[cosmotron]

> Brokerage customers keep ~10% of their assets in cash. The 200 basis point spread between cash in brokerage accounts and money market funds or insured bank accounts [...] is equivalent to a 20 bps asset management fee across the portfolio.

Could someone break this down a bit more? I'm trying to grok the point, but don't have the intuition. Where is the "200 basis point spread" coming from? Why is it equivalent to a 20 bps management fee?

[Iburinoc]

The "200 basis point spread" comes from the difference between the very low or non-existent interest paid on the cash in brokerage accounts and the rates the brokerage can earn by lending that money out basically risk-free. If you keep 10% of your assets in cash, a 200 bp interest spread becomes effectively a 20 bp management fee on your assets.