You don’t have to use a singular bank to this. You have can have numerous banks in and sweep the money around to control exposure to any one bank. A single bank is not the norm for this kind of setup. Sweep accounts are a thing for this very reason.
Using sweep accounts is considered an investment (of client funds), which must be clearly stated in TOS. This also pulls tons of regulations for the company. There is also a higher chance that one of the sweep account investments goes badly than a bank collapses where you hold client funds.
Yeah my first thought was I am absolutely shocked that they used SVB exclusively until 9 months ago. Now they use JPM, but what if JPM has an issue? You would think a payroll company would integrate with at least 2-3 of the bulge bracket banks…
For long term holding, sure. For funds that move in and out in 48 hours? I doubt any bank wants money bouncing in and out like that. They probably pay svb, and now jpm, to be allowed to do that.
