IFAs have a key role to play helping small and medium sized enterprises(SMEs) which are missing out on over a billion pounds a year by keeping money in low-paying business current accounts, Standard Life Bank says.
This amount has more than doubled from when Standard life Bank last ran the research in 2004, when inert SMEs were missing out on £523m a year.
The huge increase is attributable to the fact SMEs are holding far more cash in their current accounts than ever before, according to the research among 500 SME MDs and senior decision makers. In 2004, the average SME kept just over £8,000 in its current account at any one time while today the average is £14,400.
Standard Life Bank says the IFA’s role is crucial in persuading SMEs to switch to a business savings account.
According to research among IFAs, while a third said they advised clients on what to do with their business savings (34pc), many were not giving their clients the best advice by telling them to leave their savings in a current account (11%), put money into an ISA (29%) or use a business current account (33%).
Just over one in 10 of the SMEs questioned said they actively used their higher paying business savings account while 26% admitted they hadn’t even set one up.
However, 60% aren’t happy with the level of interest they are paid on their business current account; the majority averaging 2.75% against business savings accounts often paying more than 4.5%.
Jackie Moran, head of sales proposition, Standard Life Bank, says: “Clearly many SMEs go to their IFAs for advice but in a lot of cases they aren’t getting the right advice and therefore aren’t getting the best deal for their money. Our calculations show the gains that SMEs can make by putting their hard-earned money in a specialist business savings account.”
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