Client Deposit Accounts

Client deposit accounts explained

What is the purpose of a client account?

A client account, also known as a client holding account, is simply a bank account for eligible businesses to hold funds on behalf of their clients or customers. Money could be in these accounts for a short period of time, such as a few days, or for a longer period.

Client accounts are specifically designed for authorised businesses who are legally required to hold money for their clients and customers. They allow firms to comply with regulations by keeping any clients’ monies completely separate from their own funds.

You can choose between designated client accounts, which means you have a separate, named account for each individual client, or undesignated client accounts (also known as pooled accounts) which hold money from multiple clients in the same account.

Designated accounts may be suitable for tax advisers or property managers holding money for specific clients, while undesignated accounts may be suitable for solicitors who need an account to store funds for financial and property transactions, for example.

Can I earn interest on my clients’ money?

Yes, client deposit accounts can pay interest which means you can earn interest on your clients’ money.

However, it’s important to be aware of any regulations and requirements that apply to the interest earned.

For example, the Solicitors Regulation Authority (SRA ) requires firms to pay clients a “fair sum of interest” on the money they held on the client’s behalf. Interest could also be used to offset any charges associated with the account.

This will be particularly significant if firms hold a large sum of money for a long period, meaning it could earn a sizeable amount of interest.

Who needs a client account?

Regulated firms and professionals who are authorised to hold client funds are likely to need a client account.

This could include:

• solicitors
• accountants
• insurance brokers
• estate and letting agents
• tax advisers
• insolvency practitioners
• property managers
• firms that manage money on behalf of vulnerable customers, such as care providers.

Is money in a client deposit account safe?

As with deposits in personal or business accounts, money in a client deposit account is protected under the Financial Services Compensation Scheme (FSCS).

This scheme covers up to £85,000 you have saved with a provider (or multiple brands if they operate under the same banking licence) should the provider fail.

How to open a client account

The process for setting up a client deposit account may vary depending on the provider and your individual situation.

You will need to meet the eligibility criteria of a provider to open a client deposit account. For example, some providers may only offer client accounts to existing customers, and you may need to maintain a minimum balance in the account.

Your firm will also need to comply with all necessary regulations , including having the right authorisation and membership of certain professional bodies, for example, to qualify for an account.

As part of the application process, providers will require some information about your firm and its directors, the clients you deal with and your due diligence processes, for example.

You may need to provide supporting documents when opening client bank accounts, including proof of identity.

Which UK banks offer client accounts?

Many of the major high street banking brands offer client deposit accounts, as well as several building societies and other providers. For example, at the time of writing, brands such as HSBC, NatWest, Virgin Money and Metro Bank offer bank accounts for client funds.

Our chart above lists the providers that offer client accounts, as well as showing the latest client account interest rates.

Where can I find solicitor client accounts?

Providers don’t typically offer specific solicitor client accounts, but many client accounts can be used by solicitors.

You can look at the chart above and click “view further details” to see if an account is suitable for solicitors and holding client monies.

Before opening an account to store your client funds, it’s important to check the criteria and features to ensure it meets your requirements.

Alternative business products

If you need an account to store funds for your own business, not for your clients, you could consider the following:

Business bank accounts

These accounts are suitable for managing your day-to-day business finances as they allow you to make and receive payments, set up direct debits and deposit cash, for example. They may also offer extra features such as integration with accounting software, cashback and access to a relationship manager (or other forms of support).

Business bank accounts often come with fees, but these will vary between providers. Some accounts may charge a monthly fee while others may charge transaction fees, for example. However, some providers may offer promotional fee-free periods for start-ups or businesses opening a new account.

Charity and club accounts

Similar to business bank accounts, these accounts are specifically designed for clubs and charities to manage their funds.

They can offer specific features or benefits for these organisations that a standard business bank account may not.

Business savings accounts

While business bank accounts are useful for your everyday cash flow, business savings accounts are suitable for storing any surplus funds. For example, you can use them for an emergency fund or to help you save up towards your longer-term business goals.

Depending on whether you want access to your funds or you’re willing to restrict access in return for a guaranteed interest rate, there are different types of savings account to choose from:

• Business easy access accounts
• Business notice accounts
• Business fixed rate bonds