FCA warns retail customers that cash could be invested for higher returns

The FCA has warned that customers holding on to too much of their wealth in cash are missing out on potentially higher returns as they don’t receive proper financial advice.

In a new document, the FCA says that many customers are still holding large amounts of cash, however, too many don’t get the advice they need to help make informed investment decisions and access better returns.

Bowmore Wealth Group, says there needs to be a greater effort from the financial advisory industry and the FCA to educate customers who hold far too much of their wealth in cash that ultimately delivers negative real returns.
Mark Incledon, Chief Executive Officer of Bowmore Wealth Group, says: “There’s a strong case that cash savings products should carry a warning about how their real value declines due to inflation.”
“More than GBP40 billion was put into cash ISAs last year alone and this is a good illustration of the problem. The public need to understand that due to inflation, they are losing money in real terms.”
“The only way to protect against the impact of inflation is to invest in assets that can grow faster than inflation and generate income.”
“A cash deposit today is unlikely to earn you more than 0.2 per cent interest each year, when inflation is significantly higher than that even in the middle of a lockdown.”
“The Bank of England’s inflation target is 2 per cent, so during normal times for each GBP100 held in cash you are losing GBP1.80 each year by doing nothing. In contrast, world equity market indices have averaged around 10 per cent growth per annum over the last 100 years.”
“This shows that sitting on your hands and doing nothing will be detrimental to your long-term wealth.”
“The mindset that “cash is king” with regards to savings and investments needs to be addressed so that retail investors understand the negative impact holding cash will have on your overall wealth.”