James Hay  

Investors urged to check cash holdings

Investors urged to check cash holdings

The majority of financial advisers do not advise clients on cash products, but investors are still invested in cash for prolonged periods, research has found.

In February, self-invested personal pension provider James Hay asked 361 advisers whether they were providing specific advice to clients to hold money in cash on a platform.

It found that of those questioned, 88 per cent said they had not advised them on cash.

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The remaining advisers said that cash was mainly used for future investment or for administration purposes and managing income payments, drawdown and fees. 

Despite this James Hay stated that in Q1 2019 £1bn of its assets under administration was held in the transaction cash account.

Tim Morris, financial adviser at Russell & Co, told FTAdviser: "I don’t advise on cash, other than national savings and investments (NS&I).

"However, it’s always vital for a client to keep a certain amount in cash accessible in their bank for emergencies. Depending on their circumstances, perhaps at least 3-6 months worth of expenditure.

"On top of that, a client in drawdown may well keep additional cash to save them having to draw money from their pension. This can avoid ‘pound cost ravaging’ impacting the value of their fund by drawing when the markets are falling."

Paul Bagley, director of distribution and marketing at James Hay, said: "This isn’t necessarily a new trend, we have seen investors choosing cash over the past 12-18 months and we recognise that for some there will be a conscious choice to do so. 

"Nevertheless, as part of our duty to the investors using our platform, we need to consider the possibility that some of this money could either be sitting in cash due to an oversight or possibly not be sat in the most financially appropriate cash solution."

All platforms have a transactional cash account for each investor which is intended for short term use to manage payments or fees, however these accounts are not intended to be investment options, stated James Hay.

Mr Bagley said: "We at James Hay do our part and proactively monitor the transactional cash accounts, looking for any large amounts held for long periods of time; we will then notify the adviser in case they wish to take action."

For investors holding cash for the mid- to long-term there are other options such as cash funds, which many platforms would offer as part of their fund choices, Mr Bagley said.

He added: "For advisers advising on mid- to long-term cash holding, it’s certainly something to consider and may be a more appropriate solution than leaving cash in the transactional cash account."


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