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.