The average yield on cash sweeps has climbed from 2 bp to 80 bp since the end of 2021, yet balances have fallen consistently quarter over quarter during the same period and 20% overall (see chart). When yields were painfully low across all deposits products, clients had little incentive to move their money out of sweeps. But as rates started to rise in 2022, savvy investors knew better than to leave the traditional 5-7% of AUM sitting in their sweep accounts.
Sweeps Growth vs Client Rates | Dec ‘21 – Mar ‘25
Source(s): Curinos analysis, Curinos Standard Rate Data, S&P Global SNL | Note(s): Growth calculated on total market size and not simple average across institutions | End of quarter values shown | Sweeps rates based on posted rate for $100,000 in cash
Today, firms that continue to pay close to (or less than) the average yield on sweeps have seen their portfolios dwindle, and many wonder how low the floor may go. It’s now not uncommon for clients to hold as little as 2% of AUM in their sweep accounts, just enough to cover fees.
But what if these sweep accounts had similar features to deposit accounts, like direct deposit and bill pay, and offered timely transfers? Many clients would likely sacrifice some yield for a seamless way to transact across cash and investments. Then, it would all come down to determining how rate-sensitive that cash is across client segments.
Once firms understand the inflection point at which the rate differential between sweeps, deposits and money funds becomes less important, they’re in a better position to create a strategic pricing strategy to grow and retain the cash in sweep accounts.
