Why advisers should rethink clients’ cash management

That’s a huge pool of money losing value in real terms, but it provides an often-overlooked way to add real, measurable value to clients’ portfolios. We asked Alex Schlee, Senior Partnerships Manager at cash deposit platform Flagstone, to crunch the numbers. He calculates: “If a client has £50,000 in a 0% account, as many do, and instead splits that cash between a 12-month fixed and an instant access account at around 4%, over four years that £50,000 could grow to more than £60,800.”

That’s more than £10,000 extra money, simply by managing cash better.

As well as missing out on lost interest, those in low-interest accounts are also seeing the value of their cash savings falling in real terms. Bank of England figures show the average rate of interest paid on easy access accounts was 1.84% in August, way below inflation, which currently stands at 3.8%.

The cost of inertia

While supporting the investment strategy sits at the heart of most advisers’ work, maintaining sufficient cash reserves, for emergencies or to cover known expenses within the next five years, will always be an important part of a well-constructed financial plan. So why is so much money still sitting in low-interest accounts?

Alex points to consumer inertia: “People in the UK often don’t optimise their cash, which means they lose out on interest, and they don’t always fully protect themselves.”

He explains that this inertia comes from two main factors, effort and fear: “Effort because the admin involved in setting up and maintaining savings accounts is arduous. Each new account means another application process, another round of Anti-Money Laundering (AML) and Know Your Customer (KYC) checks. Actively managing cash savings to secure the best available rates year after year can take a long time.

Why advisers can’t ignore cash anymore

Although historically, cash has tended to sit outside advisers’ remit, as something that clients could manage themselves, with today’s environment of higher rates, better technology, and platforms like Flagstone to lighten the load, advisers can now add significant value without taking on a lot of extra work.

Alex says: “Advisers are incredibly busy, often dealing with complex client situations. In the past, cash wasn’t a priority because the process was slow and the returns were negligible. But with rates now competitive and technology simplifying the process, that’s no longer the case.

What active cash management can deliver

Platforms like Flagstone can help clients access dozens of banks through a single application, stripping away the friction that stops people from optimising their savings.

Alex explains: “With one simple application form, clients can access our 70 partner banks and move funds between them at the click of a button. You get full visibility of the rates, the banks, the terms – all in one dashboard. We remove both the setup burden and the ongoing admin to dramatically reduce the effort involved.

“All the banks on our platform are fully regulated, and none share the same licence, so clients can easily spread money across institutions to make use of multiple £85,000 FSCS protection limits, all at the click of a button.”

He adds: “When it comes to cash, it’s the one asset everyone expects to be absolutely rock solid. So we sometimes hear, ‘This sounds too good to be true. How can I move money between multiple banks without applying each time?’ That’s why working through advisers is so valuable. They can explain clearly how the process works, how the platform operates, and where protections apply.”

The role of technology

Open Banking gave clients and advisers new visibility of non-advised assets in one place. When intelliflo first launched its Open Banking service, it uncovered £20 million of held-away assets within the first three weeks! Cash platforms like Flagstone take that one step further, giving clients the power to act and transfer money between banks without applying to each individually.

Alex believes this visibility will further drive demand for cash management. “When advisers can see a client has cash sitting idly in accounts earning less than 2%, it becomes a natural conversation: ‘We can do better for you here.’”

And he finds that clients are receptive: “When advisers bring up cash management, the reaction is usually intrigue, and often relief. It solves an almost universal frustration: the admin of opening and maintaining accounts, year after year. Most people know they should be doing more with their cash, but they just don’t want the hassle.”

There are, of course, exceptions. “You’ll always have the enthusiasts,” he acknowledges. “The ones who enjoy managing 30 accounts in a colour-coded spreadsheet. But for everyone else, this is a game-changer.”