Two-thirds of wealth managers and independent financial advisers (IFAs) are advising on adding cash to their clients’ portfolios, a rise of 47% since 2021.
The overriding reason for this appeal to invest in cash is the “upward trajectory” of bank interest rates following the rising Bank of England base rate. This impacted 93% of clients who wanted to invest in cash, according to the advisers surveyed by Flagstone.
Another incentive to have cash investments was the desire to have emergency and short-term access, with 90% of IFAs claiming this as a key factor for their clients.
The future looks as though more cash investments will be hitting clients’ portfolios in the coming years, too. A total of 62% of the IFAs and wealth managers who had at least £25,000 in cash to deposits are likely to continue “proactively advising” on cash in the future too.
Meanwhile, the drawbacks of cash investment for advisers are the length of time the process of making returns takes, as well as holding some scepticism over the revenue potential. Those factors put off a third (35%) and just under half (44%) of advisers talking to their clients.
Wellness and wellbeing holidays: Travel insurance is essential for your peace of mind
Out of the pandemic lockdowns, there’s a greater emphasis on wellbeing and wellness, with
Sponsored by Post Office
‘Cash is coming into its own’
The shift in appeal of cash investments comes as the option “is coming into its own”, says Simon Merchant, CEO at Flagstone.
Merchant said: “We have for a long time considered cash the inevitable asset class. Assuming it is protected, cash is low-risk, and in the current higher-rate market, it looks set to continue to deliver hugely competitive risk-adjusted returns for a long while yet.
“Comparing our findings three years apart, it’s clear that advisers stand to play an important role in challenging and reversing inertia in the savings space.”
Merchant added: “With all the available rates, returns and tools at their fingertips, those advisers who aren’t advising on cash surely have to ask themselves why not, and how much longer that can last.”
Claire Jones, head of strategic relationships and new business at Flagstone, echoed the praise for the potential of cash investments.
Jones added: “The faster these individuals see the benefits of cash for their clients, the sooner they dispel the idea that there’s limited gain from cash for themselves as professionals or small business owners.”
