What is a Pooled Account?11 min read

What is a Pooled Account?11 min read

A pooled account refers to a banking arrangement where multiple clients’ funds are aggregated or “pooled” together into a single bank account. 

At its core, a pooled account allows businesses and organizations to combine their clients’ financial assets for more efficient banking and investment purposes. 

But what exactly are pooled accounts, and how do they work in practice – especially in the context of digital banking? Let’s take a deeper look.

What Does Pooled Account Mean in Digital Banking?

In digital banking, a pooled account functions very similar to traditional banking – the main difference being that it is managed entirely online without a physical branch. 

With a pooled account, multiple clients grant a designated entity (like a wealth manager or corporate bank) authority over their funds, which are then deposited into a single “master” or “pooled” bank account.

Each client maintains ownership over their portion of money in the pooled account, known as their “sub-account” balance. 

Transactions like deposits, withdrawals and interest allocations are tracked at the individual sub-account level through the use of virtual account numbers and internal accounting methods. 

This allows pooled account providers to offer services like consolidated reporting, interest accrual, and funds aggregation while providing proper client-level segregation of accounts digitally.

In effect, a pooled account allows various parties like investment funds, asset managers or corporate treasury teams to pool numerous clients’ cash into one master account held at a digital bank. 

The funds are then allocated virtually to each underlying client for accounting purposes through the use of technology. This arrangement provides multi-faceted benefits which we will explore later.

What Banking Transactions are Performed with a Pooled Account?

Pooled accounts are very versatile banking tools that enable a variety of financial activities to be performed on behalf of multiple clients simultaneously. 

Some common transaction types conducted through pooled accounts include:

• Receiving and distributing client deposits and investment contributions into the pooled account on a regular basis.
• Settling trades and investment withdrawals back to individual clients from proceeds held in the pooled account.
• Collecting dividends, interest payments and other earnings generated from assets held in the pooled vehicle, and crediting individual clients’ sub-accounts.
• Making periodic fund purchases and redemptions on clients’ behalf and updating their respective holdings.
• Facilitating multi-party domestic and cross-border payment flows into and out of the pooled account for trading activity, settlements etc.
• Allowing for the automated sweeping or pooling of surplus balances between clients’ sub-accounts and the master account for improved liquidity and interest optimization.

As such, pooled accounts offer users a streamlined way to aggregate, manage and deploy client money for various investment and banking needs centrally through a pooled master account structure.

Things to Know When Opening a Pooled Account

If you’re considering opening a pooled account for your organization or investment vehicle, here are some key things you should understand upfront:

Know your account holder type

Pooled accounts can be set up for different entities like investment funds, wealth managers, corporate treasury departments etc. It’s important to confirm your eligibility and comply with regulations for your account holder type.

Choose the right digital bank

Select a digital banking platform that is well-suited for your needs, compliant in relevant jurisdictions, and offers robust pooled account capabilities. World-leading options like The Kingdom Bank provide dedicated pooled account solutions.

Familiarize with account documentation

Review legal agreements like the pooling agreement or master-custodian contract to understand responsibilities, permissible activities, fee arrangements and more. Comply with all disclosure and ‘Know Your Client’ requirements.

Establish proper accounting systems

Have accounting practices like user defined fields, segmented reporting and intra-day position tracking in place to accurately allocate underlying client balances and track internal transactions.

Consider asset segregation

Check if physical or legal asset segregation is offered by the digital bank based on regulations. Understand implications if comingling of proprietary and client assets occurs within the pooled account structure.

Verify oversight & controls

Make sure you have adequate oversight, reviews and technical controls over the pooled account and client sub-accounts to comply with fiduciary duties and regulatory requirements concerning client protection.

By comprehending these aspects upfront, account holders can select an appropriate pooled account that fits their banking needs responsibly and compliantly.

What Advantages Do Pooled Account Holders Benefit from?

Pooled accounts offer multiple advantages that explain their popularity among corporate, investment and treasury professionals. 

Some key benefits of using a pooled account arrangement include:

• Economies of scale – Larger funds provide negotiating power for better interest rates and lower transaction fees from digital banks.
• Efficient cash management – Tools like cash sweeping allow for optimized liquidity and interest maximization between clients’ sub-accounts and the pooled master account.
• Reduced administration – A pooled structure simplifies record keeping, accounting, reporting and compliance for account holders with responsibility over multiple client balances.
• Flexible access to funds – Pooled accounts facilitate faster deployment of aggregated cash into desired investments or payments due to consolidated liquidity versus individual client accounts.
• Regulatory relief – Regulations may be less stringent for pooled client money versus managing each deposit individually, as digital banks provide oversight and insurance on the master account.
• Global portability – Leading digital banks with pooled capabilities like The Kingdom Bank provide streamlined account opening online and allow money movement globally.

As such, the operational and financial incentives have made pooled accounts an indispensable treasury tool for organizations with significant transaction volumes and client money balances to manage digitally.

The Best Digital Bank to Open a Pooled Account

When selecting a digital banking partner well-equipped to handle pooled accounts, The Kingdom Bank stands out as one of the premier options globally.

As a fully licensed bank based in Dominica, The Kingdom Bank provides a full-suite corporate banking platform purpose-built for digital treasury and fund services.

Some key strengths that make The Kingdom Bank an ideal choice for pooled account clients include:

• Dedicated pooled account solutions allowing for layered account structures and full STP processing.
• Robust in-house account management system supporting virtual account numbers and granular client-level allocation of balances.
• Advanced global payment capabilities via SWIFT, SEPA, Fedwire and local schemes for settlement needs.
• Holistic relationship support including multi-currency wallets, virtual cards, access to correspondent banking.
• Industrial-grade security infrastructure and top-tier banking regulations for asset protection assurance.
• Straightforward digital on-boarding experience with no minimum deposit requirements.

With award-winning online banking services across private, business and corporate banking, The Kingdom Bank provides a complete digital banking ecosystem for both internal and client-facing treasury processes involving pooled fund activity.

Pooled accounts are a sophisticated yet practical banking instrument that offer substantial benefits for fund managers, corporate treasury teams and other account holders with oversight over multiple client money balances. 

By implementing pooled accounts through a best-in-class digital bank like The Kingdom Bank, organizations can streamline cash deployment globally for improved results.