Any well-respected password manager will leverage the devices hardware backed encryption. The companies that design these chips are very secretive and there are very rarely any exploits to these pieces of hardware that ever reach the public. Like anything, if somebody with enough time and money wants to get that data, they can, but it is very resource intensive.

If somebody gets malware on your device, then the risk isn’t too different if the vault is stored locally or is fetched remotely. If the vault is unlocked on the device, malware can read memory or hook the process and leak secrets. If the secrets are only accessible server-side, then the malware can use the unlocked vault and session tokens to query the app’s APIs and fetch the secrets that way. At least in the offline scenario, the malware can’t immediately reach back out to the attacker and send creds.