Advisers deny flight to cash despite rise in enquiries

Advisers deny flight to cash despite rise in enquiries

A cash management service saw a 46 per cent rise in enquiries in March as advisers sought a safe haven for their clients’ assets amid the market turmoil.

Octopus Investments told FTAdviser it has seen record inflows into Octopus Cash in the first quarter of this year, with £44m being piled into the service.

This was primarily driven by a 46 per cent boost in enquiries in March — when compared to the average month — while the average case size also increased 26 per cent from £133,000 to £166,000.

According to Octopus, the week commencing March 16 was also a record week for inflows to the service.

This was the week prime minister Boris Johnson advised the British public to avoid pubs, restaurants and theatres and told everyone who could work from home to do so. He officially closed such public places at the end of the week.

Caroline Flagg, head of Octopus Cash, said: “In the last few weeks we’ve seen a significant spike in the number of advisers using Octopus Cash for their clients. 

“That’s simply because in the current climate, cash offers the ultimate security for many people. This might be someone postponing making an investment into equity markets, or perhaps someone who has liquidated some of their existing holdings to hold a portion in cash.”

Octopus Cash searches for the savings accounts with the best returns and places a maximum of £85,000 in each, meaning all the client’s money is protected by the Financial Services Compensation Scheme, which pays out a maximum of £85,000 if a bank were to go bust.

Ms Flagg said Octopus Cash had found some individuals and businesses held large amounts of cash with a single bank, meaning advisers were now keen to spread this across several to make sure they had FSCS coverage.

She added: “Rather than opening new accounts with six or seven different banks, which can be extremely time consuming, Octopus Cash makes that process quick and easy with one single account.

“While the Bank of England’s recent base rate decision was more bad news for savers with high street banks, the challenger banks on our platform continue to offer top tier rates.”

But advisers said the vast majority of their clients had not asked to put more assets into cash, despite markets falling by about 25 per cent since the start of the year.

Michael McLintock, director at Adelp Financial Solutions, said: “I can understand why some people would want to get out the markets and go into cash, but that’s a really short-sighted move.

“Studies show if you miss just 10 of the best market days you’ve missed out on massive rises.”

Cleona Lira, founder of Conscious Money, agreed, adding many of her clients already had enough cash for outgoings and emergency funds.

In fact, some of Ms Lira’s clients were increasing their stock market holdings as stocks were cheap due to the crisis.