Cash accounts on platforms interest (ha!) me. Whilst no one really should be using a platform to be fully invested in cash in the long term it’s clearly an important facility to have. Strategic asset allocations often require a small cash holding, and most clients like the comfort blanket of knowing they can flee to (relatively) risk free assets if they get spooked.
There is an argument that platforms are becoming increasingly commoditised, all offering the same stuff, and whilst at a high level there might be some truth in this deep down in the operational detail it most certainly is not. Platform cash accounts and facilities are one of the best examples of this, both in the functionality on offer and the rates paid.
We’ll explore the functional side another day (call us if you can’t wait. We’ll be by the phone.) but as rates are cut to a record low we’d like to highlight the rates that platforms are currently paying (or not)
|Provider||Rate paid||Charge levied?|
|Ascentric||up to 0.15%||No|
|Aviva||0.10% below base rate||Yes|
|Cofunds||0.4% below base rate||No|
|Elevate||0.4 to 0.65%||Yes|
|Fidelity FN||0.4% below BOE on ISA Cash Park, 0% on Intl Bond Bank Account. Pension 1% below subject to 0.25% min||Yes (on pension)|
|James Hay||0.00001% (15/16ths of 1% below base)||No|
|Nucleus||0.17% to 0.73% (varies by wrapper)||Yes|
|ZIP||0.30%||Yes (except ISA and cash account)|
Prior to today’s interest cut the above shows the rates various providers are paying on cash, held in a cash account, wrapper cash or cash facility, and whether a charge is applied. This pre rate cut position highlights a wide range of approaches and customer outcomes. We’ll be updating this chart as and when platforms update their rates, but it’s clear that for most customers it’s not going to be good news. Indeed, some customers could find themselves paying a charge for holding an asset with zero return. Any platform with customers in this situation would do well to remember their treating customers fairly obligations, and ensure the customers are provided with clear information explaining the changes that the rate cut have brought on.
As for the future? Who knows, but if rates go any lower could we find ourselves in a scenario where clients are charged extra (above the normal platform charge) to hold assets in cash? This remains to be seen, but away from the excitement of rate changes impacting savers and mortgage holders it’s clear the platform investor is also going to feel the pinch.