Uninvested cash: how a small RIA spots it and decides what to do
Uninvested cash builds up in client accounts from deposits, dividends, sales and transfers that were never put to work. A small RIA should compare each account's cash against its model target at least monthly, separate intentional cash (a withdrawal reserve, a client instruction, a pending trade) from idle cash, invest the idle cash or record why not, and check that billing treats cash the way the advisory agreement says.
A new client's transfer lands as $300,000 in cash. The account is linked, the welcome email goes out, and everyone moves on. Two months later, at the first review, the client asks why their balance hasn't moved while the market went up. Nobody decided to keep it in cash. It just never got invested.
Where does idle cash come from?
| Source | Why it gets missed |
|---|---|
| Incoming transfers in cash | The account arrives between rebalances |
| New deposits | No trade triggered when the money lands |
| Dividends and interest | Small amounts that add up over a year |
| Sales for a withdrawal that didn't happen | The cash stays after plans change |
| Bonds or CDs maturing | Proceeds sit until someone notices |
What's the monthly check?
- List accounts where cash is above the model's target by more than your tolerance.
- For each, decide: is this cash intentional?
- If intentional, record why on the account: withdrawal reserve, client instruction, pending trade.
- If not, invest it at the next opportunity and log the trades.
- Check billing treats the cash as your agreement says.
A worked example
Take a hypothetical two-person RIA. In its monthly check, the operations lead finds five accounts over the cash tolerance. Two hold a withdrawal reserve, already noted. One is the client's instruction to keep a year of spending in cash, now written on the account. Two are idle: a new transfer and a matured CD. The advisor invests both that week, the trades go on the blotter with their reason, and the next month's check shows only the intentional cash.
What are the common gaps?
- New accounts sitting in cash after a transfer.
- Intentional cash with no recorded reason, so it looks like a mistake.
- Billing that includes or excludes cash differently from the agreement.
- Small dividend balances left for years.
When is this overkill?
If every account sweeps automatically into a model and you rebalance often, a quarterly check may be enough. If accounts arrive in cash or clients add money often, check monthly.
How Advorra fits
Advorra's portfolio analytics show each account's allocation and concentration, accounts carry their strategy and billing exclusions, and trades are logged on a blotter linked to the strategy. So you can see cash against target and record why it's there. See the product page, or read about raising cash for withdrawals and tracking incoming transfers.
One thing to do this week: sort your accounts by cash percentage and look at the top ten.
An operations routine, not investment advice.
Questions advisors ask
How much cash is too much?
It depends on the model. Compare each account's cash with its target and set a tolerance in your procedures, such as a few percentage points over target.
When is holding extra cash intentional?
When the client needs it soon, has asked for it, or a trade is pending. Record the reason on the account.
Does cash affect billing?
It can. Some agreements exclude cash or money market funds from billing, others don't. Check your agreement and make sure billing matches it.
How often should we check?
Monthly is a good default, plus after any large deposit or transfer.
Is this investment advice?
No. It is an operations routine.
See it on a demo firm
Advorra is practice software for independent RIAs: clients, models, IPS, billing and compliance records in one place, on top of the custodian you already use. Built by The CollabHub.
Get in touch