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NS&I cuts £1m maximum: where else can clients go?

3 Oct 2018

Clients who have more than £85,000 in savings are facing a sudden administrative headache. And it’s one that has created a valuable opportunity for advisers.

Until last week, clients could get 100% deposit protection on up to £1 million by putting it into one of NS&I’s fixed-term bonds. These offer 100% capital security, backed by HM Treasury.

However, these bonds have proven perhaps a bit too popular with large savers, prompting NS&I to make a change.

NS&I slashes its maximum deposit limit

Last week, NS&I cut the amount that savers can put into these bonds, from £1 million to just £10,000. At a stroke, this removes an option from clients with large cash balances they want to protect.

It leaves clients reliant on the Financial Services Compensation Scheme (FSCS), which only covers them for £85,000 per bank. So to keep more of their savings covered means opening multiple savings accounts with multiple banks.

Big headache.

There is, however, another approach that avoids this hassle. By introducing it to your clients, you can help them protect more of their cash savings, potentially get them a much better savings rate and bring more of their funds under management.

How to get your clients more protection for their cash

Cash management solutions help advisers manage client cash at scale. They can give you greater visibility of client assets while helping clients increase their funds covered by the FSCS and get a better savings rate.

Octopus launched its own cash management service, Octopus Cash, in 2017. It has since helped hundreds of advisers to get their clients’ cash working harder.

It works by automatically spreading your client’s money across different challenger banks that have signed up to the Octopus Cash platform. Octopus deals with the banks and handles all the paperwork with them, meaning the client only has to have one account with us. We sort out the rest.

All of our partner banks are covered by the FSCS, so by spreading money across different banks your client can get much more than £85,000 in deposit protection. And because challenger banks have much lower overheads than the high street names, they tend to pay more competitive savings rates too.

“The need for simple, easy-to-use cash management solutions has never been greater”, says Sam Handfield-Jones, Head of Octopus Cash. “Wealthy savers shouldn’t have to suffer the burden of having to open multiple accounts just to keep their savings covered.”

Why it can pay to advise on cash savings

Now, you may be thinking this is a nice idea, but is advising clients on their cash savings worth the added paperwork?

In many cases, it may well be. Here are some reasons to consider talking to clients about a cash management solution:

  • You may get greater visibility over your client’s assets, putting you in a better position to advise them going forward.
  • You demonstrate the breadth of your knowledge and the ability to find little-known solutions to your client’s problem.
  • Some clients may end up earning double the rate they are currently, making it reasonable to earn an administration fee.
  • You shield your clients from cross selling by banks.

Above all, this solves a very clear client problem. Clients who hold a lot of cash are likely to be more cautious, and therefore keen to ensure as much of their savings are protected as possible.

Helping them achieve this goal with a minimum of hassle, while potentially getting them a better interest rate at the same time, is a straightforward way to showcase your expertise and strengthen the relationship.

Important information

Personal opinions may change and should not be taken as advice or recommendation. Money saved via Octopus Cash will be deposited at UK PRA regulated credit institutions that are covered by the Financial Services Compensation Scheme (FSCS). However, we’ll need you to confirm that they don’t already hold savings with these banks. This is so that they don’t hold more than £85,000 with any one – which is the total covered by the FSCS.

You should be aware that if your client saves with our fixed-term Octopus Cash accounts, they won’t be able to access the money you deposit before the end of the term.

Interest is calculated daily and, in the case of the fixed-term account, will be paid at the end of the term. When saving through our 35-day notice account, your clients’ interest will be paid into their Octopus Cash account each month.

Octopus Cash is offered by Octopus Co-Lend Ltd., which is authorised and regulated by the Financial Conduct Authority (reference number 722801). Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 08913299. Octopus Cash is managed on a day to day basis by Octopus Institutional Deposits Limited (Company registration number 10163532). CAM07122-1806.

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