Client money: what happens to cash sitting on your investment platform
Client money rules help protect cash on investment platforms, but they are not magic. Here is what UK investors should check before assuming safety.
Cash on an investment platform can feel like money in a normal bank account. It is not quite that simple. Client money rules are there to protect you, but you still need to know where the protection starts and stops.
The Short Version
- Client money is money a regulated firm holds for customers rather than for itself.
- Investment platforms should segregate client money from the firm’s own money under FCA client asset rules.
- FSCS protection may apply if an authorised investment firm fails, but limits and eligibility matter.
- You should check platform authorisation, cash interest, bank arrangements, fees and how quickly cash can be moved.
What Client Money Means
Client money is cash that belongs to customers but is held by a firm. On an investment platform, this might include uninvested cash in an ISA, SIPP, general investment account or dealing account.
The key point is separation. The platform’s own money and customer money should not be treated as one pot. FCA client asset rules are designed to reduce the damage if a firm gets into trouble.
The FCA has a dedicated page on client money and assets, often referred to as CASS. It explains the regulatory framework firms must follow.
That does not mean every situation is risk-free. Rules reduce risk. They do not remove operational mistakes, fraud, delays or disputes about eligibility.
How Platform Cash Is Usually Held
A platform may place client cash with one or more banks. The cash is recorded as client money and should be held separately from the platform’s own funds.
You may see one cash balance on your account screen, but behind that number the platform may use pooled accounts. Pooled arrangements are common, but they make accurate records important.
The platform should be able to explain how client cash is held, whether it earns interest, how much interest is passed on and what happens if a bank or the platform fails.
Do not assume the best answer. Read the platform’s client money, cash interest and terms documents before leaving large cash balances idle.
FSCS Protection Is Not A Magic Shield
The Financial Services Compensation Scheme can protect eligible customers when authorised firms fail. But the exact protection depends on the activity, the firm, the product and the reason for the loss.
The FSCS investment protection checker explains that the relevant activity must be regulated by the FCA or PRA and that eligibility limits apply. See the FSCS investment protection checker for the official starting point.
This matters because cash on a platform can involve both the investment firm and the banks where client money is deposited. The details can be complicated, especially if several institutions are involved.
For most beginners, the safe habit is to understand the limit, avoid unnecessary concentration and keep records of your account balance.
Cash Interest Can Create A Trade-Off
Platforms do not all treat cash interest the same way. Some pass on most interest. Some retain part of it. Some pay tiered rates or different rates by account type.
A higher interest rate is useful, but it is not the only factor. You also need to consider platform strength, service, investment range, fees and how quickly you can move money.
Cash held for a short period before investing is different from cash left for months. If you are deliberately holding a large cash balance, compare the terms with bank savings options and tax wrappers.
The key is not to forget cash just because it sits inside an investment account. Idle cash is still part of your portfolio.
What Happens If A Platform Fails
If a platform fails, administrators would try to reconcile client money and assets, transfer accounts or return value to customers. That process can take time.
Segregation and records are meant to make this easier. But delays are possible, especially if records are poor or if there is a shortfall.
Your shares and funds are not the same thing as your cash balance. Investments may be held through nominees or custodians, while cash is handled under client money arrangements.
That is why account statements matter. Download or save periodic records showing cash, holdings, account numbers and transactions. They are useful if you ever need to prove what you held.
Also remember that a platform failure can create an access problem even when most or all value is eventually recovered. You may not be able to move cash, sell holdings or reinvest immediately while administrators work through the records.
For money you may need soon, access risk matters as much as compensation risk. A cash balance intended for a house deposit, tax bill or emergency fund should be treated differently from temporary cash waiting for a trade.
A Worked Example
Imagine you sell shares inside an ISA and leave GBP 18,000 as cash while waiting for a new investment. The platform shows the money as available cash.
Your first checks are simple. Is the platform authorised? What interest is paid on cash? Which terms explain client money handling? How quickly can you withdraw the money?
Now imagine you hold GBP 120,000 in platform cash after selling a large holding. The stakes are different. You should think about concentration, FSCS eligibility, whether the cash would be better split, and whether you need the money inside the platform at all.
The rule is practical. The bigger and longer the cash balance, the more attention client money details deserve.
What This Means For You
Do not panic about platform cash. Client money rules exist for a reason, and regulated firms have duties. But do not treat those duties as a substitute for understanding your own account.
Check authorisation on the FCA register, read the platform’s cash terms, understand interest, keep statements and avoid leaving large cash balances unnoticed.
If you are using cash as a waiting room between investments, set a review date. If it is emergency money or near-term spending money, ask whether an investment platform is the right place for it.
Your simple checklist is authorisation, cash terms, interest, access, compensation eligibility and records. If any part is unclear, ask the platform before the balance becomes large enough to matter.
The aim is not to become a custody expert. It is to know enough that the cash line on your platform screen does not lull you into ignoring protection, limits and practical access.
Large balances deserve a second look. Splitting cash, moving it back to a bank account or choosing a platform with clearer cash terms may be boring, but boring is exactly what cash management should be.
In Plain English
Client money is customer cash held by a firm. It should be separated from the firm’s own money, but you still need to check protection, limits, interest and access.
Disclaimer: The value of investments can go down as well as up, and you may get back less than you invest. This article is for informational and educational purposes only and does not constitute financial advice. Always do your own research and consider seeking independent advice before making any investment decision.