Advisers turn to cash amid volatile markets

Advisers turn to cash amid volatile markets

More than a third of advisers expect to increase their clients’ cash holdings this year, an NS&I survey has found. 

In its latest Financial Adviser Barometer NS&I stated 38 per cent of advisers will increase the cash holdings in client portfolios in the next six months. 

The survey also confirmed an upward trend in the number of advisers recommending a 20 per cent cash holding in client investment portfolios. 

In October 27 per cent of those surveyed said they would recommend a higher weighting to cash, compared with 23 per cent in July and 18 per cent in April. 

Martin Bamford, chartered financial planner at Informed Choice, said: "Cash often gets a bad rap, thanks to low interest rates and price inflation erosion over longer periods of time. But cash is king and offers a great deal of comfort to investors, especially during volatile economic and political times. 

"Holding sufficient amounts in cash gives you greater capacity to leave other monies invested for the longer term, riding out periods of volatility.

"If you are boosting your cash holdings, it’s important to shop around for competitive interest rates and to keep these under regular review."

But Scott Gallacher, chartered financial planner at Rowley Turton, said he was surprised at the findings.

He said: "I suspect that this may be as a reaction to Brexit and Trump/China concerns but I worry that they may simply be guilty of what we advise our clients not to do, i.e. attempting to time the market.

"20 per cent does sound a high amount to hold in cash at a time of very low interest rates and concerns about rising inflation."

Meanwhile security remained the top concern for advisers at the end of 2018, with 42 per cent suggesting this as a top priority when advising their clients. 

Adviser confidence also waned with just 28 per cent of those surveyed saying they were ‘very confident’ in the future prospects for the financial adviser industry, down 14 percentage points from July. 

Conversely, more than half remained ‘fairly confident’, an 11 percentage point increase when compared with July’s 40 per cent figure. 

Andrew Pike, head of intermediary relationships at NS&I, said: "Our most recent adviser survey indicates that security remains the top priority for advisers’ clients.

"There also appears to be a clear trend towards cash, reflected in both an increase in the proportion of advisers expecting to increase their clients’ cash holdings heading into 2019 and an increase in the proportion of advisers that recommend that cash takes a bigger share of investment portfolios."