In our latest Adviser Exchange article, we speak with Abigail Ford, Senior Adviser at Dyer & Co. Wealth Management Ltd, and Barry Sime, an Independent Financial Adviser at Fairstone Group. In this interview, they discuss the ways clients nearing retirement can use cash strategically. They also explore how technology and cash management platforms are impacting adviser efficiency, as well as client returns.
Abigail and Barry, welcome to Flagstone.
Let’s start with your clients’ expectations and their portfolio strategy. In the current environment, how are you advising them to strike the right balance between saving for short-term needs and investing for long-term goals?
Abigail: As there are still relatively competitive interest rates available, shopping around is a must. So, when a client intends to hold large amounts of cash, which is required in the shorter term, I generally encourage them to use a cash platform. In truth, due to the long-term nature of investing, this isn’t any different from the advice we’d offer at any other time.
However, in the instance where a client has significant cash on deposit and is undecided about the longer-term intention for the fund, I would say that the option to enter the market for the purpose of combatting inflation is not so pressing. This would have to be considered in conjunction with any other financial goals they may have.
Barry: With the sharp rises in interest rates, it’s really important for clients to try and take advantage of the relatively risk-free returns available, particularly for short-term needs. Depending on their age, circumstances, and investment journey, it may also suit clients to hold more cash than they’re used to, following the long history of low interest rates. That’s where independent financial advice really counts – to coach clients to get the right outcomes for their circumstances.
How do you balance your clients’ expectations of liquidity and easy access with the need for higher returns from their cash investments?
Abigail: Most of our clients understand the position regarding cash when it comes to interest rates, as well as the usual correlation between commitment and the available rate. Therefore, if a client intends to hold a significant amount of cash for a period of time, I encourage them to apportion the funds to varying “tie in” periods so that they can capitalise on the layers of rates available. This is where the Flagstone system is so very useful. They enable clients to maximise returns by keeping some cash more readily available, whilst tying up other amounts for longer periods.
Barry: Liquidity is important and traditionally, cash is viewed as accessible money. For many of our clients, that’s over and above invested money. There are some attractive interest rates available, and there are especially significant advantages for people if they lock money into a fixed-term account. However, that seems increasingly challenging for clients to achieve from their High Street banks. Again, sound advice and education are key to suggesting opportunities and managing expectations.
How are you positioning cash as a strategic part of your clients’ portfolios, especially for those people approaching retirement?
Abigail: The right conversations are certainly more relevant than ever. For me, they tend to centre around holding adequate income requirements in a cash environment as a shield against market fluctuations and the impact of making significant withdrawals in a low market.
Barry: While we haven’t significantly changed our views across the board, making sure cash is a cornerstone of a client approaching or well into retirement has become far more important. Some of the returns our clients have seen in recent times have beaten invested portfolios – with the added bonus of minimal risk.
What role can technology play in improving cash management efficiency and returns for clients?
Abigail: I believe anything which simplifies the process of moving money from one provider to another, and effectively facilitates rate chasing will assist clients and improve returns. The main barrier to obtaining improved rates is usually inertia. If AI and digital transformation can reduce the complexity and time spent, it’ll always benefit the client. This is provided that the technology has ease of use at its core.
Barry: I agree with Abigail. Technology is extremely important these days, especially when it’s challenging to physically access bank branches and open new accounts at financial institutions. In the last few years, tech has also become much more expected and accepted. Cutting edge technology solutions that offer a secure, reliable interface for clients to get great returns and clear visibility of their money are paramount.
How do cash management platforms enhance your ability to manage clients' portfolios more efficiently, and what features are most useful for you and your clients?
Abigail: Personally, I see them as an ancillary benefit, which complements our service and adds further value to the proposition we offer. Clients have commented on how easy the Flagstone platform is to use, which, in my opinion, is critical. Clients also seem to be far more engaged with their holdings when they’re able to shop around and feel more proactively involved with the process. Equally, having sight of their cash wealth and the actions being taken with them is very useful to me as their adviser.
Barry: I have recently seen first-hand what cash management platforms can do with a couple of clients, one who is a recently retired adviser. Convincing him about the benefits of anything related to our industry is a challenge, but I've never seen him as enthusiastic about anything money-related until he started using Flagstone. I feel Flagstone is a game-changer and has been an exciting part of my clients’ cash management. It gives them access to some of the best rates in the market, without having to open further individual bank accounts. Going forward, I only see the impact of Flagstone increasing for more clients.
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