Why Managing Cash is Essential

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A client will INVEST MORE MONEY when they understand the value of their cash and how they should be managing their cash. Clients keep too much money in cash.

"A Cash Management proposition
clearly enhances the value of EVERY regulatory policy
simply because clients understand the value of their cash better."


There are 2 key points that illustrate this:

  1. Everybody has cash and everybody needs cash
  2. All financial planning aims to:
    1. Protect cash
    2. Grow the value of cash
    3. Generate cash

Yet, given these facts, the value of cash has never been an integrated part of the financial planning process because its value has never been understood.

Until now!

Financial Advisers have spent the last 40 years telling clients they do not manage cash, which forces clients to behave in 4 distinct ways:
  1. They trust their bank or building society more
  2. They do not engage with Financial Advisers because they expect to be advised to invest all of their money
  3. They do not disclose all the full amount they hold in cash
  4. They retain too much money in cash because they believe they need more in cash than they actually do

In addition to these commercial points, the regulatory value of managing cash is also essential to have.

How different do clients react to a fall
in the valuation of their investments compared to a rise in the value?


If advice is provided on the basis of the poor performance in cash a client has every right to think:

The value of my cash was poor,
but at least my bank or building society,
do not lose me money like this!


And a client has EVERY RIGHT TO COMPLAIN if they then then find out how much they could have earned from their cash if it had been managed properly. And they have EVERY RIGHT TO COMPENSATION because the advice is based upon misinformation.

Understanding the value of cash will change either the client’s position, or the Financial Adviser’s position in relation to all of the following regulatory policy requirements:

  1. Attitude to Risk – because getting a better value on their safe and secure assets enables them to make more determined investment decisions.

  2. Capacity for Loss – because when a client can invest more when they understand that they do not need to hold as much in cash as they first understood.

  3. Conflict of Interest – because helping a client to manage the value of their most important non-regulated financial asset demonstrates a balanced approach to advising on risk-based regulated solutions.

  4. Vulnerable Clients Policy – because cash is even more important to a vulnerable client and financial advisers must demonstrate their sensitivity and understanding more than usual for vulnerable clients.

  5. Treating Customers Fairly – because full disclosure is fair and incomplete disclosure is not.

  6. Remuneration Policy – because contingent charging policies are still despised by the regulator and demonstrating income to the financial adviser and value to the client not only demonstrates a less dependent position on contingent fees, it also demonstrates more value to the client and determines the client will have a more balanced solution towards the cash and investment position

  7. Centralised Investment Proposition – because no matter what a client’s experience and value, any investment portfolio is much better constructed when it is underpinned by an Effective Cash Management portfolio.

  8. Financial Planning Policy – because the FPP lays out the overall approach to financial planning for all clients and it should recognise the value of cash to every client and it should explain how the Effective Cash Management Policy is applied to each and every client.

  9. Effective Cash Management Policy – because all clients should know and understand the value of their cash. It is not the preserve of the wealthy because the understanding of cash will impact every decision a client makes.

  10. Attitude to Wealth – which is not currently a required regulatory policy but when a client understands the value of their cash, their attitude to wealth will change.
    1. They will understand better how it balances with their cash position.
    2. They will be able to withstand the downturn of the stock market and keep themselves invested.
    3. They will make better investment decisions because they will not be over-burdened with the lack of understanding with what they should be doing with their cash.