After years of near-zero returns, cash is back in focus. Higher interest rates, market volatility and innovation from challenger banks have reshaped how advisers think about liquidity and client portfolios.
But with inflation still eroding real returns and new digital entrants transforming the savings landscape, advisers face fresh questions about how much cash clients should hold, where to keep it and how to make it work harder.
Flagstone partnerships manager Stephen Bottomley and account relationship manager Ed Waite discussed these themes at Money Marketing Interactive London 2025.
1) Is cash still king, or have inflation and higher-return alternatives reduced its role in portfolios for good?
Cash will always play a key part in clients’ investment portfolios and – more importantly – in their wider financial planning. Recent years have seen record market volatility, reminding us how important liquidity can be. It’s crucial not to invest cash that may be needed within three to five years. Clients also need healthy emergency reserves for life’s unexpected events. No other asset class offers the same liquidity or certainty as cash when it’s needed most. For those reasons alone, cash will remain king.
2) Are challenger banks genuinely transforming the market, or are they style over substance?
Challenger banks have changed the industry with digital-first, app-based models that bypass legacy systems and costly branch networks. The success of Starling and Monzo has also influenced some major players. For example, JP Morgan’s UK launch of Chase copied their approach.
Another evolution is the rise of Banking-as-a-Service (BaaS) models, with challenger banks as the primary adopters. Providers like ClearBank and 10x are supporting newer entrants like Kroo, OakNorth and HTB. And their market share is growing, especially in lending and deposits.
Firms like LHV offer cloud-based banking and enhanced cross-currency transactions. And while electronic money institutions such as Revolut and Wise are not technically challenger banks, they’re forcing innovation. ClearBank, one of only six UK clearers, is a prime example of the impact challenger innovation is having on UK banking.
3) With rates higher than they’ve been in over a decade, should advisers be more proactive in encouraging clients to hold cash, or is that a dangerous distraction from long-term investing?
Cash has become a far more appealing asset class over the last decade. Rising rates have rewarded savers and made cash management an even more important part of client conversations. Advisers should make sure clients are earning competitive returns and fully understand how FSCS can protect their cash savings.
Cash isn’t separate from investing. It’s a core part of sound financial planning. When managed actively, a client’s cash portfolio can work as hard as their investments and improve overall performance.
4) What emerging trends in the UK cash market should advisers be watching – and what effect could these have on advice and portfolios?
We’ll all be watching the Chancellor’s Autumn Budget, which could bring changes to Cash ISA allowances. The expected rise in FSCS limits from £85,000 to £110,000 in December 2025 will give clients access to more protection.
We’ll then turn to the Bank of England’s Monetary Policy Committee meeting on 6 November. With inflation still running higher than expected, rates could be held steady or cut less than originally anticipated. Either way, it means cash should continue to deliver strong returns during the rest of 2025.
