Cash has struggled to gain the recognition it deserves as a result of historically low interest rates. And while it is true that dwindling rates have dampened the desire to hold cash for some, it is not all bad news. Due to cash’s versatility and flexibility, there remains high value in seeing it as an opportunity for both clients and advisers alike.
Reduced spending during the pandemic has increased the saving habits of many. Unable to leave the home or go on holiday meant that high-income households accumulated the most in saved disposable income. Now savers want to know how to put their money to good use, presenting a need to advise on cash and how it can achieve their goals.
While clients wait to invest their money in other financial assets, their funds could be unprotected or earning next-to-nothing. There lies a time-limited yet crucial opportunity for advisers to recommend risk evading practices or show how to earn additional interest returns. Ensuring your clients’ cash is managed and diversified during the ‘cash to stocks interval’ is a great way to build on trust and enhance client relationships.
Economic turbulence has impacted the mindsets of investors. According to new research from Abrdn, one third of advised individuals want less investment risk than they did before the UK went into lockdown. Enter the famously safer option, cash.
But it does little for its owner when sat in high street accounts. If left to inertia, clients with sizeable sums placed in low interest-bearing accounts could be missing out on substantial returns. Advisers should endorse shopping around for the best deposit rates and encourage keeping up to date with the changing market.
It is widely known that interest rates can be used as a tool to slow down soaring inflation and control consumer prices by encouraging people to save more and spend less. When inflation is on the rise and central banks increase the base rate, it reduces the attractiveness of stocks and so the prices tend to decline. This makes keeping cash a more secure and appealing offering.
Given the inflation climate and the prospect of interest rate hikes, it is now more important than ever to avoid hoarding cash in negligible paying accounts, in order to maximise returns and minimise the impact of inflation. One simple solution for this is to use a tech-led cash management system. Advisers can access the Flagstone cash deposit platform which enables clients to open multiple accounts with different banks through a single application.
High-net-worth clients and businesses will always hold cash as part of a wider portfolio, in any case – whether it be for a rainy day, opportunistic purchase, or emergency stash. A cushion of cash provides peace of mind when the market becomes volatile. Having oversight of the cash that clients hold in savings allows advisers to understand the full picture of wealth and provide holistic, timely, insight-led advice.
In short, advising on clients’ cash is often advising on an existing yet sometimes overlooked asset. By doing so, it can result in better client relationships and lead to new referrals.
Speak to us today to learn more about how Flagstone can help you build better client relationships.