With an electric mixer, beat cream cheese and butter together until well blended.
Add powdered sugar a little at a time.
Mix in vanilla and 1-2 tsp. of milk if the frosting seems too stiff to spread. It should be soft and spreadable.
Place one layer on cake plate. Frost top of that layer. Add the second layer and frost top of it too.
Frost sides of cake. Spread the frosting heavily so there's a good bit for the nuts to stick into.
Gather a handful of nuts and smoosh them gently into the frosting on the sides of the cake. Work your way around, gathering up any nuts that fall off. Finish by using a piece of wax paper to gently press the nuts into the frosting.