Many Americans continue to be economically impacted as our country continues toward recovery from COVID-19. Liquidity for an unexpected life event through a cash distribution is one of the easiest ways advisors can help to keep a portfolio intact and an investor safe. When unexpected events occur requiring investors to liquidate shares to access cash for financial emergencies, their entire portfolio declines if occurring during a down market. With inflation starting and the financial markets responding, clients may need help with cash management, signaling an area where advisors can assist and make a difference.

While some advisors may argue that a portfolio shouldn’t be an emergency fund, there is no better place to keep six months or more living expenses. Cash accounts are tied to an investor’s psyche and can help them stick to their investment strategy through all types of events they may experience. Also, cash accounts help protect the portfolio against premature liquidation. Setting cash reserve minimums for each client’s portfolio, specifically for financial emergencies, is easily accomplished with our AdvisorPeak software.

The two obvious places to save cash are in a bank account such as a savings or checking. However, brokerage accounts provide both savings and investment cash and are a component of a diversified portfolio to help reduce portfolio risk. Cash saved within the portfolio in a brokerage account also provides stability for the portfolio—and the client. Assets in a brokerage account are protected up to $500,000 per investor, including a maximum of $250,000 in cash, by Securities Investor Protection Corporation (SIPC), in the event a SIPC-member brokerage fails.

Investors are more likely to leave cash reserves inside their portfolio for the long-term versus inside a bank savings or checking account because it is often less visible and accessible to them. Here are the most common reasons for cash management in investors’ portfolios:

  • Liquidity and opportunity
  • Reduce portfolio volatility
  • Preparing for a slowing Bull market
  • Unanticipated emergencies
  • Providing cash resources for their dreams

At AdvisorPeak we feel this is an opportunity for advisors to deliver a critical service to their clients. Let us show you how easy it is to manage account cash requirements, distributions, withdrawals, dollar-cost averaging schedules, and more to ensure your clients’ financial wellness through cash management. Contact us today.