Industry research highlights a significant opportunity for UK IFA firms to apply the same cash management principles they recommend to clients within their own businesses
One in five IFA firms now uses a cash deposit platform to manage their reserve funds and three quarters see value of a platform to access the best rates without too much effort
Flagstone’s latest quarterly poll of UK IFA and wealth management firms* has found that the majority are yet to maximise the income generation potential of their own cash reserves using widely available cash management techniques.
11,000 UK small and medium-sized businesses now rely on Flagstone to maximise the return opportunity and risk protection on their cash reserves. Knowing that many of these businesses come to Flagstone through their advisers and accountants, Flagstone wanted to explore the tendency by financial advisers themselves to actively manage their firms’ cash for better returns and risk protection.
The findings were illuminating:
More than half (56%) of UK IFA firms earned 2.00% or less on their cash reserves in the last 12 months
Only 6% of firms earned over 4.00%
Fortunately, only 4% of IFA firms say they do not know how much interest their cash reserves earned
A crucial explanation for why such a large proportion of IFA firms are earning so little on their cash can be found in where these reserves are held:
Almost half (45%) of IFA firms keep most or all of their cash reserves in a business current account
More than two fifths (41%) only hold cash reserves in instant access business savings accounts
Business current accounts are renowned for their scarce interest payments. Analysis of the 49 business current accounts currently listed on Moneyfacts shows that only six of these accounts offer interest payments, while 26 charge account fees**. Likewise, instant or easy access business savings accounts are seven times less likely to offer the most competitive interest rates to customers: analysis of business savings accounts on Moneyfacts shows that only 3% of the 101 instant access business savings accounts currently offer rates of 4.00% or over, while 20% of 172 fixed-term business savings accounts do the same***.
John Martin, CPO at Flagstone, comments: ‘This data strongly suggests that these firms haven’t, in the main, the time or resources to take advantage of the wealth of high interest options available to them as SMEs. That’s where low-friction solutions come into their own. A high base rate and stubborn inflation mean that the proliferation of high interest business savings options that would make an IFA firm’s cash work harder remains high.’
37% of IFA firms observe FSCS rules in relation to their firm’s cash reserves, but this small proportion doesn’t suggest a widespread disregard for FSCS protection. In fact, 51% of IFA firms have £120,000 or less in cash reserves making FSCS adherence non-essential, and the data suggests that only one in ten (9%) IFA firms have more than £120,000 in cash but do not observe FSCS protection rules. Yet, the data also reveals that at least half of this unobservant cohort (5% of all firms) don’t observe FSCS for the reason that overseeing separate bank accounts is ‘too time-consuming’.
A fifth (19%) of IFA firms told Flagstone that they manage their cash reserves in a combination of instant access, notice and fixed term business savings accounts. The same proportion (21%) use a cash deposit platform like Flagstone. Encouragingly, more than seven in ten (73%) acknowledge that a cash deposit platform would help them to access the best rates for their cash without too much effort, and nearly a third (31%) say that use of a platform would help them ‘practise what they preach’.
Mark Windsor, Director of Premier Financial Services, comments: "I had a sudden realisation that my own practice's cash was sitting in the bank earning next to nothing, while I was advising clients to do exactly the opposite with theirs. Moving to a cash deposit platform meant much better interest, stronger FSCS protection, and everything in one place rather than juggling accounts. It's easy to use, easy to check on the app, and now it's exactly the kind of solution I recommend to clients who hold higher levels of cash themselves."
Flagstone’s John Martin: ‘High proportions of IFAs see the value of better cash management and even recognise the benefits of cash deposit platforms to help them achieve better returns amid higher risk protection. That means that now greater work needs to happen to convert that ability to see the benefits into real action to take advantage of them.
‘IFA firms aren’t immune to the pressures facing SMEs throughout the UK: high business rates and employment costs, and late payments are universally challenging. Just as they advise their clients to make shrewd financial decisions, we’ll be fascinated to see how more IFAs can be tempted to explore fast, flexible and efficient ways to safely turn their dormant cash reserves into secure and active income generation vehicles.’
* Survey of UK financial advisers by Flagstone, July 2026
** https://moneyfactscompare.co.uk/business/business-current-accounts/
*** https://moneyfactscompare.co.uk/business/business-easy-access-savings/ & https://moneyfactscompare.co.uk/business/business-bonds/
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Carmen Dixon | 07717 278 846 | carmen@ripplecomms.co
Jo Candy | 07909 992082 | jo@ripplecomms.co