Bank Diversification: Don’t Keep All Your Eggs in One Bank

Jul 29th 2019

The very real threat of a No Deal Brexit scenario in October has led to increased political and economic uncertainty and discussions around the impact this will have on the UK banking system. As a consequence, savers may want to consider making the most of the FSCS eligibility per banking license and not put all their savings into one bank.

A no deal scenario has many economic implications to the everyday consumer. The pound lost almost 20% of its value against the dollar in the months following the 2016 referendum and we’ve already seen a slowdown in the property market as a result of uncertainty around the Brexit process. Therefore, a no deal itself could have even harsher consequences. A major fall in the pound, significant rises in inflation and the threat of recession have all been predicted if Britain leaves the EU without a deal. A stress test done by the Bank of England ran a number of ‘worst case scenario’ variables against the UK economy. Although UK banks withstood the test, albeit with varying levels of success, the report was clear that a disorderly Brexit would be the biggest shock to the UK economy since 2008. It is paramount that consumers understand the consequences of Brexit and do all they can to protect and maintain the value of their funds against economic downturn.

This is particularly prevalent with regards to cash savings. Often a client will keep their cash aside and not discuss their cash levels with their wealth manager and yet, recent studies indicate that there is £1.6 trillion in cash savings in the UK. Furthermore, market instability has led to more and more people favouring cash for its liquidity and as recently as last year, people have increased the cash portions of their portfolios to between 8% and 20%. Cash is a bigger asset than ever before but also significant in that it benefits from government protection. The Financial Services Compensation Scheme will cover £85,000 per person per banking licence if the bank was to fail. In uncertain times, consumers should consider capitalising on government schemes such as the FSCS to protect their assets.

A little-known fact too is that for a client that has sold their primary property, funds from the sale can be protected under the temporary high balance clause for up to £1,000,000 for a maximum of 6 months, therefore protecting more funds earmarked for a specific purpose under FSCS eligibility.

For clients, a savings platform like Insignis can assist them to protect their deposits and diversify across a number of bank accounts to maximise FSCS protection with little hassle. We take care of setting up all the accounts needed once the client has signed up with one simple form. More importantly however, is the continuous management of the deposit and constant review of the bank interest rates to ensure that the cash is always making the most of the better banking rates available.

We work with hundreds of Wealth Managers across the UK to ensure that their clients’ cash is taken care of. As an add-on service for wealth managers, it could not be easier as we do all the work for you and your clients.

The truth is, no one knows exactly what will happen if we exit the EU without a deal. There is no precedent for countries withdrawing from a trade agreement as entrenched and as complex as the European Union and the consequences are unpredictable. However, you can prepare for it and make sure your clients are prepared, especially when it comes to cash.

To find out how we can help you with cash management email us at