait a minute, they didn't have to sell the textbooks. They could simply be the marketplace that aligns buyers and sellers of all sorts of products. And that's effectively what we've done with Max. We're not a bank. We never touch any money. All we do is help you discover the highest dealing banks in the country. And then we help clients actively manage their accounts so that they're always getting the best pricing. So I guess where the analogy falls apart is with online shopping: you're making a single point in time decision, much like investing with bank accounts every single day. You keep money in a bank, you're making an active decision to accept their interest rate. So that's sort of how it evolved.
Justin L. Mack: (
All right. And then the last thing I would love to ask you, and I always like to end the podcast with some good vibes, asking people about the highlights. The things that are celebrated or thought about fondly, because we often talk so much about problems that we need to solve and how we're trying to solve them. So for you, like I said, we're coming down on nearly 10 years of MaxMyInterest. Looking back on all your experiences. I don't know if there's anything that stands out to you as your favorite part of kind of being able to transition to this part of the financial services industry and being able to do so many of the things that we talked about today. Strengthening client-advisor relationships. Helping people make their cash make more for them. All the other things we've talked about, but anything stand out to you as that top good vibe moment that when you think back on the transition you've made and say, man, I'm really glad I did that?
Gary Zimmerman: (
My, my favorite thing is our team. And really one of the great privileges of starting a company and running a company is that you get to pick who you work with. So every day you go to work, you're going to work with the people you wanna work with. And our team is really phenomenal. And I think anyone listening was ever interacted with anyone on our team, you know, whether it's Michael Haller and who runs business development, or Sean Haggerty who heads our customer support operations and product. Our engineers. Anyone who anyone's interacted with ... I think you'll find them just to be delightful people. They're really bright. They're super motivated. They're really energetic. And they just, they motivate me every day. I guess, beyond the team, and that's sort of the thing first and foremost in my mind, is the tangible results we're generating.
Gary Zimmerman: (
So one of the ways that we measure Max is how much alpha. How much incremental risk to return are we generating for clients? And in the early days of Max, we were just trying to help people discover the higher yields available through online banks. But over time we figured out how we were driving even greater efficiency in the banking market. And some of the banks started coming to us and said, gee, you know you're saving us so much money because we don't have to pay for advertising. And your customers are higher quality and lower risk. And you know, it's just a much better relationship for us. Can we pay you for those deposits? And we said, no, don't pay us for the deposits. If you paid us per deposit, that would create a conflict of interest. But if you want to, you can choose to pay our customers a higher rate than you offer otherwise.
Gary Zimmerman: (
And some of the banks took us up on that offer and said, yeah, sure, we'll pass along some of these savings to clients. And so we started to get some of the banks on the Max platform, offering preferential rates that aren't available anywhere else. And so fast forward to today, you know, today our top rate is 2.21%. In contrast the national savings average is 0.1%. So we're generating about 211 basis points of alpha over and above a typical brick and mortar bank. But that's not all: if you compare it to the leading nationally advertised online banks, and a lot of those names will be familiar to listeners, the average rate paid by those banks today is 1.54%. So we're delivering 67 basis points higher yield than even the highest yielding nationally advertised online banks. And that's real money, right? Like, you know, 60 plus basis points of alpha is real. No matter what asset class you're focused on. So the ability to actually move the market and create efficiency and deliver that value to our members, both the clients and their advisors is one of the things that is most personally rewarding about this. We can see the real, tangible effect of what we're doing.
Justin L. Mack: (
Fantastic. Well, big shouts out to the entire team over at MaxMyInterest. And Gary, thank you so much again for joining us this week on the Financial Planning Podcast.
Gary Zimmerman: (
Great. Thank you, Justin.
Justin L. Mack: (
Absolutely. And thanks everyone for listening to this week's edition of the Financial Planning Podcast. This episode was produced by Arizent with audio production by Kellie Malone. Special thanks again to our guest, Gary Zimmerman, founder and CEO of MaxMyInterest. Rate us, review us and subscribe to all of our content at www.financial-planning.com/subscribe. From Financial Planning, I'm Justin Mack. Thanks for listening.