Further to your article FCA Will Get Tough if IFAs Avoid Low-Risk Assets (FA 9 October), I agree that advisers should diversify portfolios and use cash deposits, but should advisers themselves be active cash managers?
How many firms can pay staff to do nothing but monitor the multitude of accounts and go through the laborious exercise of switching between them? Time expended has to be paid for. Unless you are allocating millions of pounds for individual clients, current low interest rates make it impossible to generate sufficient additional return to make deposit management pay for both the client and adviser.
We allocate cash in every client’s portfolio, but we are completely up front about this issue and make clear we are investment advisers, not cash managers. We tell clients to self-source suitable bank or building society accounts with a helpful push in the direction of www.moneyfacts.co.uk. In any case I really do not like the idea of being paid for ‘managing’ cash. If I cannot add value to an exercise I will not undertake it.
A firm I once worked for was greedy for every penny and channeled its clients’ deposits into the banking arm of a life company for which it got a small commission despite the rates being unexceptional and better available elsewhere. What value did it add? None. I doubt they would get away with it today.
There are misers out there with nothing better to do all day than trawl the web for an extra basis point here or there, and they will be quick to demand compensation if they find a more competitive account than the one their supposedly cash-managing adviser has them in. My advice on this one is not to be greedy and tell the client to ‘DIY’.
Neil F Liversidge, managing director, West Riding Personal Financial Solutions, Castleford, West Yorkshire
