InvestmentsNov 18 2021

Using cash management systems

Supported by
Flagstone
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Supported by
Flagstone
Using cash management systems
Pexels/Alaur Rahman

Understandably some clients like to maintain access to cash, including access to significant sums that they may wish to get hold of easily for emergencies. 

And where the amount of money is substantial, one of their main priorities will be security – for instance if the sum is in excess of the £85,000 compensation provided by the Financial Services Compensation Scheme in the event of bank or building society failure.

Another priority is the ability to earn the highest levels of interest available.  

NS&I, backed by the government, offers a higher level of security than FSCS, guaranteeing 100 per cent of customers’ savings, but its rates may not be a draw for those seeking to maximise the return on their money.

One of the ways to address the issues of access, security and better savings rates is by making use of cash management systems.

These can sidestep the problem of having to open and manage lots of different bank accounts where the sum is greater than the £85,000 (£170,000 for joint accounts) protected by the FSCS, and where clients may not be keen to lodge their savings with NS&I.  

Some advisers find this a useful option for helping clients achieve their goals, as Jason Hollands, managing director – corporate affairs at Tilney Smith & Williamson, explains: “We provide clients with a cash management service through Flagstone, which allocates cash deposits across a panel of banks to optimise rates and security, while eliminating the administrative hassle and complexity of opening and managing multiple accounts.”  

Other advisers have used cash management systems too, when required, as Ross Leckridge, associate director at Johnston Carmichael Wealth, notes: “In the past, we have used companies that split large cash deposits into separate cash accounts on one platform in order to boost returns.

"This allows funds to be spread across a number of institutions and different rate terms with the additional benefit that you can retain FSCS protection.  

“Lately we’ve seen providers of this type of all-under-one-roof cash solution exit the market, as margins remain so tight while interest rates remain so low. So, more often we’re having to revert to manually sourcing and applying for individual accounts.” 

Scott Gallacher, director and chartered financial planner at Rowley Turton, says the business has also used such services, but is no longer a customer, as he explains: “We used to use an external cash management service for some of our clients. However, with today's low interest rates it wasn't worth the costs of the service.” 

How it works 

Cash deposit platform Flagstone, which launched in 2013, is one of the cash management systems available that can enable clients to save cash according to interest rate and protection requirements.  

However, the minimum amount required to open an account is £50,000 for individuals (£250,000 for companies, charities and trusts). This may therefore be most appealing for clients who have and want to keep a sizeable amount of their assets in cash.

Charges include the cost of setting up an account, which requires a one-off administration fee of £150 for amounts deposited of up to £250,000 and £500 for deposits in excess of £250,000. The platform also charges an annual management fee of between 0.15 per cent to 0.25 per cent. 

Flagstone, which has placed more than £8bn in client assets, reports that it offers savers access to hundreds of deposit accounts, including instant access, notice account and fixed-term deposit accounts from a panel of up to 50 banks through one application. 

Simon Merchant, co-founder and chief executive of Flagstone, says: “Earlier this year, we reviewed the rates we were able to offer over the 18 months ending in August 2021.

"Compared to the UK market average, our fixed-term rates tracked three times above the market average and our instant access rates tracked nine times above the market average.”

Explaining how the system works, Merchant says: “The client funds their holding account (a segregated trust account, ensuring funds are protected), and chooses where to place their money from the range of available savings accounts.” 

Deposits placed can be moved around between selected banks, with FSCS protection for each account opened. Savers can place, move or withdraw money from their holding account at any time.  

For clients who may be looking to keep less than £50,000 in cash, there are options available such as Aviva Save, which allows customers to manage all their cash savings in one place.

It is currently offering a £75 bonus to the first 1,000 savers opening a fixed-term deposit account, with a minimum of £10,000, by December 14 this year.  

Hargreaves Lansdown’s Active Savings product also offers the opportunity for savers to ‘pick and mix’ accounts from a range of banks and building societies. Instead of charging savers, it charges its banking partners. Savers can start with just £1. 

Patrick Christie, graduate trainee financial planner at WealthFlow, says that cash management systems are worth considering for some: “For those holding large volumes of cash, and for periods where they can’t afford to be exposed to market risk, cash management is an effective option. Ensuring cash is moved to obtain the best rates is potentially worth significant sums for a client in this situation.” 

But others would be unwilling to use such platforms at all, as Keith Churchouse, director and chartered financial planner at Chapters Financial, explains: “We don’t use these systems and are not likely to. I’ve read less than glowing reports about them.”  

Fiona Nicolson is acting deputy features editor at FTAdviser