As more financial institutions find their deposit portfolios shaken by the collapse of Silicon Valley Bank and other institutions, the value of stable deposits has jumped in recent weeks. Couple that instability with a climbing fed funds rate, and banks are looking for additional ways to shore up their core deposits. An excellent route is to target 1031 Exchanges as a high-volume source of commercial deposits.
Our blog on 1031s offers a high-level explanation of like-kind exchanges, the qualified intermediaries (QIs) who facilitate them, and how they can fit into your specialty deposit strategy. If your institution is interested in exploring this specialized industry, there are concrete steps you can take to attract and retain them as commercial clients.
The 180-day window for 1031s may suggest they belong in the time deposit category, like CDs, but that view is incorrect. Indeed, a few 1031s won’t make much of a difference for your deposit portfolio. You need to build relationships with QIs.The 1031 deposits you want to attract only come through a QI, even if that is a QI department you create within your institution, as some banks do. QI firms often handle thousands of 1031 transactions a year, which result in a high average balance when viewed in aggregate. Even during slow economic periods, property investors who favor 1031s are eager to take advantage of lower prices to maximize their income-producing real estate assets.
The 1031 industry follows strict compliance requirements that can vary for states with their own income tax and capital gains rules. QIs are looking for banking partners that understand their business and can provide support in the right areas. If you can meet their business needs and be fair-minded in your negotiations, you’ll go a long way toward winning loyal clients.
If your commercial banking team is ready to add QIs to your specialty deposit portfolio, then watch our webinar on demand. It’s called The art of the possible: Becoming the go-to financial institution for 1031 Exchanges. You’ll hear ZSuite Tech’s CEO and Co-founder, Nathan Baumeister presenting alongside our Chief Client Officer, Jill Feiler. They both have a deep understanding of how commercial bankers can tap new sources of core deposits using niche industries, such as QIs.