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It is a great time to regain some of the cash reserves that clients have been hoarding in bank accounts.

Since 2008, many clients have been holding higher-than-usual reserves in banks because money market yields were so low. But that is changing, and we can thank good old Treasury bills.


Interest rates are creeping higher and are expected to continue to do so. Not only is this move a good way for advisors to get money onto their custodial platforms, but clients will be able to earn more on their reserve capital than they have in years.

For example, a six-month Treasury bill yields 2%. Cash accounts at banks, on the other hand, generally are yielding 1% to 1.5% or less.

Two percent may not sound sexy, but when I tell clients about this return they think it is an amazing deal. That is because short-term rates plummeted and stayed at almost zero after the global financial crisis of 2008 to 2009, followed by years of the Federal Reserve’s quantitative easing.

But with inflation ticking up in recent months and the Fed raising rates, the short end of the yield curve has climbed to levels close to those offered by longer-term Treasurys.

The 10-year Treasury note, for instance, pays about 3% in annual interest. That means investors get only about 1% of additional interest for holding it for the full 9 1/2 years beyond a 6-month Treasury bill.

My recommendation to clients is to start taking a little more rate risk, but don’t extend too far out in maturity because they aren’t getting compensated for moving out on what has been a relatively flat yield curve of late.

Whether advisors should charge a fee for holding 6-month Treasury bills is up to them. Some may want to hold them on their books as a courtesy to clients.

For most clients, especially those without pressing or upcoming needs, only a very small portion of their portfolios should be in cash.

Unfortunately, spooked by the banking bailouts of 10 years ago and the subsequent stock market decline, many have been flocking to the safety of cash for years. It is time to change that mindset, and that is already happening.

In recent weeks many people have begun switching back into the market. ETFs devoted to short-dated Treasurys have seen huge inflows.

The bottom line: For advisors, it is a great time to collect customer assets from low-yielding bank accounts, get them under their control and get ready for the next inflation-driven opportunity.

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