Partner insight: Cash is still king, but where's the opportunity?

The size of the cash market in the UK is huge and is growing amid the uncertain market backdrop, yet advisers are missing an opportunity to offer cash as a haven with a respectable rate of return, says Flagstone's Simon Merchant

clock • 2 min read
Simon Merchant, Flagstone
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Simon Merchant, Flagstone

From buy and selling property, to saving for a child's education, and to retirement, cash is a cyclical asset that is with investors at every step of their journey. From a long-term savings and investing perspective, cash has a necessary place in a well-diversified portfolio.

"Cash is an inevitable and low-risk asset class and assuming it is protected, you know that your principle investment is guaranteed," says Simon Merchant, co-founder and CEO of Flagstone.

In the UK, the overall size of cash market is huge, with the market totalling £2.6trn and £1.7trn of that held by households. Those numbers are climbing as investors stockpile cash in response to volatile equity and bond markets.

Yet, despite the inevitability and benefits of holding cash, the asset class is not without risk. The most severe risk is inflation, which erodes the value of cash over time. Even as the spread between the return investors can get on cash and inflation is very wide right now, they are missing an opportunity to narrow the gap by not taking advantage of the best offers.

"The opportunity is there, and it is growing, we are seeing new rates in the market daily that are moving in that upwards direction," says Merchant.

Cash has been an area long ignored by financial advisers, but it is an inevitable and easy entry product for advisers to talk to their clients about. Advisers now have the opportunity look at clients' wealth holistically and offer cash as a haven with a respectable rate of return.

Merchant says that from an adviser's point of view, there is a large opportunity to broaden the focus and think of cash as a strategic asset class and part of a holistic, diversified portfolio.

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