Financial Planners Are Telling Clients to Make This Investing Move Before Interest Rates Drop

Investors may want to capitalize on today's historically high interest rates before it's too late. With the Federal Reserve poised to start cutting interest rates later this year, many certified financial planners are advising clients to take advantage of high-yield investment accounts whose APYs are around the highest they've been in years.

An annual survey released last week by the nonprofit CFP Board found that over 40% of planners are recommending high-yield investments such as CDs and money market mutual funds. A good portion are also counseling their clients to avoid certain types of debt in the current high-interest environment.

Investments recommended by financial planners

The CFP Board surveyed more than 670 certified financial planners across the country in February, finding that 41% are telling clients to move their funds into high-yield investment accounts due to current interest rates. For largely the same reason, 28% are also advising people to reduce their exposure to high-interest debt.

Roughly 3 in 5 CFPs also said that clients are more likely in general to start to invest or increase their level of investment thanks to clients’ bullish outlook overall.

High-yield investments tools

The central bank held the Federal Funds Rate at 5.25% to 5.5% at its last committee meeting due to core inflation hovering around 3.2%, still above the target rate of about 2%. Even so, Federal Reserve Chair Jerome Powell indicated that the Fed would likely cut interest rates three times this year.

While that’s good news for borrowers, it also means that the rates on high-yield savings accounts, CDs and other products are expected to level off or drop, too. Rates on CDs, for example, have surged in recent years, with some surpassing 5% or even 6%. These increased annual percentage yields (APYs) have given Americans a rare rate environment to grow their savings and investments over the last couple years.

But these rates aren’t likely to get any higher, and certain products are even seeing APY reductions. Some high-yield CD payouts began dropping in December in anticipation of rate cuts in 2024 — like Barclay’s 12-month CD, which has fallen from 5.5% in January to its current 5%.

That said, rates on high-yield products are still high: Some of the best 12-month CD rates currently range from 4.5% to 5.3%. Other high-yield investment tools like money market accounts and money market mutual funds, aka money market funds, also offer more low-risk ways to earn interest on your money.

CDs are particularly attractive at the moment because their rates are fixed for the agreed-upon length of time, even if interest rates in general decrease during that period. Products with variable APYs, such as savings accounts and money market accounts, can change at any time and are likely to fall when the Fed lowers interest rates.

CFPs are encouraging investors and savers to take advantage of high APYs before rates continue to drop. To get the most out of your investments, you can learn more with Money’s breakdown of the differences between money market accounts and high-yield savings accounts, or our guide to how to ladder CDs.

More from Money:

CD Rates Are Starting to Drop. Is It Too Late to Buy?

Investing in CDs Is Not Exciting — but It’s a Great Move Right Now

Investing Outlook: Expert Predictions for the Markets and More in 2024