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NS&I: The increasing importance of cash in the financial planning process

Andrew Pike, Head of Intermediary Relationships at NS&I has been talking to IFA Magazine’s Sue Whitbread about the changing role of cash within clients’ portfolios. They discuss not only how NS&I has developed its product range to ensure that it remains relevant, but also how the organisation has transformed its service proposition to deliver a slick new online administration service which is adding real value for advice firms.

 

SW: Cash holdings are clearly an essential part of the asset allocation process as well as the financial planning process. How do you see cash as having evolved in the world of financial planning in recent years? And where do you see NS&I’s role within that space?

AP: I’ve been at NS&I for over 17 years now, not always in this role, but I’ve always been aware of what engagement is like with the financial advice community.

If we look back over the last 15 years or so, things have changed a lot, with big changes in terms of advisers’ approach to cash. If we look back to the middle of the ‘noughties’, I think it’s fair to say that advising clients on their cash holdings back then was a peripheral concern for the average adviser. Whilst many within the financial planning community were certainly more focused on clients’ cash holdings, they were relatively small in number and not typical of the wider advice industry at that time.

Clearly, that’s changed a lot over the last 15 years. Now, there are so many more financial planners who are providing holistic financial planning services, delivering long-term planning based on the needs of their clients. Obviously, cash holdings have a key role to play in that and at NS&I, we’ve seen a lot more adviser interest in our product range as a result. I believe that growth in the number of financial planners has been a factor.

We must also mention the financial crisis in 2008-09 as the years since then have changed things a lot. I remember a time before the financial crisis when NS&I was offering Index-linked Savings Certificates. I’m guessing that many IFA Magazine readers will probably remember them too. That product, when you grossed it up for higher rate taxpayers, was generating about 9% per annum for a cash product, which is just amazing now to even think that existed. But it did.

Now of course, with the UK base rate still at a record low as we speak, cash products are typically generating interest at a fraction of 1% per annum, which has been the case for quite a long time now. It’s been a very flat market overall for the last decade and the COVID-19 pandemic has also affected all of this.

This all means that there’s been a sustained period of uncertainty and in periods of uncertainty, people do look at the security of cash more and at NS&I more too as a result.

As for our role, of crucial importance, is the fact that NS&I is backed by HM Treasury. This means that all the money which advisers’ clients save with NS&I, and I stress the word all, is 100% secure.

NS&I has that unique 100% security guarantee which applies even above the FSCS limit.

It’s one of the main reasons that our products remain very popular choices with advice firms and their clients.

We also offer other unique products too of course, like Premium Bonds, which most advisers will also recommend directly too.

I believe that NS&I has a key role to play in the cash world in working with advisers now and in the future. We always have to some extent, but over the last 10 or 15 years we’ve had an even bigger role to play.

SW: NS&I has recently launched the new Green Savings Bonds. What appetite do you think is there amongst advisers and their clients for this new type of savings product?

AP: It’s difficult to tell at this stage but I believe it’s going to be popular. It’s such a unique product – a world first for a government to launch a green retail savings product. It’s going to be very interesting to see what the pick-up is in terms of not just advisers’ interest in it, but also their clients and our mass market customers too.

As we are speaking, shortly after the Bonds’ launch, it’s far too early to say how it’s going, but clearly it’s had a lot of publicity.

Green Savings Bonds are part of a much wider government drive in trying to lead the world in green finance.

Their aim is to help get everyone to join in the collective effort towards helping the UK and the world to achieve the net zero CO2 emissions target by 2050.

As the recent COP26 conference has demonstrated, there’s a huge drive towards tackling climate change in this country and right across the world.

The launch of the NS&I Green Savings Bond is therefore very timely. The money invested into Green Savings Bonds will be contributing to green projects chosen by the Government. HM Treasury plans to allocate an amount equivalent to the funds raised from these Bonds to its chosen green projects, within two years. The Government will also publish details about how the money is being spent and what the environmental benefits are, so advisers and their clients can see the difference that their investment is making.

No doubt, IFA Magazine readers will have also seen the recent green gilt releases as well. It’s all part of this broader strategy to get everybody joining in the collective effort to help the country towards meeting those all-important green targets. I think that’s very exciting.

The Green Savings Bond is the first new product that NS&I has launched in quite some time. That in itself is exciting, but mainly because it’s so unusual, so different.

In terms of the appetite with advisers and their clients, it’s difficult to tell how it’s going to go. Of course, it’s going to be very different on a client by client basis. What I mean by that is that it’s about each client’s own values – about how seriously and how much they care about the green credentials of their savings products versus the interest rate which it will earn – will vary tremendously. Probably everyone will care about both to some extent, but it will be different depending on which clients advisers are talking to.

With the high maximum investment limit of £100,000, I believe the Bonds will be attractive to many high net worth clients. When you add to that the 100% security that NS&I always offers, then this in itself is likely to make the product attractive as well as its strong green credentials of course.

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