Uninvested cash, Harris said, is too often an afterthought to wealth managers more concerned with dividing investors' portfolios up among stocks, bonds and other standard investments. That's a mistake, he said.
"Financial advisors have not been trained to think about cash as anything other than protection," he said. "When anyone talks about the highest level of running a portfolio, the question is, 'OK, what is the stock-to-bond split?' Is it 60-40? Is it 70-30? But it's not stocks, bonds and cash equivalents, which is what the question should be."
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Harris, who also founded the digital advice provider Personal Capital, is himself adding to the array of products offering strong payouts. His latest venture, Evergreen Money,
The product, officially Liquid Treasuries, moves cash into short-term Treasuries, offering investors a return of 5.31%. Depositors can pull their money out using checks, debit cards, ATMs or other means commonly found with regular checking accounts.
Harris naturally favors his own product — noting that Treasuries offer an additional boost to returns because their interest earnings aren't subject to state and local income taxes. But whether investors choose to go with Liquid Treasuries or not, Harris said far more people could still do more with their cash.
'Dumb money'
To be sure, investors haven't been oblivious to the opportunities offered by high interest rates. The Investment Company Institute reported earlier this month that assets in money markets have hit a record high of $6.12 trillion.
But Harris thinks investors could still fare better. Using data culled from the Federal Reserve, U.S. Census Bureau and similar sources, he estimated Americans lose out on $283 million in possible interest earnings every day, simply by leaving their money in regular checking accounts offering miniscule yields.
"The banks, in public, they call it lazy money," Harris said. "In private, they call it dumb money."
Investors are starting to question large institutions' handling of their cash reserves.
The cash trap
Many of the legal actions make much of the fact that investors could be receiving better returns from money markets and high-yield savings accounts. But even with those sorts of vehicles paying their highest rates in years, advisors aren't necessarily convinced clients should be dedicating large parts of their portfolios to cash.
J.P. Morgan Asset Management has been
David Demming, the founder and principal of Demming Financial Services in Aurora, Ohio, said he believes the high interest rates now propping up many high-yielding money markets and savings accounts will eventually come back to earth. Before that happens, he'd rather have clients lock in current high rates by putting their money into Treasury notes or municipal bonds maturing in two or three years.
Demming had no prediction for
"We just think interest rates from now will be lower than they are today and, as a consequence, leaving cash in a bank account or money market will provide a rate of return that will probably be considerably lower a year or two from now," Demming said.
That's not to say clients shouldn't have cash on hand for emergencies, unplanned purchases or for things like vacations. And if cash is going to be kept around for those purposes, he said, there's no reason it shouldn't be held in accounts or funds offering the highest yields.
"If you say, 'I'm going to set money aside to remodel a bathroom,' we're going to put it in a money market and let it earn interest," Demming said. "And then you can call us and we'll move it out into your bank account."
Fiduciary duty
Ashton Lawrence, a director and senior wealth advisor at Mariner Wealth Advisors' offices in Greenville, South Carolina, agreed that advisors with clients who are heavily invested in cash need to consider the likelihood that interest rates will start coming down. To offset the risk of declining yields, he suggested they consider short-term bonds, dividend-paying stocks and income structured notes, a type of debt obligation.
Lawrence said he thinks advisors' fiduciary duty to look out for clients' best interests extends to making sure they're putting their cash to the best possible uses.
"This includes recommending the movement of funds from low-yielding accounts to higher-yielding money market or savings accounts when it aligns with the clients' goals and risk tolerance," he said.
Peter Crane, the president of the money-market tracker
"It's going to be quarter by quarter, and it's going to be gradual," he said. "If the Fed cuts one time, you are going to have plenty of time to think about reallocating and trying to lock in some yields."
