PlatformsOct 23 2013

Ascentric ditches half of banking panel due to poor rates

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Wrap provider Ascentric has made a “tough decision” to pull clients’ cash out of leading UK banks because the rates offered on deposit is so low, Hugo Thorman has said.

The managing director of the wrap platform said that Ascentric had maintained a stance of spreading risk across eight banks, maximising the possible protections offered under the Financial Services Compensation Scheme.

This meant that cash positions within portfolios on the platform could benefit from eight times the £85,000 capital protection under the scheme.

However, Mr Thorman said the platform had to “weigh up” the risk of spreading the risk and getting £680,000 capital protected, or seek the best rates.

He said: “Barclays, Santander, NatWest and Coutts are going to go because their rates are so low.

“It is all to do with the banks’ capital position. If they are in a good cash position, they don’t need depositors. Why would they put their rates up?”

Mr Thorman said with banks getting backing from various government schemes, it does not seem likely that they will put their rates up soon but if they were to change their position, Ascentric would “bring them back in”.

None of the above banks were able to provide comment as at time of going to press.

The cash holdings total just 8 per cent of portfolios on the platform - “the lowest level it has been in years”, Mr Thorman said. In total, Ascentric has £500m in cash, out of a total of £6.5bn.

He said the cash was used as a transactional tool primarily; for example if a client was at retirement and using cash as an income rather than locking into an annuity while rates are poor.

Who’s left on the list?

HSBC

RBS

Lloyds

Bank of Scotland

Mark Polson, founder of platform consultancy the Lang Cat, said: “I agree that one has to spread the risk around but then you don’t get good rates; so you are damned if you do, and damned if you don’t.

“Cash accounts should just be there to help the functionality of the platform however, not used as an asset class in its own right. If investors want to have cash balances on platforms, they should consider something such as a structured deposit or money market fund.”

A spokesman for Skandia said it did not have a cash account, but if people wanted cash in their asset allocation, they could use money market funds.

Website Savingschampion.co.uk runs a service called Concierge Managed Savings to help savers who have various cash deposits spread around.

Anna Bowes, director and co-founder of Savingschampion.co.uk, said: “Interest rates are at record low levels and providers are cutting rates for existing customers even though the base rate has remained the same for 4.5 years.

“With inflation often higher that the interest being earned, leaving savings to languish is no longer an option. It’s vital that savers shop around and move their money if their account offers an uncompetitive rate.”

She added that many savers neglect this area as they feel “it’s either not worth reviewing or it’s too complicated”.

Jeremy Fawcett, head of direct for The Platforum, said: “Cash is a live issue on platforms at the moment and some platforms have spoken of the ‘headwinds’ from interest rates.

“If someone is going to hold a cash product on the platform, the platform will expect some sort of fee for that. If the fee is 25 basis points, this is coming off what the saver is getting from cash - and in some cases the return on cash is already next to nothing.”

He said that the only provider that is different is NS&I as the FSCS guarantee limit does not apply to NS&I, but these products are not available on platforms.

Mr Fawcett added: “With respect to direct platforms, some of the wealthier clients will find the FSCS guarantee limit restrictive whether for cash or for investments.”