Why it’s important to organise and structure your cash efficiently as part of your overall wealth management plans.

While the interest rates available today on savings and deposit accounts may be lower when compared to potential returns from other asset classes or business opportunities, maintaining an allocation to cash is important. You want to ensure your cash is accessible when you need it, and not risk having to sell assets in unfavourable markets to generate liquidity. That’s why it makes good financial sense to maintain an allocation to cash as part of your overall plans for organizing and structuring your wealth.

We see signs of strain emerging all around the world as the global economy potentially slows. Against the backdrop of recession fear, and as geopolitical events such as the trade war between the United States and China continue to unsettle financial markets, many investors have been increasing their allocations to cash to protect against potential market risks. If your allocation to cash has increased then it’s essential to think about how to achieve the best blend of yield and liquidity.

Cash management can be a strategic component of your wider wealth plan. When it comes to your investment strategy, an allocation to cash in a diversified portfolio provides flexibility and control. 

Here are some of the reasons clients can benefit from holding cash:

  • You’ll be able to act quickly, taking advantage of attractive investment opportunities as soon as you identify them.
  • You’ll be less likely to be forced to liquidate existing assets at unattractive prices if market conditions are unfavourable.
  • You’ll have cash readily available to cover any margin calls in your trading account, capital calls for private equity investments, or to meet unforeseen cash demands.
  • You’ll have a natural hedge against your other investments.

The answer will depend on your individual situation and needs, and it will require consideration of a wide range of issues. You will want to bucket your liquidity to ensure you have the right amounts available at different time horizons to meet all of your goals. You will want to make sure you can maintain your current lifestyle for yourself and your family, meet any ongoing expenses, such as covering the costs of running a family office, as well as retaining enough cash to cover unforeseen expenses.

Cash management planning is essential. Understand your full financial picture, assess your cash flows, choose the cash management products that suit your liquidity needs, and be able to access to solutions that give you the flexibility in case your cash needs change unexpectedly are critical to cash management planning.

To get the most from your wealth, it is important to make sure your cash savings are always working as hard as possible. That’s why you might want to consider organizing your money across a combination of investment and deposit products, in order to maximize returns.

There are deposit solutions across the liquidity spectrum to suit your cash management needs, including daily liquidity, through to deposits with typical tenors of up to a year. Discuss with your advisors to select the products that will provide you with the right level of liquidity to meet upcoming expenses, such as tax payments or insurance policy premium payments.

Managing your money should be straightforward even when your wealth is complex, so that you have flexibility and control over the way you spend, save and invest.

At J.P. Morgan Private Bank, we offer a range of cash management products to help you manage your wealth efficiently. We can work with you to identify the right cash management solutions for you, in the context of your wider investment plan.