Why advisers still need to talk about cash

Think back to January 2023. At the time, there were worries about the cost-of-living crisis, inflation, an impending global recession, and geo-political events. This led many people to reconsider their approach to their finances.

Fast forward eight months and the economic narrative hasn't shifted much. What has emerged is the need for advisers to take the lead in discussing cash. We explain why. 

What are investors’ biggest concerns?

• In August 2023, 53% of UK households said their living costs had increased.
• The current rate of inflation* is 6.8%. While considerably lower than October 2022’s high of 11.1%, many people are still feeling the pinch.
• Almost three-quarters of advisers (70%) said the cost of living crisis concerned people most, while 47% of clients worried about inflation.

The UK narrowly avoided an official recession. However, the economy is still fragile. Stubbornly high inflation could see the current 5.25% interest rate* rise again before 2024, which will put even more pressure on mortgages and homeowners.

These ever-present concerns continue to cast a shadow over traditional investment strategies. As a result, many people are shifting to savings portfolios that can withstand economic uncertainty.

How do investors’ concerns affect advisers?

Against this backdrop, your role is even more vital. Rather than discussing more traditional investment opportunities, like stocks or bonds, advisers have become navigators. By guiding their clients through difficult terrain, advisors create strategies that walk the tricky line between risk and return.

Typically, investors fall into two groups with very different needs and risk-appetite. It’s important to understand what makes both tick and tailor your approach when discussing cash as an investment strategy. 

Experienced investors are usually happy to make their own decisions. While they have the time and interest in managing their money, they’re likely to ask you for help doing it. They’ve also felt the highs and lows of economic cycles, so understand what to expect.

Inexperienced investors may have built up their pot of money through employer pensions or an inheritance. Because they tend to see cash as offering security and stability, they often want emotional assurance that they’re doing the right thing. You may need to educate them about investing and growing their wealth.

Concerns over market volatility, inflation and economic downturns are ever present. The untapped power of cash as part of a broader savings portfolio has seen advisers having to rip up the rule book.

As more providers enter the market, there’s more choice, greater competition, and increasing complexity. And as more clients explore how their cash can work harder, they’re looking to you, their trusted adviser, for help. In fact, 40% of IFAs are spending more time guiding clients through the cash maze.

Why is it important to have cash conversations?

Market declines can be emotional for investors, and can be power cash conversations between you and your clients.

Although 47% of advisers mostly broached the subject of cash, 12% said it was mostly clients, while 18% said it was half-and-half.

The truth is you no longer have the luxury of waiting for clients to come to you. While interest rates remain far higher than August 2021’s 0.1%, they will inevitably fall. Be proactive in talking about the potential of cash and taking advantage of the high interest rates while still available. Especially where longer-term accounts offer even bigger returns. By taking the lead, you can empower your clients to make informed decisions that match their financial and lifestyle goals.

Our 2019 study revealed an inertia around cash had left a colossal £1.3 trillion of household savings sitting in lower-paying, high street accounts, earning minimal interest with little security.

This gives you the ideal ‘in’ to speak to both experienced and inexperienced investors. You can steer the latter group in the right direction early on, and explain cash’s potential in growing and protecting their wealth. For the former, you can highlight how cash can complement their wider investment strategy, mitigating higher risks, while financing other savings opportunities as they arise.

What are the benefits of cash as part of a savings portfolio?

Cash allows investors to maximise their interest income for the short, medium and long term.

Many advisers recommend their clients keep a healthy sum of cash savings to use as an emergency buffer. This offers protection against unexpected life events, plugs gaps in cash flow, and acts as a safe haven, while investing the remainder in high-return assets like equities. This is particularly true for people currently accumulating wealth who can invest for longer. Typically, the more risk-averse your client, the more cash comes into play.

Cash deposit platforms have become popular among savers of all ages, including tech-savvy younger investors who want to do business digitally. Cash deposit platforms generally give clients access to a range of savings accounts with just a single application. This will often include market-leading and exclusive rates, higher than high street banks.

By spreading their cash funds across multiple accounts, investors can ensure a steady rate of return to either liquidate or reinvest at the end of the term. They also receive FSCS protection of £85K (£170K for joint accounts) for every eligible account opened. This provides security and peace of mind for their entire cash wealth.

Many high-net-worth individuals are time-poor. By recommending a platform that’s already done the hard work of selecting the best banks and accounts, your clients receive the best possible returns, without the hassle.

With favourable interest rates, increased security, accessibility and liquidity, cash offers stability in difficult economic times. By talking about its potential and making cash part of your investing armoury, you can empower your clients to navigate the dynamic financial landscape.

Interested in learning why other advisers are talking about cash?

Find out more

*as of August 2023