How and why has cash become an integral part of the holistic financial planning process?
Expert: Andrew Pike, Head of Intermediary Relationships, NS&I
Facilitator: Martyn Laverick, Divisional Director of Mergers & Acquisitions, Paul Harper Search & Selection
Key Takeaways:
- What’s in a name? A review of NS&I survey showed more firms now refer to themselves as Financial Planners rather than Financial Advisers. It is now nearly equally split between the two.
- Helping clients with their cash investments is difficult to do whilst interest rates are so low. Charging a fee to do this did not seem appropriate and there are very few cash services around at present.
- API – going forward this is seen as being a very beneficial to advisory businesses as it puts more power in their hands and removing it from the banks. It was also seen as being a useful step in firms helping people with Lifetime Cash Flow Planning
- There is a danger that elderly clients could get left behind with more offerings being online when not everyone is able of / capable of accessing these offers
- Over the last year there has not been a flight to cash which has served clients well as markets have recovered and clients have been well advised
Context:
What’s in a name? A review of NS&I survey showed more firms now refer to themselves as Financial Planners rather than Financial Advisers. It is now nearly equally split between the two.
Part of NS&I’s survey into how clients were being advised included research into the growth of the title Financial Planner away from Financial Adviser. Both are now almost on parity and the feedback was that this was possibly more of an internal industry issue as if the audience were ambivalent about what title was used.
Helping clients with their cash investments is difficult to do whilst interest rates are so low. Charging a fee to do this did not seem appropriate and there are very few cash services around at present.
The majority of advisers discuss cash options with their clients around what amount needs to be held in cash etc but when it comes to helping them either open accounts this is left to the client in the vast majority of cases. The reason for this is purely down to the fact that the returns are so low from cash investments any adviser charge would outweigh the returns for the client. Therefore, the responsibility to open accounts etc sits with the client. For larger holdings and spreading the funds around different accounts to benefit from maximum coverage from FSCS did not seem commonplace.
API – going forward this is seen as being a very beneficial to advisory businesses as it puts more power in their hands and removing it from the banks. It was also seen as being a useful step in firms helping people with Lifetime Cash Flow Planning
Getting access to information easily was viewed to be a major benefit of API and would allow advisers to see clients cash holdings, spending etc from banks in a straightforward way. This was seen to be a major plus for IFAs to be able to have sight over all the client’s finances and reduce the control banks may have over this aspect of a client’s finances. This was also seen as being very beneficial when working with clients on cash flow planning as it allowed access to greater information on the clients spending patterns etc rather than having to burden the client with providing this information.
NS&I’s own platform was discussed which allows for online access to a client’s holdings was discussed as being a very positive and useful step in the right direction.
There is a danger that elderly clients could get left behind with more offerings being online when not everyone is able of capable of accessing these offers
It was highlighted that whilst online functionality is welcomed many elderly clients are unable to access these types of services either because they are unable to or do not like going online to manage their money. NS&I are well aware of this given their client base demographics, but it was felt that many institutions do not always have these clients in mind when they launch new offerings.
Over the last year there has not been a flight to cash which has served clients well as markets have recovered and clients have been well advised
The survey also revealed that whilst there was an increase in cash holdings during the past 12 months due to the pandemic there was not the flight to cash that might have been expected 12 months ago. Indeed, the survey also highlighted looking forward that more people were looking to make non cash investments as well. Within the advised community the overarching view is that clients did not panic as they were well advised what to do and reminded that they had a plan and to stick to it. This has served advised clients well and should help highlight the benefit of advice.
