How to make cash work harder

Hi voornaam,

In an era where every basis point counts, can you afford not to optimise your cash management?

As rates remain high, and with increased volatility across domestic and global markets, cash has moved from an afterthought during Covid to now mean reverting material allocations up to 15% of portfolios.

Cash is king again. Effective cash management has become a crucial component of a diversified portfolio, with investors expecting strong returns on cash holdings, which provide low risk, strong risk-adjusted returns, and liquidity.

Term deposits remain the easy go-to cash product but are time consuming for brokers and advisers to set up and manage. With cash allocations reverting to historical norms within your client’s portfolio, seeking the best rates in the marketplace is paramount. As seen by the chart below, it’s not a case of just calling your bank.

Term deposit rates are not easily accessible, and highly elastic to demand, yet to maximise returns you need to find those lucrative rates and follow them from bank to bank. Banks are price-makers depending on their requirements, not yours and these requirements are always changing.

FY24 Interest rates per tenor per ADI

A new solution

Transact1's in-house proprietary research clearly indicates an obvious and persistent dispersion of rates across banks and across all term periods. This persistent dispersion in rates offered clearly indicates that an active approach to cash management can deliver meaningful outperformance over time, as ADI’s (Authorised deposit-taking institution) offer rates (i.e. the amount they are prepared to pay to use your cash) on their terms - which are always changing.

For advisers, actively managing cash rather than adopting a 'set and forget' approach is crucial to optimising returns, which can vary significantly.

Managing cash in-house might involve additional costs and requires careful consideration of profitability. The most effective solution is to outsource, leveraging a specialist provider for their efficient access into this opaque market and up-to-date market information.

Transact1, a FinClear company, offers an established alternative to direct term deposits: an actively managed portfolio of term deposits that eliminates the hassle of sourcing rates and the ongoing commitment of resources used up by managing term deposit investments. With a singular focus on the cash asset class, Transact1, a FinClear company, leverages economies of scale and efficiencies to access competitive rates, move funds to the best offerings and navigate the fees, terms and other intricacies of dealing with the big banks, making the banks work for you and not the other way around.

FinClear's cash offering is designed to simplify the complexities of cash management, providing strategic, outsourced solutions that optimise returns and efficiency. For advisers seeking a hands-off approach while still realising the benefits of active cash management, we offer two options:

Transact1, a FinClear company

Commencing in July 2017 and now with over $3.1 billion Funds Under Management (FUM), Transact1 is designed to address the challenges of cash management.

With unrivalled intangible benefits including deep market relationships, expertise and economies of scale, we may achieve better outcomes for clients than advisers could achieve independently.

By automating the process to source the best rates, we increase buying power and operational efficiency. We navigate the intricacies of bank negotiations to ensure our clients consistently receive top-tier rates and terms. Our team also handles the administrative burden, from AML/KYC compliance to reinvestment and maturity tracking.

The FinClear Cash Income Fund

The FinClear Cash Income Fund offers exceptional net returns and total liquidity through a closely managed portfolio of term deposits. With low fees and no 30-day notice requirements, the fund provides seamless access to funds when needed. The transparency provided on the underlying term deposits is paramount to the security for the investor.

Built for advisers by advisers, the FinClear Wealth Cash Income Fund has low fees and a proven track record of performance over more than six years, this is a brokers’ and advisers’ secret weapon to making cash work harder.

The FinClear Wealth Cash Income Fund uses proprietary technology to automate the search for best rates on an intraday basis. The Fund offers compelling returns, transparency and liquidity, by blending term deposit rates from a broad range of ADIs not available on your direct term deposit panel.

Importantly for time-poor advisers and brokers, the Fund assumes the standard responsibilities by taking care of AML/KYC, reporting and managing cash flow movements, reinvestment, maturities, as well as finding the best rates on offer to include in the portfolio. Unlike direct term deposits, your funds will not be locked up for a specified time, providing monthly income and accessible for agile market responses.

FinClear Group

More broadly, the FinClear group manages over A$150 billion for over 250 financial intermediaries as ASX participant. FinClear Group is ideally placed to leverage our extensive capabilities and trusted market presence, to deliver superior cash management solutions that help advisers, and their clients optimise financial outcomes with minimal effort.

At FinClear, we turn complexity into opportunity, ensuring your client’s cash works as hard as you do. Contact us today to learn how our groundbreaking solutions can benefit your portfolio.

Interest reignites in cash

For a more in-depth discussion on maximising your returns on cash, listen to FinClear’s Bill Keogh and Daniel Bower in conversation with Laura Dew, as part of the Relative Return podcast series:

FinClear is Australia’s leading independent technology and infrastructure provider for financial market access. FinClear hosts over A$150billion of listed assets on its existing digital platform and touches over 570,000 accounts. Find out more at FinClear.com.au

FinClear Pty Ltd is the holder of an AFSL and is regulated by ASIC. FinClear Services Pty Ltd is a General Clearing Participant of ASX Clear and an ASX Settlement Participant and also holds an AFSL. FinClear Execution Ltd is an ASX Market and ASX Settlement (Account) Participant and is also a holder of an AFSL.