Why cash still matters to advisors

In our previous article, we looked at the reasons why cash still matters for clients. In this second part of the series, we’ll review why cash still matters for advisors. 

Although the Fed has foreshadowed that rates will remain “higher for longer,” with only a handful of rate cuts on the horizon, growth-minded advisors know that concerns surrounding cash are not going away. Even if rates fall from current levels, clients have become far more aware of this piece of the personal financial puzzle than in previous decades, creating an opportunity for advisors to raise this often-ignored subject directly.

And it can pay off. High net worth investors increasingly hold a higher and higher percentage of their total net worth in cash. According to the Capgemini 2023 World Wealth Report, cash and cash equivalents represented an average 34% of overall household assets as of Q1 2023.¹ At the same time, Envestnet reports that while 70% of advisors say organic growth is “very important,” most are not achieving their AUM goals.² Fortunately, by adding a conversation around cash to your client meeting agendas, you can add value, strengthen relationships, and unearth new assets.

1. Everyone holds cash

At Flourish, we believe that every client can benefit from a cash management solution — but all too often, we hear that advisors limit the discussion to the firm’s top clients or those they assume hold large cash reserves. At the same time, when advisors roll Flourish Cash^† out across their client base more broadly, we consistently hear that advisors are shocked at how much cash some clients hold, while even lower-balance clients are often delighted to earn more. Until you’ve had the cash conversation with every single client, it’s impossible to know how much they are holding and why. By adding cash to the quarterly agenda of every household at least once per year, you can be assured that you’re adding value on an asset class that tends to be highly emotional for clients, while creating an opportunity to discover large held-away balances you weren’t aware of. Keep in mind that every single client has cash in a checking or savings account and might be excited to earn more, whether they have $100 or $100,000. And even if they don’t have a large cash balance today, a bonus or other windfall can change that fast. 

2. Unearth new assets and increase wallet share

By starting the cash conversation with clients and offering a true-value add solution for excess savings, advisors have the opportunity to increase their wallet share — i.e., the portion of the client’s net worth that’s overseen by their advisors. The visibility advisors gain when clients move assets from held-away bank accounts to Flourish Cash can directly lead to better planning conversations, whether that’s around short-term goals like a home purchase or tax liability, or around longer financial outcomes.^∆ It can also open the door to a conversation about “how much cash is enough” — which ultimately may result in clients moving assets from Flourish Cash to your custodians.

This isn’t just hypothetical — in net, more than $115M has been transferred from Flourish Cash to custodians such as Charles Schwab and Fidelity since our inception.^|| While for any particular client, funds may flow from custodian to Flourish Cash or from Flourish Cash to custodian, on balance, there’s a strong likelihood that rolling Flourish Cash out across your client base may result in additional assets within a fee-earning portfolio over time.

3. Stepping up organic growth

Prioritizing growth is critical in today’s competitive advisory landscape. And, according to Brad Grubb, Managing Director of DeVoe & Company, you’ll be rewarded. He noted, "RIAs that can demonstrate sustainable, above-average organic growth will continue to earn a premium to their valuations.”³ However, according to Envestnet, most advisors are only averaging 2-3% organic growth per year when market returns are subtracted out.² That’s where Flourish is helping firms expand their services: in addition to unearthing new assets, a significant number of firms leverage Flourish Cash within their overall prospecting efforts. Some firms start by inviting G2 or G3 clients as a lightweight way to deepen family relationships, while other firms invite virtually every “prospect” of the firm — delivering immediate value-add to potential clients while knowing that firm’s logo and branding will be constantly reinforced each time they log in to Flourish. Still other firms focus on businesses and nonprofits, using Flourish Cash to gain an audience with other key executives and board members who may be a fit for advisory services. Expanding share of wallet with existing clients while driving prospecting with Flourish Cash are simple, practical tactics that any advisor can deploy while also reinforcing a more holistic approach that can help you further differentiate your services.

No one ever tires of delivering good news to clients and prospects. By adding Flourish Cash to your firm’s repertoire and offering it to every client, you can quickly distinguish your services, unearth new assets, and deliver more of that good news more often.