We have a lot of Phoenix clients that need their cash proactively managed. Most advice firms won’t do this as it doesn’t pay the adviser to actively manage cash. Instead they will try to persuade their clients to invest all of their cash above an emergency reserve. In reality people can have multiple reasons why they need to hold cash for periods of less than 5 years (the minimum time horizon for investing). There might be lots of cash temporarily; due to a bonus payment, share scheme maturity, due to a house sale, a business sale, an inheritance or just as a buffer for those who have a lot of their wealth already committed to markets.
At Altor, as every client pays us the same flat fee, we are always looking for ways that we can add value to our clients’ finances. Cash management is one of those additional services.
The first port of call for large sums of money is National Savings & Investments (NS&I) as you can hold large sums of cash with them and because they are an arm of the Treasury the usual £85,000 Financial Service Compensation Scheme (FSCS) cap on compensation doesn’t apply. NS&I are also great to deal with as an independent financial adviser because they give view only access to all clients holdings ,so that it is easier to advise on.
In the past NS&I have offered very competitive interest rates and tax exemptions. We have been advising long enough to remember the days when you could invest in several issues of their Index-Linked Certificates which were both tax-free and guaranteed to offer an above inflation rate of interest. You could invest the maximum amount and then treble up by holding them on behalf of a spouse and in trust for a spouse. Sadly these haven’t been available for several years now and the other tax-free account, Premium Bonds, are fun and offer a good rate of interest (paid as regular prizes) but not as high as the certificates.
The issue with NS&I is that their interest rates have not been reliable in the past few years. They move rates up to attract money when the Treasury needs to raise cash for the public finances and reduces them when they have raised enough money. The Treasury gives NS&I a target amount to raise and so savers using them are somewhat at the mercy of what the Chancellor is trying to do at the time.
As at the time of posting, NS&I rates are competitive but not as high as some banks are offering. Given the FSCS limit of £85,000 and the hassle factor of opening multiple bank accounts what is the easiest alternative?
At Altor as well as using NS&I we use a couple of cash management services. These are an excellent alternative to NS&I as they only require a single bank account application at the start and once open, give access to 40+ different banks. We and our clients enjoy the benefits of a single login and hundreds of savings accounts that money can be easily moved between to maximise the interest available. We can build a series of accounts with different maturity dates to cover known future expenditures for each client and switch to maximise interest on instant access accounts. Having multiple banks means that the FSCS limit of £85,000 per person, per bank can be kept within and the range of banks means access to the best interest rates available on the market. In addition the service itself is very low cost at 0.15% per annum for most clients and the admin is significantly reduced as they produce a single consolidated interest certificate across the full range of accounts. Anyone who has tried to extract the interest statement from their bank to help with their tax return will understand how beneficial this is.
If you are a Phoenix client of ours and not currently benefiting from this service, please get in touch with your adviser. If you aren’t yet a client of ours and want to explore the full range of services we offer our clients, please get in touch.
Altor advises Phoenix staff from our Hook office and throughout the country using the latest technology.
