Where to Park Your Clients' Cash Now

In September, Vanguard tackled the cash question, noting that most U.S. households keep the majority of their cash in low-yield checking and savings accounts, even though money market accounts generally offer higher returns.

Moreover, citing a Cerulli Associates study, Vanguard said that cash management is a $3.5 trillion addressable market among high-net-worth American households.

The fastest-growing segment for cash management? Ultrashort bond funds and exchange-traded funds, which captured 33% of new cash flow as of mid-2025, according to Vanguard.

"Our research shows advisor portfolios have increased allocations to these products, using them to reduce risk and manage liquidity more strategically — especially during market volatility," Vanguard's fixed income experts wrote.

The giant asset manager suggests that advisors figure the best cash weight for each client and place assets into three tiers — immediate, upcoming and planned spending.

Specifically, Vanguard recommends:

• Treasury bills, money markets and checking accounts for immediate expenses
• ultrashort individual bonds, certificates of deposit, Treasury inflation-protected securities and ultrashort bond ETFs for upcoming expenses
• short-term individual bonds and short-term bond ETFs for planned expenses.

How Some Pros Do It

So what are financial pros actually doing? I recently talked to investment leaders about how much clients should hold in cash and cash equivalents, and with a cash-management platform executive about ways that advisors can find products that offer wealthy clients higher yields and reduced risk.

Ryan Detrick, Carson Group's chief market strategist, told me in an email that a 2% to 4% cash allocation "makes sense in today's environment and we'd recommend sticking with money market funds, probably just simple ETFs.

"Twenty years ago it was simple for advisors, as bonds would give you diversification from stocks. When stocks historically zigged, bonds zagged. Well, that hasn't been the case really since post-Covid, as 2022 was the first time in history stocks were in a bear market and bonds didn't provide major protection," he added.

"We are suggesting to have more of an allocation in 'the other stuff' away from bonds and into gold, managed futures, and some cash," Detrick said.

The traditional 60% stock, 40% bond allocation "isn't what it once was, as bonds haven't given much diversification the past several years," he explained.

Carson suggests a 60/30/10 split, with 10% of the portfolio in gold, cash and managed futures.

"As we like to say," Detrick added, "in this type of environment you should diversify your diversifiers."

Jamie Battmer, Creative Planning's chief investment officer, offered another view.

"Pertaining to true cash, we maintain a sub 1% — ideally even lower than that — exposure on behalf of our clients.

He called "cash is king" a myth peddled by Wall Street.

"The historical empirical data and academic research paints a different story," Battmer told me in an email.

"Cash feels good, it has always been positive, but when you factor in the impact of inflation for nearly 100 years, cash has only generated about 0.3% in real annualized returns. Cash isn't king but rather just a financial gateway to sub-optimal outcomes." he said.

Creative Planning customizes all portfolios to clients' specific needs, "so it is not for every client, but typically there are high-quality surrogates in cash-like vehicles like Treasurys," Battmer added.

An Untapped Opportunity?

Some service providers argue that advisors may be missing big opportunities when it comes to clients' cash holdings.

Flourish, a fintech offering high-yield products to RIAs, reported two years ago that these holdings are "vastly underestimated." While advisors surveyed estimated that their average client holds 7% of their net worth in cash, the number for HNW individuals really comes to more than 30%, the firm found.

The survey also found that only 5% of advisors regularly asked clients about their cash holdings.

More recently, MaxMyInterest, a 12-year-old platform offering RIAs access to Federal Deposit Insurance Corp.-covered high-yield savings products for clients, found in a study that "actively managing cash can generate real alpha," according to a summary by Michael Halloran, the firm's partnership and business development head.

Max, over multiple periods, "far outperformed the leading U.S. online banks individually, and as a group, by a wide margin," according to the report.

"Max has helped individual investors generate more yield than they could have earned on their own," the summary notes, "even net of Max's annual cost of 0.16%, all while keeping funds FDIC-insured and same-day liquid in their own bank accounts."

In a recent interview, Halloran told me that with the market so heavily invested in a few technology companies, clients are looking to diversify. And cash held outside the portfolio can help reduce risk and improve returns, he said.

"There is a sentiment I hear from a lot of advisors that diversification is a topic that has come up with increasing frequency. The benefit of holding cash outside of your portfolio is that it gives you a cash buffer that should the market decline as it did in 2023, that it creates a much greater sense of confidence among the client that they can weather the storm no matter what the market does," Halloran said.

Portfolio cash is typically held at the custodian and used for sales, trading and liquidity, he noted, adding that people generally don't chase yield with cash used for safety and liquidity, which goes into vehicles like Treasury and government-only money market funds.

"What is often overlooked is that the portfolio cash just represents a smaller portion of the client's overall cash holding," he added.

Typically, high-net-worth clients also have a relationship with a private bank and many with large money center banks, Halloran said.

This "held-away cash," he said, presents "one of the greatest opportunities to help clients reduce risk as well as increase their return."

His Max platform, he noted, allows advisors to place client assets in multiple FDIC-insured accounts so they don't exceed the $250,000 coverage limit.

Halloran pointed to a more emotional aspect of the cash issue, one found in a research study that Michael Kitces, the financial planning authority, cited in a column years ago: Having a good amount of cash at the ready makes people feel better.

"No matter how much total wealth and income we have, we're just not as happy unless it's also accompanied by a healthy pile of cash," Kitces wrote. "Rather than always encouraging clients to fully deploy their available cash, perhaps instead it would be better for advisors to start by asking clients 'how much cash do you need to hold to feel comfortable and sleep well at night.'"