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Quilter will widen savers’ access to fixed-term deposits through its platform in response to the rising number of investors allocating more of their portfolio to cash.
The combination of rising interest rates and volatile markets means investors are increasingly turning to cash for lower-risk returns.
Quilter announced this week that it will introduce a cash hub on its adviser platform this year, allowing clients to choose from a range of fixed-term deposit accounts offered by banks, in addition to its cash account, which currently pays 3.38 per cent.
Quilter’s chief executive Steven Levin told the Financial Times the size of the “inflow pie” has shrunk in recent months. “Clients are paying off debt and putting money into cash products,” he said.
Asset managers have reported a slowdown in fund flows in the first six months of the year, with Quilter’s flows dropping 56 per cent year-on-year and Abrdn’s falling 16 per cent.
In times of market volatility, investors tend to hold more of their assets in cash, with those on platforms choosing to allow income to accumulate in cash instead of reinvesting it.
Quilter, which will make a small margin on any cash invested through the hub, wants to allow customers to hold and manage their cash through its platform, and is also seeking to prepare for the wave of redeployment when market sentiment starts to improve.
The change will allow advisers to take advantage of fixed-term interest rates offered by the wider market, as well as managing the protection on deposits guaranteed by the Financial Services Compensation Scheme, which covers up to £85,000 of savers’ cash in the case of a bank failure.
Just eight out of the 25 main adviser platforms offer on-platform access to fixed-rate deposits, including Quilter, according to data from the Lang Cat.
This includes Transact, Nucleus and M&G’s Wealth Platform, with Abrdn’s Wrap platform and AJ Bell’s Investcentre offering deposits through Sipps.
Interest rates have risen sharply in the UK over the past 18 months with the Bank of England making 14 consecutive rate rises to take the base rate of interest to a 15-year high of 5.25 per cent.
The rises have been in response to soaring inflation, which was 7.9 per cent in June and has exceeded the Bank of England’s 2 per cent target since May 2021.
UK banks recently improved their savers’ rates after pressure from the regulator after MPs voiced concern that banks were raising mortgage costs but failing to pass on interest rates to savers.
The average savings rates for £10,000 are currently 5.23 per cent for a one-year fix, dropping to 5 per cent over three years and 4.77 per cent for five, according to data provider Moneyfacts.
UK Finance, the industry group, said although savings rates have increased recently and there are a lot of good products on the market, savers are always encouraged to “shop around”.
“Savings account aggregators can be a good way for busy customers with higher balances looking to maximise their returns to do this,” it said.