Raising cash for a client withdrawal: a simple routine for small RIAs
When a client needs cash, a small RIA should confirm the request through a known contact, check how much cash is already in the account, decide what to sell so the account stays close to its model, allow time for trades to settle before the money moves, and record the request, the trades and the reason on the client's record. For regular withdrawals, hold a cash buffer so you aren't selling every month.
A client emails on Tuesday: they need $40,000 for a roof repair by Friday. The advisor sells a fund that afternoon, the transfer goes out, and everyone's happy. Then at the next rebalance the account is well off its model, the sale wasn't the one the advisor would have picked with more time, and nobody wrote down why it happened.
What does the routine look like?
- Confirm the request by phone using the number on file, especially if it came by email.
- Check the cash already there. The account may already hold enough.
- Decide what to sell. Usually what's most overweight against the model; in taxable accounts, consider gains.
- Allow for settlement. Sales need to settle before the money can leave.
- Stop it being reinvested. If a rebalance is due, place a short hold or a note on the account.
- Record it: the request, the trades, why those holdings, and when the money left.
How do regular withdrawals change things?
| Approach | How it works | Watch for |
|---|---|---|
| Sell each time | Raise exactly what's needed each month | Many small trades, drift from model |
| Cash buffer | Keep a few months of withdrawals in cash; top up at rebalancing | Cash drag; make sure billing treats cash as your agreement says |
| Model with a cash target | The model itself includes a cash allocation for this client | Needs its own documented reason |
A worked example
Take the roof repair at a hypothetical two-person RIA. The assistant calls the client to confirm. The account already holds $6,000 in cash. The advisor sells $34,000 from the two holdings most overweight against the model, so the account ends up closer to target, not further away. A note on the account stops the next rebalance reinvesting the cash before it leaves. The trades go on the blotter linked to the client's strategy with the reason "client withdrawal, roof repair", and the transfer goes out after settlement.
What are the common gaps?
- Selling the first holding that comes to mind, then fixing the drift later.
- A rebalance reinvesting the cash before the transfer goes out.
- No record of why a trade happened, so it looks like a model trade gone wrong.
- Acting on an emailed request without confirming it.
When is this overkill?
For a tiny one-off withdrawal from plenty of cash, a note on the record is enough. For anything that needs a sale, follow the routine.
How Advorra fits
Advorra logs each trade on a blotter linked to the account's strategy, with an exception queue for trades outside the normal pattern, and accounts can be put on trade hold. So a withdrawal sale carries its reason and doesn't look like a model trade gone wrong. See the product page, or read about verifying client money instructions and trade holds.
One thing to do this week: list the clients who take regular withdrawals and check each has a cash plan you've written down.
An operations routine, not investment or tax advice.
Questions advisors ask
How much notice should clients give?
Ask for a few business days where possible, so trades can settle before the transfer. Explain this at onboarding.
Which holdings should we sell?
Usually whatever brings the account back toward its model, taking account of taxes in taxable accounts. The decision is the advisor's; record the reasoning.
What about regular monthly withdrawals?
Many firms keep a small cash reserve in the account for upcoming withdrawals and top it up at rebalancing, rather than selling every month.
Should the account be on hold while this happens?
If a rebalance might run before the withdrawal, a short trade hold or a note stops the cash being reinvested.
Is this investment or tax advice?
No. It is an operations routine. Tax decisions belong with the client's tax adviser.
See it on a demo firm
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