Clients missing out as cash levels rise

A new white paper from Macquarie titled ‘Hidden risks in a safe haven: Managing cash and cash equivalents in a changing environment’ has revealed that 30 per cent of private banking clients have seen their cash at call holdings increase in the last 12 months.

Research conducted for the bank by RFi Group in April 2020 showed that more private bank clients cited an increase in their cash holdings over this period than any other asset class, and that after property, cash made up the second biggest proportion of their wealth portfolio.

“Household cash is near historically high levels, partly due to reduced spending because of COVID-19 restrictions, partly thanks to government support against potential income loss, but also potentially as a flight to safety,” the paper stated.

However, further data collected by Macquarie in late 2019 revealed that just 44 per cent of advisers had full visibility over their clients’ cash holdings, while 62 per cent said they would like to have more visibility over clients’ cash assets.

Macquarie head of technical advice services David Barrett said many clients had an overly simplistic view of the role of cash in their portfolio, and therefore often held cash separately to the funds that were being managed through their adviser.

“One issue advisers have with cash is the perception of value: clients see it as simple, not something they need advice on,” Mr Barrett said.

“And as a result, clients can show inertia with the idea of taking a more active approach to managing their cash investments.”

However, the 2019 data revealed that those advisers who did proactively use cash as a portfolio management tool with clients tended to be rewarded by getting a greater proportion of their clients’ assets to manage, indicating that clients did see the value in an active cash strategy if it was suggested by their adviser.

Of advisers who actively managed their clients’ cash, 25 per cent said they had visibility over 75 per cent or more of their clients’ total cash holdings, compared to 19 per cent who did not actively manage clients’ cash.

“Greater visibility allows advisers more context to provide holistic advice by helping [clients] identify opportunities they might not see otherwise,” the paper stated.