Savers aren't making the most out of their cash. How can we change this?

Tim Parker
Posted by Tim Parker
Posted on February 02, 2021 Leave a comment

When the pandemic and ensuing lockdown hit in March last year, no one was sure of when it would be over and how it would impact their job or their finances.

The fact is, it’s still not over, but a lot of people have learned in the past nine months, whilst going through a recession, that keeping their finances in order is critical to future financial security. This is especially true considering that no one can predict what will happen to them personally. Unfortunately, we have all witnessed the destruction of whole industries at the hands of coronavirus in mere weeks.

As the surge of savers continues, financial advisors would be remiss to ignore these new pockets of clients all over the UK, and over at the Akoni blog, we recently spoke about the New Year’s resolution financial advisors should be making in 2021 to help them secure more clients.

Not only will financial advisors benefit from the new wave of savers, but so will individuals who will see better returns than what is on the market, and be able to make their money work for them in a way that suits their circumstances and values (ESG investing has become very popular in the last year and continues to outperform more traditional investments).

So who are these new savers, and where have they come from?

We have spoken before on the Akoni Blog about the rush of new savers that exist now compared to pre-pandemic times.

Analysis by the Bank of England found that sadly 28% of households have seen their income fall during the pandemic. This number rises significantly to 66% amongst the self-employed. Spending has fallen even further, even for those still working. They estimate that 57% of households cut their spending in the early months of the crisis as a precautionary measure to what the future might hold.

As for those who made gains during this time - 28% of those surveyed had accumulated additional savings as a result of the pandemic, whilst on the other hand, 20% had seen a depletion in their savings. 

Unsurprisingly, households whose savings increased due to the pandemic were much less likely to have seen their incomes fall (for example, because of furlough or unemployment) than households whose savings decreased. It was also noted that 42% of high-income employed households saved more during the pandemic, compared with 22% of low-income employed households.

Furthermore, according to another study, 85% of UK adults have spent less during the lockdown. On average, people saved, per month, £49 a month on petrol, £57 by not going to pubs or restaurants, £53 by not going to shops, and made significant savings in other areas, totalling £617 a month on average for those still receiving their full income. The report also found that 31% of people with savings accounts had increased their monthly deposits since the start of lockdown.

According to The Guardian: “The UK savings ratio, which measures how much disposable income is set aside, rose to 29% between April and June, compared with 6.8% in the same period last year. The ratio is more than twice as high as the previous record of 14.4%, set almost three decades ago”. This goes in line with the Bank of England’s chief economist, Andy Haldane comments. It was reported that Haldane said that excess savings during the pandemic amounted to about £100 billion.

Where are clients keeping their cash, and would they be better off placing it somewhere else?

A recent survey showed that 58% of advisers found acquiring new clients ‘significantly harder’ during the pandemic and they had little confidence that anything would change suggesting that financial advisors should not be the only ones setting resolutions for 2021.

It was said in the Financial Conduct Authority’s (FCA) review of the Retail Distribution Review (RDR) and Financial Advice Market Review (FAMR), that too many clients do not get the advice they need to help make informed investment decisions and access better returns.

37% of consumers with more than £10,000 of investable assets did not have any investments at all and were holding their assets entirely in cash. A further 18% of consumers were holding more than 75% of their investable assets in cash.

As we have discussed at length, more people are saving in this climate, yet one area that seems to be a blind spot for many people is how they can make their money work for them.

Renowned for steep charges, low-interest rates and limited choices, high street banks do not have the best reputation amongst those who want to see returns on their cash.

According to Accenture, Covid has helped to accelerate consumer adoption of digital banking channels, thereby increasing the ongoing erosion of consumer trust in banks due to the impersonal nature of it all. Yet, many people still insist on keeping their cash sitting idle in their current account with their high street bank, which may not even include any savings products or a good return on their investments.

This is Money suggests that customers with a current or savings account with a high street bank will find the path to investing with them easy to navigate. The familiarity may also be appealing if they have never invested before

As always, when new opportunities arise for people, they may not know the best course of action to best benefit themselves. As such, in this example, people who have only just started saving are doing what is safe, easy and convenient to them and sticking to what they know.

Some places are offering decent rates, especially in this current market. The people who will be best suited to guide clients throughout this time are trusted financial advisors and wealth managers who are learning to work with and acquire new clients from all walks of life. This marks a notable shift away from the old way of working with only high net worth individuals (HNWI) and those who were ‘in the know’ within the financial community.

Having a platform that gives the client as little or as much control and participation as they want is the perfect solution for financial advisors trying to educate their clients without overwhelming them or making them feel out of their comfort zone.

As the breadth of clients grows, so will the incentive for financial institutions to give better rates. Finding all of these options in one place, and with the right guidance and support can change someone’s financial health, and potentially along with that, their lives.

So, why should you choose Akoni to help you with your client’s cash decisions?

1) Safe and secure with the FSCS Government deposit guarantee

All deposits are held with each bank providing protection of up to £85,000 per bank, or up to £1 million for Temporary High balances.

2) Diversifying risk (spreading money across savings providers)

With the option to spread cash across several providers on the Akoni Cash Management Platform, you can diversify risk, and increase the chances of positive returns.

2) Increased returns & Better interest rates

In a climate of economic uncertainty, and with interest rates being cut across many providers, it’s not easy to find decent interest rates in a simple way. With Akoni, you can find competitive interest rates to suit your client’s specific needs.

4) Quicker, and hassle-free - no form filling

Akoni Hub provides a hassle-free cash management experience - your clients can onboard and open an account online with no fuss. Clients will only need to complete one AML/KYC process, can switch between providers, and manage their account on the Akoni Cash Management Platform in just a few clicks.

5) White label Adviser portal and tools

You have the flexibility to create a platform that works for you and your clients. Add your branding to showcase who you are through a sleek, professional cash management platform designed with you in mind.

Find out more about Akoni: Akoni is an award-winning UK cash platform, which provides a marketplace to financial advisors and wealth managers through a bespoke white-label offering, or off-the-shelf offering. Akoni uses innovative technology to personalise cash planning solutions for clients, and also provides a full API solution to banks and insurance clients.

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