Macquarie warns advisers to closely examine cash management products
Macquarie Adviser Services has warned financial advisers to look behind the offer of high interest rates when considering whether to recommend cash management products.
The reason for Macquarie’s concern is the trend for cash to take a backseat to other elements of an investment portfolio.
Head of Macquarie cash product and marketing Kathy Vincent explained: “Often cash is not the first item in the investment portfolio that an adviser talks to their client about. Early discussions are usually centred on the asset allocation strategy, the actual investment solutions in the portfolio, and then discussions on how you actually control that investment portfolio through an investment hub are usually secondary.
“That’s the whole reason why we produce client booklets and cash flow budgeting tools, to help advisers talk to their clients about it and help advisers leverage our experience in this market,” she said.
In particular, Macquarie is suggesting a cautious approach to using cash management accounts as a vehicle to control cash flow requirements for clients on the strength of the high interest rates being offered.
“If you’re using the account as a cash flow system and want to make transactions through it, you can be hit by some fairly hefty fees. For example, some accounts charge up to $2 for counter withdrawals, 75c for each cheque withdrawal, and a 20c fee for using BPAY,” Vincent said.
She estimates structures like this could cost clients over $100 per year if he or she were using a few of these transactions each month.
Vincent said the Macquarie Cash Management Trust (CMT) is in complete contrast to the above scenario.
“With the Macquarie CMT the use of everyday banking features does not diminish your disclosed returns. The interest rate we pay may appear lower than others, but when you look into it clients who are running a cash flow strategy could be significantly worse off in a product that pays a seemingly higher rate of interest but is running a transaction based fee structure,” she said.
Recommended for you
An adviser has received a written reprimand from the Financial Services and Credit Panel after failing to meet his CPD requirements, the panel’s first action since June.
AMP has reported a 61 per cent rise in inflows to its platform, with net cash flow passing $1 billion for the quarter, but superannuation fell back into outflows.
Those large AFSLs are among the groups experiencing the most adviser growth, indicating they are ready to expand following a period of transition and stabilisation after the Hayne royal commission.
The industry can expect to see more partnerships in the retirement income space in the future, enabling firms to progress their innovation, according to a panel.
