Cash strategy guidelines for financial advisers

Understanding your client’s needs & attitudes

01.

Suitability, documentation, and advice process

02.

Strategy & cash planning

03.

Contents

Guiding your client’s cash conversations – so they can make the most of their wealth, and you can stay compliant.

Understanding your client’s needs & attitudes

What is your client’s emotional relationship with cash? Every client will approach cash differently, based on their attitude to risk. So it’s important to take the time to understand the client’s unique view on cash, while clearly communicating the potential impact of those views. What are the client’s cash needs in the short, medium, and long term? Short term: Emergency fund (3-6 months’ expenses), upcoming bills Medium term: Planned expenses (such as school fees, home improvements) Long term: Strategic reserves, drawdown buffers, or risk mitigation Does the client believe cash is ‘risk-free’? Many clients equate cash with safety. But with high inflation, cash can erode their purchasing power. Additionally, holding more than the FSCS protection limit in one bank exposes any excess funds to the risk of bank failure. How much cash do they hold? Cash held in bank accounts or Cash ISAs can be significant – and clients often under-report just how much they’re holding. Fully reviewing the client’s cash position helps with assessing their overall risk profile and capacity for loss. Has their life stage or liquidity requirement changed since the last review? Retirement, inheritance, property plans, and many other factors can dramatically shift clients’ cash needs. Periodic reviews will help ensure that clients’ approach to cash is appropriate.

Suitability, documentation, and advice process

Include cash in suitability reports Cash is part of the client’s overall asset allocation. So it’s important that it’s discussed and documented in suitability reports, to ensure compliance with COBS 9 and Consumer Duty. Document the rationale for holding cash Cash is an important part of many financial plans, whether for short-term needs, future goals, or as a buffer against uncertainty. Clearly recording the client reasons and timeframes helps demonstrate suitability, supports good outcomes, and meets Consumer Duty expectations. Flag any long-term cash held inside tax wrappers (ISA/SIPP) Clients may not notice cash building up in tax wrappers like stocks & shares ISAs and SIPPs. It’s good practice for advisers who don’t manage these accounts directly to ask clients about the cash balance, document its purpose, and consider whether it can grow more elsewhere. Treat cash as an asset class to deliver 'good value’ Clients’ cash needn't lose value while it waits to be put to use. With many providers offering competitive rates, advisers can help clients choose savings accounts that preserve and grow their cash. This also supports their Consumer Duty obligation to deliver ‘good value’. Record all cash advice It’s considered best practice for advisers to document cash recommendations in the same way they would other investments. This mitigates compliance risks and demonstrates commitment to transparent processes.

Strategy & cash planning

Incorporate cash into wider planning strategies Holding a cash buffer in retirement to manage sequencing risk Using cash for gifting or IHT planning Parking cash temporarily to prepare for a change in risk profile Discuss client cash growth High street banks often pay far below market-leading rates. Advisers can redirect clients to solutions like Flagstone offering better returns. Protect clients’ cash Ensuring all client cash is eligible for FSCS protection helps advisers stay compliant with Consumer Duty, by helping clients ‘avoid foreseeable harm’. Consider a cash management platform Platforms like Flagstone can offer easy management of multiple savings account with different banks, all in one place. This helps clients maximise returns and FSCS protection. Has their life stage or liquidity requirement changed since the last review? Educating clients close to retirement about laddering strategies will help them secure reliable income: Spreading cash across Fixed Term saving accounts based on when funds are needed to earn higher returns and curb impulse spending. Regularly opening new Fixed Term accounts, taking interest as income at maturity while reinvesting the capital to continue generating returns.