A cash management platform aims to provide a simple, seamless process providing clients with access to multiple cash deposits in a safe, secure manner.
For example, a client who only has to onboard once through a one-time application process will only take a few minutes to get started. All they need to do is input their details and once they have passed the necessary checks within minutes, can access many cash deposit options instead of spending time applying to each individual provider.
As this is powered by technology, it is a hassle-free way for advisers and clients to interact with each other and receive a service that may have once been complex in an uncomplicated, automated way.
Risk management
On the legal and regulatory side, cash management platforms are required to treat all monies deposited on their platform in a manner that ensures that, at all times, there is no exposure to their balance sheet or its creditors.
Specifically, they will establish a number of trust accounts with each bank providing a letter of assurance that the monies are held for the benefit of customers only trust letter. These trust letters are similar to what banks provide other regulated and professional businesses holding client monies and provide the legal security for customers against the service provider and their creditors.
A flow of funds perspective
Funds will come from the client’s account to what is often referred to as a 'hub' account. This will generally be offered by a well-known High Street bank. Once funds are cleared into the hub, clients will then be able to allocate those funds out to the panel banks.
All accounts have trust letters in place and are reconciled on a daily basis – which is another regulatory requirement – to each customer. Further protection is granted by ensuring monies deposited to each underlying bank can only be paid out to the originating account nominated by the customer and reviewed as part of the initial checks.
In other words, monies in the hub account can only be remitted out to the customer's original bank account.
In the event of the platform going into administration, its creditors cannot claim any entitlement to the monies deposited by customers. All monies deposited will continue to be held by the underlying banks. Upon expiry of the term of each product, monies will either be returned to the customer-nominated source account or distributed to the customer by an independent administrator.
The operational and legal arrangements of cash management both with banks and clients are designed to preserve FSCS eligibility for clients with each bank.
