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What does ADM do?
We offer businesses a higher return on their cash balances while keeping it safe and liquid. Currently, our accounts are earning almost 7x the national average money market fund, with less risk and over-night liquidity.
How does ADM provide a higher return with lower risk?
We have a network of small community banks who we’ve developed relationships with. These banks often need deposits to fund their businesses and are willing to pay ADM competitive rates for access to large amounts of funds. We can then pass on this higher rate of return to our cash clients.
By bridging the gap between cash clients and bankers, ADM is able to provide a safer and higher return for cash clients while supporting local communities across the country. It’s a pretty cool business model, if you’re financial geeks like us.
I can deposit my cash into a local bank. What is the advantage of working with ADM?
You can! There a just a few disadvantages to that.
- Lower return. It’s unlikely that your local bank is offering the most competitive rate in the country. And even if they are, it likely won’t be for long.
- Increased risk. There’s additional counter-party risk in working with just one (or only a few) bank partners as compared to an ADM, such as limited FDIC coverage. Cash deposits with any one bank are only covered by the FDIC up to $250,000. In working with ADM we can expand FDIC coverage up to $50,000,000.*
Is ADM a mutual fund?
No. A mutual fund by definition is a pool of money invested in securities such as stocks, bonds, and other assets. All of the assets, no matter how safe carry some market risk. Meaning, there is a possibility to lose principal value. A dollar in doesn’t always mean a dollar out.
ADM accounts are deposit accounts with one (or more) financial institutions. Deposited funds are not pooled and invested in other assets, they are deposited as cash with a bank.
What is the difference between ADM and the Wisconsin LGIP?
The Wisconsin LGIP is a pool of funds. Meaning the cash invested in the pool is commingled with other funds and invested in other assets like bonds. ADM deposit account funds are not pooled together and are not invested in other types of assets. This means ADM cash deposits carry less risk than the cash invested with the LGIP.
If there is no market risk, does that mean my cash deposit with ADM has zero risk?
In life nothing is free and everything has risk. While ADM offers a zero market risk deposit account option, it is not risk free. We’ve just found a way to reduce the counter-party risk that exists for all deposits, even banks.
What is counter-party risk?
By definition its the risk that one party of a contract will not live up to its contractual obligations.
When depositing cash in one bank there is risk that the bank won’t be able to pay out the funds when requested. This is called “a run on the bank,” and is counter-party risk.
A deposit with ADM diversifies the cash across multiple banks and that reduces the counter-party risk.