Charles Schwab and LPL Financial fell more than 6% and 7% on Tuesday as attention on Meta's Muse agent grew. A Truist analyst says brokers already rely far less on idle customer cash than they did in the zero-rate era.
Robinhood charges customers a subscription fee for, among other things, a 3.6% annual yield on their uninvested cash. The fact that a broker can sell that as a feature says a lot about how the business of holding other people's money has changed.
That business came under pressure this week. On Tuesday, LPL Financial lost more than 7% and Charles Schwab more than 6%, while Bank of America, JPMorgan Chase and Wells Fargo each gave up more than 3% alongside other brokerages and wealth managers. The KBW Nasdaq Bank index has fallen almost 3% this week, while Meta Platforms, whose new Muse AI agent has climbed to the top of app-store charts, has gained more than 11%.
Traders have treated agents like Muse as a threat to one of finance's quiet advantages: inertia. Customers have long left cash in low-yielding accounts because moving it takes effort. An agent instructed to find the best yield removes most of that effort.
Household savings are thinner as well. The U.S. personal savings rate fell to 2.6% in April, its lowest since 2022, and JPMorgan Chase economists estimate higher energy prices may have taken another half point off it since February.
Loyalty to a single bank is fading. One in eight U.S. bank customers, or 12%, had no single primary account in a recent Simon-Kucher & Partners poll, a share the firm projects could reach 20% by 2029. "The byproduct of that is that customers in general become more rate sensitive," said Abdul Bhatti, a senior director at the firm.
The pressure on deposits predates AI. The Fed's rate increases starting in 2022 reset what cash can earn. Neobanks, stablecoins and Treasury bills packaged as tokens or ETFs now compete for balances. Bankers have told analysts it is getting tougher to hold deposit rates down, and bank stocks have at times moved opposite to interest rates this year on that concern. The fight over whether crypto firms could pay rewards to stablecoin holders, a central issue in the Clarity Act debate, turned on the same competition for cash.
The counterargument is that much of the cash has already moved. With rates high since 2022, customers have had years to shift balances into money-market funds and other higher-yielding options. "Compared to the last zero rate era, [the] cash mix is way down for most brokers," Truist Securities analyst David Smith wrote. "It has already been sorted into higher yielding options."
That leaves two readings of this week's selloff. In one, agents compress whatever cheap cash remains and make future balances more mobile than ever. In the other, the industry already absorbed the big shift in the last rate cycle, and the remaining exposure is smaller than the stock moves imply. Some firms are hedging either way by leaning on fee-based models, as Robinhood's subscription shows.
Third-quarter earnings reports next month will supply the numbers. Sweep cash balances at brokers and deposit costs at banks should reveal whether customers are moving money faster than before, or whether the sorting Smith described is largely done.