Why advisors should look beyond traditional cash

At this year’s Future Proof Festival, Vanguard’s Brad Collins and Jonathan Wendeborn hosted a small group session on capital preservation, focusing on how advisors can enhance their clients’ cash management strategies in today’s evolving market. The discussion highlighted the shifting landscape of cash vehicles, the growing role of ultrashort bond ETFs, and practical approaches to liquidity strategy.

Here are the key takeaways:

A new cash landscape

Yields on traditional cash vehicles have shifted dramatically since 2020. Money market accounts now offer much higher returns than savings accounts, but most U.S. households still keep the majority of their cash in low-yield checking and savings. Advisors have a clear opportunity to help clients move cash into higher-yield vehicles. In fact, cash management is a $3.5T addressable market among high-net-worth U.S. households.¹

Ultrashort bond ETFs are on the rise

Ultrashort bond funds and ETFs are now the fastest-growing category for cash management, capturing 33% of new cash flow.² Our research shows advisor portfolios have increased allocations to these products, using them to reduce risk and manage liquidity more strategically—especially during market volatility.

Building a tiered liquidity strategy

You should determine the ideal cash weight for each client based on risk tolerance, time horizon, and funding level. Cash and short-term bonds can dampen portfolio volatility, but the allocation size must be tailored to individual needs

 Liquidity strategies should be segmented into three tiers:

• Immediate spending (0–6 months): Treasury bills, money markets, checking accounts.
• Upcoming spending (6–18 months): Ultrashort individual bonds, CDs, TIPS, ultrashort bond ETFs.
• Planned spending (15–36 months): Short-term individual bonds, short-term bond ETFs.

To hear more of our experts’ latest fixed income strategies for today’s market, save your spot for our fixed income outlook event. 

Notes

1 Cerulli Associates. (2025). U.S. Managed Accounts 2025: Prioritizing Tax Optimization.

2 Vanguard Investment Advisory Research Center calculations using data from Morningstar, Inc., as of June 30, 2025.

Important information

All investing is subject to risk, including possible loss of principal.

Diversification does not ensure a profit or protect against a loss.

Investments in bonds are subject to interest rate, credit, and inflation risk.