Dear fellow practitioners, CPAs, attorneys, and other professionals. Welcome to the tenth edition of our “Dreidel” newsletter about planning and investment issues of US citizens living overseas.

This month Mike Reed talks about the impact of rising rates on your clients’ investment portfolios.

Over the last few years, the rise in interest rates in the US has been painful for new borrowers. This has increased the cost of items such as homes and cars.  There is a flip side to higher rates. For savers it has been a good thing as they are able to earn a higher return on even the least risky assets.  For example, the rate on one year US Treasury bills went from nearly zero in 2022 to over 5% at one point in 2024.  The same can be seen in other fixed income instruments as well, such as Agency Bonds and ten-year US Treasuries.

Rising rates impacts investors in their brokerage and their money market accounts.  Money market rates have also risen to 5% in many cases.  However, some brokerage firms will not put their clients automatically into these higher yielding money markets, leaving them instead in low yielding accounts often paying less than half a percent. In dollar terms, the difference for a $50,000 deposit between earning 0.25% and 4.75% over a year is $2,250.  

While using the lower yielding account may just be an operational oversight on the part of the brokerage firm, they may they have other incentives too. The brokerage firm may be owned by a bank or have a bank attached to it. Client accounts left on the bank side can be used as deposits, which can effectively be counted as capital held by the bank, or lent out to other bank customers.

Even though rates may start to come down in the US, we believe now is still a good time to advise your clients to check their brokerage accounts, 401(k) plans, and retirement accounts to make sure that any cash is being invested in the highest yielding money market or cash equivalent account. It pays to be proactive here.

We are happy to discuss this in further detail. Please contact us to discuss.

Disclaimer Nardis Advisors LLC (“Nardis”) is a Registered Investment Advisory Firm regulated by the U.S Securities and Exchange Commission in accordance and compliance with applicable securities laws and regulations. Registration does not imply a certain level of skill or training. Nardis does not render or offer to render personalized investment advice through this medium. The information provided herein is for informational purposes only and does not constitute financial, investment or legal advice. Investment advice can only be rendered after delivery of the Firm’s disclosure statement (Form ADV Part 2) and execution of an investment advisory agreement between the client and Nardis.