One of the problems with trying to maximise returns from cash for any investor is the time it takes to move accounts.
Any retail investor knows it can take a week to switch your bank account, but in the world of wealth management seven days is an attractive timescale.
Typically, those looking to move cash accounts currently face a painful and laborious process that starts with a client being mailed out a form to complete themselves. Once that is sent back, and assuming there are no errors, the wealth manager has to take the document down to the new bank in person and run through it with bank staff.
Once this is done the form is then processed by the bank before it contacts the client to send them their password by post – again this could take several days.
The client then has to make sure the money is in place for the transfer to take place, with a few more days spent waiting for balances to clear before their money is safely at the new institution, earning the new rate.
The process above can literally take weeks, and that is just to move money to a single new account. Unsurprisingly given the time and hassle involved, most wealth managers are put off from even attempting it, especially given the small percentage uplift the client actually gets.
However, imagine you only had to fill out one set of forms, one time only with a client, and from then on you could access hundreds of deposit accounts at the touch of a button for them?
That is the premise behind our Astra system. Thanks to our deals with relevant partner lenders, clients of Flagstone can access a huge variety of interest rates, picking the deposit accounts they want for clients which can deliver a much higher income.
Not only are clients spared from having to fill out form after form, but advisers and wealth managers also save huge amounts of time, being able to deliver additional gains on cash with ease.
While a few percent may not sound like much, the impact of increasing the yield on cash for clients is actually quite dramatic.
For example, a client has £500,000 sitting in cash earning around 0.25% – or £1,250. Using Astra to get a yield between 1-2% – our top rate of interest currently is well above that – a client can turn the £1,250 of interest to between £5,000-£10,000 – just by having breadth of access to the market and the ability to deal quickly.
In a world where interest rates are so low, clients seem to have disregarded cash, but the reality is very different. Using Flagstone, the above transaction can take just a few hours of one-off administration for a new client, with the potential to then generate additional returns virtually unlimited.
When interest rates rise – as they surely must at some stage in the next few years – Flagstone’s proposition will only become even more attractive as risk-averse clients look to generate an income without jeopardising their capital.