Liquidity for an unexpected life event through a cash distribution is one of the easiest ways to keep a portfolio intact and an investor safe. When an unexpected event requires liquidating shares, the entire portfolio declines if it occurs during a down market. Cash accounts help protect the portfolio against premature liquidation. 

Although 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. Setting cash reserve minimums for each client’s portfolio, specifically for financial emergencies, is easily accomplished with our AdvisorPeak software. Cash account management is one of the ways that advisors can help ensure financial wellness for clients.

Although it is tempting to invest cash that appears to be idle into the market to produce a better return, there is a fourth reason to make cash a permanent asset class:

  • Financial wellness

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. A cash account can also help investors live out their dreams or provide for others. Life-changing opportunities or unforeseen events is what cash accounts can be to your clients- their ability to have financial wellness. 

Often, cash accounts are for reinvesting opportunities and the cash account doesn’t have to “sit idle” 100% of the time. Some part of it or even all of it can be rotated in and out of the market with set gain expectations. So instead of getting 1% or less an advisor can put some of the capital to work on a short term and finite time period and it is then pulled back to cash.

When interest rates are low or effectively at 0%, advisors are tempted to move cash to securities for performance. It used to be that cash accounts rewarded the investor- at least a little. There are reasons that cash accounts should always be present in an investor’s portfolio:

  • Liquidity and opportunity for investing
  • Life events that are planned or unplanned
  • Reduce portfolio volatility
  • Preparing for a slowing Bull market

At AdvisorPeak we feel that maintaining portfolio cash accounts is an opportunity for advisors to deliver financial wellness 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.