The financial spring clean: Moving clients from cash to investing

Nick Henshaw, Head of Intermediaries Distribution at Wesleyan Assurance Society, explores how the new tax year is an opportunity for clients to step away from cash savings towards investment, as policymakers and regulators look to create a culture of retail investment.

The start of a new tax year offers a natural opportunity for clients to revisit their investment and savings strategies.

With a refreshed ISA allowance and a full year ahead to benefit from time in the market, it’s an ideal time for advisers to help client reassess their long-term plans – including those left underwhelmed by the performance of their Cash ISAs.

Following the Spring Statement, speculation around potential cuts to the Cash ISA allowance in the Autumn Budget continues to build.

In the Spring Statement, The Chancellor confirmed that the government is looking at options to reform ISAs, with the aim of encouraging a culture of retail investing.

This move would align with the Financial Conduct Authority’s (FCA) 'cash to equities sprint'. Part of the Advice Guidance Boundary Review, the initiative is focused on developing targeted support for those moving from cash savings into investing.

Smoother alternatives

Nothing is certain at this stage, so it’s understandable for some clients to hesitate and wait for firmer policy direction before making any changes. For others, inaction could risk dampening returns.

Advisers can use the new tax year to highlight alternative solutions, offering the same tax benefits and a greater potential for returns – all while underlining the value of advice.

Naturally, risk-averse clients may still be reluctant to explore new investing options – particularly when faced with the real-time fluctuations of a Stocks and Shares ISA. New investors will also likely have seen recent reports of global stock market volatility and may baulk at the very idea of investing.

A Stocks and Shares ISA in a smoothed fund can be an effective vehicle for mitigating client concerns as they make the transition. These funds are designed to reduce the impact of short-term market fluctuations by holding some gains during strong performance periods and later using them to cushion returns when markets are weaker.

This smoothing mechanism helps create a more stable investment experience – one that reduces the emotional ups and downs that can lead inexperienced investors to panic or pull out prematurely. Of course, these funds don’t eliminate risk; it’s impossible for investing to be entirely risk free. But they do provide reassurance and help clients stay committed to their long-term investment strategies.

For advisers, they can also be a valuable tool for helping clients move beyond cash without pushing them too far outside their comfort zone. And the prospect of stronger returns down the line should be a compelling one.

The familiarity of flexibility

Of course, a change in financial behaviours isn’t always smooth. Some clients may worry about losing the flexibility and access they enjoy with cash savings, feeling like their money is trapped.

Helping clients understand the key differences between flexible and standard ISAs, particularly the ability to withdraw and replace funds within the same tax year, can be key to addressing those concerns. By highlighting that continued instant access to their money will offer a familiar sense of liquidity and freedom, those first steps into investing should feel like a much smaller leap.

When paired with a smoothed fund, a flexible Stocks and Shares ISA delivers an attractive combination for new investors: lower volatility, tax efficiency and the accessibility that clients are familiar with. Together, these features make the transition from saving to investing more comfortable and manageable.

A timely opportunity

Alongside the 'cash to equities sprint', the FCA recently launched its five-year strategy, with an objective to enable investment while ensuring consumers have the information and support they need to make decisions aligned to their financial goals.

The industry is well placed to respond. Advisers continue to help their clients to navigate market volatility, and providers are working to increase access to specialist solutions that make it easier to start their investment journey.

Wesleyan’s Smoothed With Profits Growth Fund was the first of its kind on an independent adviser platform. It is available via the platform’s flexible ISAs and JISA wrappers and as such can be easily incorporated into existing client portfolios.

Now is the time to act. By starting conversations about investing early in the tax year, advisers can help clients make the most of their allowances, seize the opportunities offered by specialist investment vehicles, and ultimately take meaningful steps toward long-term financial wellbeing.

Please remember the value of investments can go down as well as up and you may get back less than you invest.