A Fresh Take on Risk-Free Investing

At its core, wealth management is about long-term, multi-generational relationships built on trust. While products, markets, and strategies evolve, the adviser's primary responsibility has remained constant: protecting client capital.

Historically, advisers have attempted to meet this obligation through conservative portfolio construction, most frequently by relying heavily on bonds. Fixed income was expected to reduce risk, stabilize portfolios, and preserve wealth. Recent experience has challenged that assumption.

During periods of rising rates, most notably in 2024, bond-heavy portfolios experienced drawdowns traditionally associated with equity risk. Duration exposure, long treated as benign, became a material source of capital volatility. Portfolios designed for wealth preservation declined by 20–30%, exposing a growing disconnect between how risk was labeled and how it was realized. There are only so many times when a bond-dominated portfolio can suffer equity-like losses and still be credibly described as conservative.

Advisers juggle many priorities, including client relationships, operations, and growing assets under management. But at the center of any long-term investment strategy is protecting the client's capital. If the principal is permanently lost, other goals are difficult to achieve. Next is liquidity. Investors need access to their money when they need it. Without sufficient liquidity, portfolios may require selling investments at the wrong time. Once capital is protected and liquidity is in place, the focus turns to maintaining purchasing power. Over time, inflation reduces what money can buy. Simply preserving the account balance is not enough if its real value declines. Only after these foundations are addressed does return become the priority. Returns should be competitive while appropriately balancing risk through thoughtful portfolio construction and asset selection.

Cash and government securities have historically preserved nominal principal, satisfying the base of the hierarchy. In real, after-tax terms, however, they have often failed the next layer. Prolonged periods of low interest rates combined with inflation produced guaranteed erosion of purchasing power. Attempts to compensate for this erosion by extending duration introduced a different failure mode: drawdowns large enough to compromise both capital preservation and client confidence. After relevant taxes, the results rarely impress.

Can enhancing a traditional bank account with market returns replace conservative allocations and cash?

The Market Savings sub-advisory program includes two functions that were first introduced in Roman banking law and later reflected in early European (Dutch) banking practice: the secure custody of deposits and the generation of return through separate lending or investment activity. In Roman law, a safekeeping deposit (depositum) did not earn interest. The funds remained the property of the depositor and could not be used by the custodian. By contrast, a loan (mutuum) transferred use of the capital in exchange for return. Custody and investment were legally and economically distinct arrangements. Modern banking blends these functions inside the bank's balance sheet. When a client places funds in a savings account, the bank uses those deposits to make loans or invest in instruments such as Treasury securities. Interest paid to depositors reflects the bank's lending and investment activity, after costs, capital requirements, and margin.

The Market Savings sub-advisory program separates these functions again, and holds two components. 100% of client cash is placed in FDIC-insured bank accounts held in the client's name. The deposit remains fully liquid and accessible at all times and is not invested. The deposit account itself does not pay interest. Instead, return potential is generated separately within the client's investment account through the Market Savings investment program that employs the banks revenues to enhance the yield. The instruments purchased are portfolio-securities, which give the holder the upside of the underlying ETF, but none of the downside, similar to call options. Advisers and clients select from a range of underlying ETFs — including broad equity, gold, and other benchmark exposures — to define the desired market participation.

This approach keeps principal preservation and return generation distinct. The deposit remains stable and liquid, while investment exposure is defined, transparent, and separate from the cash custody function. The objective is not just to eliminate risk, it is also to separate where risk resides and as such, if the cash is withdrawn, the investments don't have to be liquidated but can continue to grow in the program account. By maintaining liquidity and insured custody at the deposit level, while allocating return potential through defined market exposure, the program aligns with a disciplined wealth management hierarchy to preserve capital, maintain access, protect purchasing power, and to pursue competitive risk-adjusted returns.

From a return potential perspective, the program employs a well-researched thesis of equity risk premia (if I take market risk I should be rewarded), which dictates equities will outperform the risk-free rate across time. This has proven to be the case and the US equity benchmarks have outperformed the risk-free rate by around 3 times. Conversely, anyone who has held their cash in bonds and T-bills would have had their gains eaten up by inflation during the same period, after tax.

So, can my clients eat their cake and have it too? Not exactly. It is important to note that building a program with FDIC insurance and 100% liquidity will not participate in the markets to 100%, but it doesn't necessarily have to. It only needs to beat the relevant risk-free rate to be attractive. Here is where the program really excels with a historic outperformance potential over the risk-free rate of 50-70% over time depending on the market regime and assets selected.

The results shown are hypothetical backtested performance and do not represent actual results. Hypothetical backtested results are limited as they are constructed with the benefit of hindsight and may not reflect the impact of material economic and market factors. Actual future performance may be worse or better than the simulated historical results shown.

So, what are the downsides and fees? As with any market-based investment, the returns aren't guaranteed, and the account can yield zero in times when the markets do not perform over longer periods of time. However, for your typical market drawdowns, given the automatic monthly allocations to the underlying asset, the strategy is similar to the well known strategy of dollar-cost averaging, where persistent buying potentially captures drawdowns and stabilizes and improves the final outcomes. More importantly, the deposit is FDIC insured and available intraday, so in periods of lower equities returns the cash can be employed elsewhere and then returned if and when the markets show better potential. There is no sub-advisory fee as costs are covered by the bank deposits revenues. The underlying ETFs retain their standard expense ratios which affects performance and there are no other transaction costs to access them.

Market Savings is a program offered by Save Advisers, LLC. Investments involve risk and may lose value. FDIC insurance applies only to the deposit component; investment returns are not guaranteed. Past performance, including hypothetical backtested results, does not guarantee future results. This material is for informational purposes only and is not an offer to sell or solicitation to buy any security. Please read all program documentation carefully before investing. www.save-technologies.com