This video discusses “sweep accounts” and how advisors need to be cognizant of the rates being earned on excess cash in client portfolios in an increasing interest rate environment. The “sweep accounts” at most firms usually give a very low interest rate compared to even money market funds or short term CDs.
Given that the Federal Reserve is expected to raise rates 100 basis points over the next 2 months (with two 50 basis point increases), the difference in money market rates and a custodian’s “sweep account” could be one percent or more in the second part of the year. Not saying it is the biggest deal in the world, BUT clients expect us to be paying attention to these things especially if excess cash is in the portfolio.
Author
John