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Brokerage Cash Yields Expected to Decline, but Some Firms Still Offer Competitive Rates

As the financial landscape shifts, brokerage firms are anticipated to reduce the yields they offer on idle cash in the latter half of 2025, prompting investors to explore alternative options for their uninvested funds.

Despite the Federal Reserve maintaining its target interest rate range at 4.25% to 4.5% since December 2024, with no immediate cuts expected at the upcoming July meeting, several brokerages have already begun lowering their cash sweep rates—the yields paid on cash not yet allocated to investments.

This trend is expected to intensify as the market anticipates two to three rate cuts in 2025 and an additional two to three in 2026. However, select firms continue to provide attractive yields, offering opportunities for investors seeking to maximize returns on their cash holdings.

The Decline in Cash Sweep Rates

Brokerages are adjusting their cash sweep programs, which hold uninvested client funds, in response to the anticipated monetary policy shifts.

For instance, Raymond James Financial recently reduced its rates by five to 25 basis points, depending on account size.

Clients with cash balances under $250,000 now earn a modest 0.15% annual percentage yield (APY), while those with accounts holding $10 million or more can secure 2.28% APY.

Bank of America’s Craig Siegenthaler notes that these reductions are likely to continue. The market’s expectation of multiple cuts over the next 12 months suggests that cash sweep rates will face further downward pressure.

Lower cash sweep rates serve a dual purpose for brokerages. First, they encourage investors to deploy idle cash into investments such as stocks, bonds, or mutual funds, aligning with the firms’ business models.

Second, reduced yields help mitigate the impact of Federal Reserve rate cuts on brokers’ net interest margins and overall income.

As rates decline, the spread between what brokerages earn on client funds and what they pay out narrows, affecting profitability. This dynamic underscores the importance of investors staying proactive in managing their cash to optimize returns.

Where to Find Competitive Yields

Despite the broader trend of declining rates, several firms continue to offer compelling yields on cash. Here are some top options:

• eToro’s High Interest Cash Program currently provides a 4.3% interest per year.

• Vanguard’s Cash Plus Account offers a 3.65% APY, down 25 basis points from earlier in 2025. Notably, the elusive 4% APY remains available at select firms.

• Robinhood Gold members and clients of Robinhood Strategies, the firm’s investment advisory service, can earn 4% on uninvested cash, providing a rare opportunity to secure a robust return in the current environment.

However, investors should remain cautious, as brokerage firms can adjust rates at their discretion, often with little notice.

Additionally, while these yields are attractive in the short term, they may not keep pace with inflation over extended periods.

For those seeking to preserve purchasing power, alternative vehicles like certificates of deposit (CDs) may offer a more stable solution. For instance, Popular Direct provides a 12-month CD with a 4.3% yield, while Bread Financial offers a comparable CD at 4%.

These options, though less liquid, allow investors to lock in higher rates for a fixed term, shielding them from the volatility of brokerage rate adjustments.

Strategic Considerations for Investors

The anticipated decline in cash sweep rates highlights the need for investors to reassess their cash management strategies.

Idle cash earning minimal returns can erode wealth over time, especially in an inflationary environment.

Moving funds into higher-yielding investments or fixed-income products like CDs can help mitigate this risk. Moreover, the potential for Federal Reserve rate cuts to accelerate in 2026 underscores the urgency of acting swiftly to capture current yields before they diminish further.

Investors should also consider the broader implications of rate changes on their portfolios. While cash sweep accounts offer convenience, their declining yields may not justify the opportunity cost of leaving funds uninvested.

Exploring options like high-yield savings accounts, money market funds, or short-term bonds could provide a balance of liquidity and return. Additionally, working with a financial advisor can help tailor strategies to individual goals, ensuring that cash allocations align with long-term objectives.

Broader Market Context

The shift in brokerage yields occurs against a backdrop of evolving market dynamics.

As reported, the stock market is showing signs of potential pullbacks in technology sectors, while certain brokerage stocks are poised for growth. Meanwhile, income-focused investors are finding opportunities in bonds, despite their challenges.

These trends suggest that investors must remain agile, balancing cash holdings with strategic investments to navigate the changing financial landscape effectively.

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