And so those things matter. And then lastly, George, I’ll say, from a strategy perspective we are — and we are showing our clients where we are spending on cashing my ships here, Richard, on the Tecatand people are seeing what we’re doing. It’s not like they’re not — as you know, as do press releases for features or clients, so that’s not what we do, right? But folks who are looking at our road map, we’re looking what comes out every month or so, who are looking — and you’ll see some of this over the course of the next 6 months. But but there’s really neat and interesting stuff going on. And what it basically just conveys is that, again, back to an earlier comment that we’re at a place of that relative to some of our competitors and certainly relative to other segments, we are very fortunate to be in a place where we can invest at a time we’re investing in the infrastructure, in the technology, in feature function, in product, actually matters versus a period where there’s not that much new happening.
And so I think the enterprise that really gets to pay attention to that, whereas the small groups kind of don’t. They’re seeing that. And I think you’re going to see it too over the course of the next year or so.
George Hill: Okay. That’s helpful. And I think I knew you weren’t going to give me an answer to the pipeline question, so I have a follow-up, which I also – I’m not sure that you’ll give me an answer to. But given that we talked about kind of the average – well, I know that the company historically is not – you guys don’t think of yourself as in the business of prognosticating rates. However, people in my business are in the business of prognosticating rates. And given where we are in the rate cycle, do you guys ever think about proactively trying to extend duration? Because I imagine a lot of people in my business if we’re looking out 3 years, we probably think the next rate move is down versus up. So just kind of like is there anything that you guys are seeing in the rate environment that kind of makes you want to change the way that you guys think about how you kind of put that custodial cash to work and duration and timing.
Jon Kessler: Yes. So I’m going to give you an answer that is only slightly different than I’ve given to this question before, but the slide is probably relevant. Let me first say the answer we generally give is that we — from the perspective of the instruments and the duration of the instruments in which we have invested in the HA cash world, we’ve not — exactly as you say, we’ve not been prognosticators and we’ve tried to generally hold aggregate duration for liquidity in that kind of 3-, 4-year range. I will say one of the benefits of the enhanced rates product, one of the features that allows us to have some trade-off around this is that we can meet our liquidity needs while the instruments in the portfolio are somewhat longer-term instruments.
And so while that wasn’t particularly designed with a moment like this one in mind, a practical effect of it is to the extent that we’re placing funds, whether it’s at the end of the last cycle or in this cycle and towards the end of this cycle, not by cycle, I mean, year and so forth, we’re going to be locking in that context, higher yields on those placements for an extended period of time. And so I do — again, I want to be thoughtful and cautious in saying that. First of all, when managing the company in expenses, we think about neutral rates because like spending into — and honestly, we’re not actually at neutral yet if you think about it. But I do think there is a practical effect of the way we’re doing this is that it is going to produce more benefit from this cycle than we’ve seen from prior cycles or than we would see if we were just using our same deposit instruments that we have in the past.
George Hill: That was relevant and helpful.
Operator: And our next question today comes from Mark Marcon with Baird.
Mark Marcon: Yes. First of all… You don’t want Macron — [indiscernible].
Mark Marcon: Tyson, it’s been a pleasure working with you. In terms of serious questions, just on the yield moving up so much on the cash, was that partially just due to the enhanced yield product is becoming a bigger portion of the overall deal? Because obviously, Fed funds doesn’t fully explain it. So I just wanted to 100% clarify that?
Jon Kessler: Yes. In addition, I would say, during this period, to the extent we had any bank placements, and they would have been small. We’ve talked about before that the bank placement market is very favorable right now.
Mark Marcon: Great. And then if we take a look at investments, I mean, 23% growth in terms of the investments there. Obviously, there’s been an impact with regards to the overall market. But what are you seeing just in terms of the behavior of the holders? Are they starting to chase additional yield even through like intermediate bond products or anything along that line? Are you seeing any sort of movement from that perspective? And how should we think about that?
Jon Kessler: Yes. Thank you for asking that question, Mark. We — our portfolio offering does include things like ultrashort bond funds, that kind of behave in the same manner as money market, but I think don’t fuzz the distinction between insured by the federal government and not insured by the federal government. And so as sometimes you see with some of what our other folks in the marketplace might do. I don’t think they intend to, but it’s the practical effect. So — and those funds have been quite popular. So I do think there’s an element of this that is investor that is members saying, “You know what, I’d like to get more yield than I can get on cash. I know I’m not going to do anything with it. Let me put it in at least today, tomorrow, I’m willing to give up the clarity of I can swipe my card or whatever, and I’ll put it in some of these products.
I think there’s some of that. I also think that the — every day, there’s an article in the paper that’s — you can decide what the motivation is, but it’s like yes, those 5% CD yields are great, but it still doesn’t beat the stock market over the long term. And so there’s some of that, too. But I think it’s probably fair to say that there’s an element, and that’s a win from our perspective in that — well, sure, on that incremental dollar, we might earn more if it were sitting in cash. That’s a customer that’s going to be more sticky. We’re giving them the product they want. We try to guide them to exactly the product that they’re asking for. If they’re getting capital A advice from us, that’s part of the discussion. I mean it’s — I just think at the end of the day — and it — while our — the rates we pay on cash are determined from a formula, nonetheless, it’s probably the availability of those products in part that has allowed not just us, but the broader industry to kind of keep a lid on custodial expense.
And so I guess I sort of think that’s a win. That’s how I think about it.
Operator: One question today comes from David Larsen at BTIG.
David Larsen: Congrats on a good quarter. And Tyson, it was great working with you. I thought you did a great job guiding the company through a very, very tough cycle. Can you maybe just talk about either Jon or Tyson, the revenue delta on interchange 1Q versus 2Q, it’s obviously down about 13%. And just any more clarity around like the COBRA impact? And if you can describe what exactly that was, that would be very helpful.
Jon Kessler: Tyson, you want to hit Part A of that…
Tyson Murdock: Yes. On the interchange, David, I mean, that’s just the normal seasonality. So we’ve got people essentially spending as they’ve loaded up the HSA accounts in the first part of the year, they’re going to spend more. And then as we move into the summer months, they’re going to spend less as they’re not home spending actually. And so we always get that seasonality through. So you’ll see a Q1 high point, you’ll see a Q2, Q3 softer point. And then as we move into Q4, you’ve got the use it or lose it and you’ve got kind of the remaining funds on those CDB accounts that get used up. And so you see a stronger Q4, and that’s why you see that. And so that seasonality is look a little funny in history. So it is hard to decipher that because the cover effect over quarters in history now, it doesn’t look as smooth as just that seasonality, I explained. So that’s kind of one thing. And then Jon, you’re going to hit the oversight of it and less David has on a roll.
