The Cash Opportunity for Advisors:

Understanding why clients hold cash

February 2, 2023

Estimated reading time: 5 minutes


Welcome to the second installment of  The Cash Opportunity for Advisors, a series of articles that explores how focusing on cash can help you better serve your clients and grow your business. In the first article, we went back to the basics to define held-away cash and understand how much cash is held outside the portfolio. In this article, we’ll take a look at where held-away cash comes from and why clients hold more cash than their advisors realize, which is critical to understand before initiating conversations about bringing it into the portfolio.


The source of held-away cash

Advisors know that having a complete overview of your clients' financial lives is essential to giving advice. In practice, however, it’s easy for advisors to lose sight of the cash that sits outside the portfolio. These funds usually sit in checking and savings accounts at banks, often earning little to no interest. Advisors don’t regularly discuss these funds with clients, integrate data about them into their tech stack, or look for opportunities to help their clients earn more.

Held-away cash can come from a sudden influx of funds, such as the sale of a business or property, an inheritance, or bonus. In other cases, the cash can be the result of a steady accumulation of funds over time. 

The last few years have taken cash for a ride. The height of the pandemic saw a massive increase in savings, with the personal savings rate reaching 34% in April 2020, resulting in an abundance of cash in the bank. Although inflation has caused savings to take a backseat, with the personal savings rate at 2.3% in October 2022,1 HNW individuals now have unprecedented amounts of cash sitting in the bank. Whether from a windfall or slowly-accumulated savings, these funds are often set aside for a rainy day and forgotten — a lost opportunity for clients and advisors.


Digging into the Why

While many advisors are initially in disbelief that their clients hold 10-20% of their wealth in cash, those numbers become understandable as soon as advisors look at the ‘why’ behind the statistics.


Speaking with clients every day, our Client Support Team frequently hears reasons why people hold cash, including:

  • Household liquidity: cash on hand offers flexibility and convenience
  • Emergency fund: typically 6-12 months’ living expenses
  • "Sleep at Night" money: provides an additional sense of security beyond an emergency fund
  • Dry powder: waiting for an opportunity to invest
  • Fear of entering the market: the opposite of dry powder, more comfortable on the sideline
  • Short-term liabilities: saving for down payment for home purchase, tax bills, or major purchase
  • Inheritance or windfall: common advice is to wait 6-12 months in cash before making changes
  • Reduced overall volatility: while advisors carefully manage risk in the portfolio, many clients – particularly new retirees – are fearful of volatility and keep extra on the side

Each client comes with their own unique story. “Client insight is really important,” said Flourish President Ben Cruikshank. “People care about how much cash they have and money will always have an emotional component. Advisors should make room for that in their client planning, understanding where the cash comes from and what it means to the client.” 

The mindset a person has towards money is shaped by past experiences and influenced by external factors. These can range from a parent’s spending habits or the culture in which they were raised, to living through a significant financial event such as the subprime mortgage crisis, graduating in a recession, or losing a job during the pandemic. Advisors who take the time to consider emotions, motivations, and money mindset will better understand a client's goals and the financial advice needed to help reach them.

Cash increases happiness

Researchers at the National Science Foundation have explored the link between wealth and well-being.2 They found that individuals who have more cash on hand feel more confident about their finances and ultimately more satisfied with their lives. Instead of net worth, income, or investments, the driving force is cash in the bank. 

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© Michael Kitces, Source: How your bank balance buys happiness: The importance of 'cash on hand' to life satisfaction (Ruberton, Gladstone, & Lyubomirsky, 2016).

Even HNW individuals with no debt and significant investments see their happiness increase when a portion of their wealth is easily accessible. As discussed in Michael Kitces’ Nerd’s Eye View, the research concludes that cash in the bank increases a sense of well-being regardless of how much a person earns, invests, or owes.3 Advisors have an opportunity to add value by helping their clients earn more on their cash and increase their happiness, while taking into account the reasons that they hold cash.


For clients who hold smaller amounts of cash, building a cushion through automated savings can put them on the path to increased happiness. Flourish Cash4 offers recurring transfers and SmartBalance, tools that automatically transfer money and enable clients to automate their savings with flexibility and control, while helping RIAs support them in the continued accumulation of cash. “Whether clients have a significant cash reserve, or are in the process of building one, advisors have an opportunity to expand the conversation, helping deliver more value — and maybe even happiness — to their clients. Bringing more assets into their orbit allows for better advice,” explained Cruikshank. 

While the source of cash and the reasons individuals hold it are varied and layered, gaining visibility into held-away cash and considering it alongside the portfolio can have tangible benefits. Once advisors get clear on where held-away cash comes from and recognize that many clients may want to keep that cash in an accessible account, they then can deliver more value to clients by offering them the opportunity to optimize their held-away cash: increasing both the yield and their happiness. 

In the next article, we’ll take a closer look at how putting cash to work can be advantageous for clients, while making it easier to move cash into the portfolio for advisors.


About Flourish

Flourish builds technology that empowers financial advisors, improves financial lives and retirement outcomes, and delivers new and innovative investment options to advisors. Today, the Flourish platform is used by more than 500 wealth management firms representing more than $1.4 trillion in assets under management. Flourish is wholly-owned by MassMutual. For more information, visit


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1 Field, S. (2022, December 1). Americans are saving less – while they spend up a storm. Marketplace. 

2 Ruberton, P. M., Gladstone, J., & Lyubomirsky, S. (2016). How your bank balance buys happiness: The importance of “cash on hand” to life satisfaction. Emotion, 16(5), 575–580.

3 Kitces, Michael. “Buying Happiness and Life Satisfaction with Greater Cash-on-Hand Reserves.” Nerd’s Eye View. April 2017. 

4 A Flourish Cash account is a brokerage account offered by Flourish Financial LLC. The cash balance in a Flourish Cash account will be swept from the brokerage account to deposit account(s) at one or more third-party banks that have agreed to accept deposits from customers of Flourish Financial LLC (Program Banks). The accounts at Program Banks will pay a variable rate of interest.