Cash is Back as an Asset Class

In financial market time frames, the now deceased era of easy monetary policy lasted for what feels like an eternity.

From the end of the financial crisis through the coronavirus-induced bear market of 2020, global central banks, including the Federal Reserve, kept interest rates low. That was great for bonds and risk assets. In the U.S., a long run of accommodative monetary policy powered a lengthy period of out-performance by growth equities. Along the way, cash investments became nearly irrelevant.

Fast-forward to 2022. Interest rates are rising, depressing bond prices in the process. Equity market volatility is on the rise and inflation is soaring, sapping equities along the way. Translation: Cash may be king again. At the very least, it’s certainly relevant and StoneCastle Cash Management (“StoneCastle’’) is helping advisors provide superior cash solutions to clients, without introducing principal or liquidity risks.

FICA For Advisors is an independent, high-yield, federally insured cash account that enables advisors to capture and protect client wealth.  The combination of its high levels of FDIC insurance, competitive rate, and liquidity helps advisors fulfill their fiduciary responsibility in presenting a cash solution that uniquely addresses their HNW clients’ savings/investing cash needs.

StoneCastle: Fortress for Cash Ideas

The now bygone era of slack monetary policy made it easy for advisors to ignore cash. With cash investments paying such scant yields, what was the point of embracing it while risk assets were soaring?

As a result, many advisors forgot how to or aren’t even schooled in conversing about cash with clients. As StoneCastle Managing Director and Head of Marketing Frank Bonanno points out, advisors that aren’t conversant in cash could be missing out on significant opportunity, particularly with high-net worth (HNW) clients.

“Advisors aren’t managing cash and many are not speaking with clients about the massive buildup of held-away cash,” says Bonanno. “HNW clients have deep excess cash reserves. Some are holding up to 25% of their assets in cash and, often times, advisors don’t know about that cash.”

By teaming with StoneCastle, advisors can become fluent in cash while opening doors to adding value for affluent clients. Part of StoneCastle’s “secret sauce” boils down to the marriage of FDIC insurance and efficiency.

As advisors know, the FDIC insures cash deposits and money markets at traditional banks, but that insurance only extends to $250,000 per account. In other words, a client with $5 million in excess cash needs to place that capital into 20 different bank accounts in order to gain FDIC protection. That’s not efficient and it makes for dizzying record keeping. StoneCastle removes that burden and keeps that cash under the advisor’s purview.

“Cash should be a riskless asset,” adds Bonanno. “StoneCastle leverages a network of more than 900 banks to provide FDIC protection on cash up to $25 million per tax ID, presenting advisors with an effective avenue for protecting wealthy clients’ cash.”

All-Weather Solution

With FICA For Advisors, advisors gain an all-weather cash solution that isn’t just relevant in the current market environment, but one that checks the boxes of FDIC protection, robust liquidity and competitive interest rates – a potentially compelling combination for HNW clients looking to skirt interest rate risk and equity market turbulence.

“A lot of advisors are returning to cash. Cash as an asset class is back,” says Bonanno.

With that in mind, now is an ideal time for advisors to up their client service games and bring more value to wealthy clients.

To learn more, please visit by StoneCastle website.

Related: It’s Time to Talk About Cash with Frank Bonanno