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Legalised theft of your PORTFOLIO

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paulnumbers
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Re: Legalised theft of your PORTFOLIO

#143193

Postby paulnumbers » June 3rd, 2018, 10:24 am

Dod101 wrote:
paulnumbers wrote:
mc2fool wrote:The FSCS covers up to £50k of losses, not just holdings of £50k. If you have (had) £500k and you get back £450k (90%) then the FSCS will cover the £50k loss. If, OTOH, you only get back, say, £420k then the FSCS will only cover £50k of the loss leaving you with a final shortfall of £30k.


Are you sure about this? This was never my understanding.


That is what an article in the Sunday Times says this morning. It is losses not the amount you have at risk.

Coming back to my original point if you have a substantial ISA built up over many years you could have say half a million or more tied up with one broker. Would you place that amount of money with one bank? A bit frightening really.

Dod


Certainly half a £mil with one broker seems too many eggs in one basket if it's the bulk of your funds. I have mine split between two, and at some point will probably go to 3 brokers. At one point I dabbled with IG Index, but over time became concerned they were too small, and now use HSBC & Halifax. Perhaps this is delusion, but I gain comfort from using larger high street brands.

GeoffF100
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Re: Legalised theft of your PORTFOLIO

#143226

Postby GeoffF100 » June 3rd, 2018, 11:36 am

Dod101 wrote:Coming back to my original point if you have a substantial ISA built up over many years you could have say half a million or more tied up with one broker. Would you place that amount of money with one bank? A bit frightening really.

A deposit with a bank is fundamentally different. The bank can do what it wants with your money (usually lend it out), whereas your investments are ring fenced. For a bank deposit, the FSCS guarantees the full deposit, but only up to the compensation limit. Anything beyond that is at risk. For investments, the FSCS covers your loss, which hopefully will be much less than your investment. There are proposals to increase the investment compensation limit to £85,000:

https://www.investmentweek.co.uk/invest ... tion-limit

Splitting your money too many ways has its problems. You soon have to use less solid and more expensive providers. I have over fifty investments with over a dozen financial service providers. That is OK now, but it might not be as I get older. I would hate to have to pay £200 per hour or more for someone to look after the administration.

I do not think you need to worry much about £500K with one the more solid providers. Indeed, I would not be too worried about £1 million if it saved me a lot of work. An increase in the compensation limit would be a big help here though.

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Re: Legalised theft of your PORTFOLIO

#143229

Postby mc2fool » June 3rd, 2018, 11:42 am

paulnumbers wrote:
mc2fool wrote:The FSCS covers up to £50k of losses, not just holdings of £50k. If you have (had) £500k and you get back £450k (90%) then the FSCS will cover the £50k loss. If, OTOH, you only get back, say, £420k then the FSCS will only cover £50k of the loss leaving you with a final shortfall of £30k.

Are you sure about this? This was never my understanding.

The £50K is a compensation limit.

https://www.fscs.org.uk/what-we-cover/compensation-limits/
FSCS wrote:The actual level of compensation you receive will depend on the basis of your claim. The FSCS only pays compensation for financial loss. Compensation limits are per person per firm, and per claim category (listed below).
:
The maximum levels of compensation are:
:
Investments: £50,000 per person per firm (for claims against firms declared in default from 1 January 2010).

The afore-linked-to FCA statement on Beaufort also makes it clear:
FCA wrote:Will the FSCS cover any of the losses?

Yes, the FSCS will cover shortfalls in client money or assets for eligible clients up to £50,000. ... The administrators have estimated that more than 90% of eligible clients who have client money and/or assets with BACSL are likely to have losses which fall under this £50,000 limit.

Alaric
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Re: Legalised theft of your PORTFOLIO

#143233

Postby Alaric » June 3rd, 2018, 12:00 pm

GeoffF100 wrote:For investments, the FSCS covers your loss, which hopefully will be much less than your investment.


Liquidators have found an interesting wheeze in the Beaufort case. Announce correctly or otherwise that it's going to take a lot of expensive liquidator time to reunite clients with their assets and that they propose to help themselves to pay the fees. The premise is that the FSCS will cough up, so "smaller" investors won't be out of pocket.

There's an added complication in the Beaufort case that some of the investments may be worthless.

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Re: Legalised theft of your PORTFOLIO

#143234

Postby Dod101 » June 3rd, 2018, 12:10 pm

Thanks Paul and Geoff. I take Geoff's point and realised as I wrote my comment that it is fundamentally different from a bank deposit. It would still be awkward though if say a broker holding that much failed and we know now what ring fencing really means!

I use ATS and II and cannot really think I would like another although HSBC would be delighted to see me I expect as I am a Premier customer with them. I may try to do a bit of rebalancing although keeping some shares in certificated form seems sensible to me.

I think that ring fencing should really mean what it says and that the piece of legislation allowing administrators to plunder client funds should be repealed. I wonder if administrators' fees come first from any shareholder funds held by the broker? I would hope so.

BTW it is not a 'wheeze'. It is perfectly legal and they are not simply 'helping themselves'. It all has to court approved as far as I know. And if some of the investments are worthless that is nothing to do with the failure of the Beaufort business as such, which is what we are discussing.

Dod

paulnumbers
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Re: Legalised theft of your PORTFOLIO

#143271

Postby paulnumbers » June 3rd, 2018, 3:22 pm

Hi Dod,

Just a comment on HSBC. I only picked them because I hold some shares in USD, and they do not charge FX commissions. Other than that they are pretty naff. They are slow and expensive, but for me the lack of FX charges makes it viable. Also it has the added benefit of qualifying me for premier, so I can get the worldwide travel insurance.

Not related to you, but noteworthy for others - I understand from someone who used to work for HSBC that once you qualify for premier they don't take it away even if you no longer meet the requirements (£50k with them). So it seems a pretty good wheeze to get free travel insurance until you're 70 years old, even if you don't stay with them. As you're probably away, it's not a cheap policy.

Paul

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Re: Legalised theft of your PORTFOLIO

#143272

Postby Lootman » June 3rd, 2018, 3:26 pm

paulnumbers wrote:I understand from someone who used to work for HSBC that once you qualify for premier they don't take it away even if you no longer meet the requirements (£50k with them). So it seems a pretty good wheeze to get free travel insurance until you're 70 years old, even if you don't stay with them. As you're probably away, it's not a cheap policy.

FWIW HSBC told me the exact opposite, If you do not maintain their minima (50K in assets, 75K a year, or whatever) then you can be downgraded.

They may not be religious about that if you are otherwise a profitable customer, but they reserve that right.

Of course, if you park 50K in cash in their savings account for 0.1% annual interest, then you are golden :D

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Re: Legalised theft of your PORTFOLIO

#143282

Postby Dod101 » June 3rd, 2018, 4:12 pm

I do not park £50,000 with HSBC and it is a long while since I moved to them so I assume I did then. They certainly do not automatically downgrade you I am sure but alas I no longer qualify for their free travel insurance. It is nice to have Premier on my cards and occasionally that helps but I like their online banking which so far suits me very well. O and they are also a well capitalised company.

Dod

paulnumbers
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Re: Legalised theft of your PORTFOLIO

#143302

Postby paulnumbers » June 3rd, 2018, 5:06 pm

Lootman wrote:
paulnumbers wrote:I understand from someone who used to work for HSBC that once you qualify for premier they don't take it away even if you no longer meet the requirements (£50k with them). So it seems a pretty good wheeze to get free travel insurance until you're 70 years old, even if you don't stay with them. As you're probably away, it's not a cheap policy.

FWIW HSBC told me the exact opposite, If you do not maintain their minima (50K in assets, 75K a year, or whatever) then you can be downgraded.

They may not be religious about that if you are otherwise a profitable customer, but they reserve that right.

Of course, if you park 50K in cash in their savings account for 0.1% annual interest, then you are golden :D


Yeah they told me that too. What they say and what they do may be different :)

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Re: Legalised theft of your PORTFOLIO

#143519

Postby ElectronicFur » June 4th, 2018, 11:53 am

mc2fool wrote:The FSCS covers up to £50k of losses, not just holdings of £50k. If you have (had) £500k and you get back £450k (90%) then the FSCS will cover the £50k loss. If, OTOH, you only get back, say, £420k then the FSCS will only cover £50k of the loss leaving you with a final shortfall of £30k.


Ah yes, I see what Alaric was getting at now, thanks for pointing that out. I had run out of coffee, so probably not enough caffeine at that point :oops:

stevensfo
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Re: Legalised theft of your PORTFOLIO

#143664

Postby stevensfo » June 4th, 2018, 5:30 pm

So to summarise, am I right in saying that re. self-select ISAs, the FSCS will guarantee 50K of losses, but we are all agreed that the term 'ring-fenced' is rhetorical twaddle with no basis in fact or law and should be consigned to the rubbish heap?


Steve

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Re: Legalised theft of your PORTFOLIO

#143667

Postby Alaric » June 4th, 2018, 5:40 pm

Dod101 wrote: And if some of the investments are worthless that is nothing to do with the failure of the Beaufort business as such, which is what we are discussing.


I suspect a connection. Brokers promoting dubious investments can get hit by misselling fines and requirements to pay compensation. That in turn will exhaust their capital, leading to insolvency or administration.

Wills & Co was another Broker failure in recent years.

http://www.thisismoney.co.uk/money/inve ... ation.html

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Re: Legalised theft of your PORTFOLIO

#143669

Postby Dod101 » June 4th, 2018, 5:42 pm

stevensfo wrote:So to summarise, am I right in saying that re. self-select ISAs, the FSCS will guarantee 50K of losses, but we are all agreed that the term 'ring-fenced' is rhetorical twaddle with no basis in fact or law and should be consigned to the rubbish heap?


Not really. The ring fencing still exists in that the funds in the nominee accounts are not part of the brokers shareholders funds. It seems that a change i9n the law in 2011(?) allows fees of administrators to be charged against the assets 'ring fenced' if these fees are being used to sort out the return of these assets to the beneficial owners. There will surely after Beaufort be a lot of pressure on the Government to change this.

Dod

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Re: Legalised theft of your PORTFOLIO

#143674

Postby stevensfo » June 4th, 2018, 5:59 pm

It seems that a change i9n the law in 2011(?) allows fees of administrators to be charged against the assets 'ring fenced' if these fees are being used to sort out the return of these assets to the beneficial owners.


Exactly. So they are not strictly 'ring-fenced'.

Seems to me that the FSCS needs to use unambiguous language. Either our NOMINEE shares in AHBell, iii, HL, Halifax etc are safe or they're not.

Steve

PS I can't believe we were all having the same discussion at least 10 years ago in TMF! :-)

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Re: Legalised theft of your PORTFOLIO

#143739

Postby GeoffF100 » June 4th, 2018, 8:14 pm

stevensfo wrote:Seems to me that the FSCS needs to use unambiguous language. Either our NOMINEE shares in AHBell, iii, HL, Halifax etc are safe or they're not.

No ring fence is impenetrable. The broker can fraudulently sell your shares and run off with the money. MF Global illegally pledged client stock as security for its derivatives trading. Certificated holdings and Crest holdings are not safe either.

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Re: Legalised theft of your PORTFOLIO

#143741

Postby tjh290633 » June 4th, 2018, 8:17 pm

stevensfo wrote:So to summarise, am I right in saying that re. self-select ISAs, the FSCS will guarantee 50K of losses, but we are all agreed that the term 'ring-fenced' is rhetorical twaddle with no basis in fact or law and should be consigned to the rubbish heap?


Steve

It all depends on the losses. For example, losing on Carillon is down to market forces. Not covered. The broker stealing your RDSB shares is covered.

TJH

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Re: Legalised theft of your PORTFOLIO

#144504

Postby FurtimNatura » June 8th, 2018, 1:25 pm


BobbyD
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Re: Legalised theft of your PORTFOLIO

#144515

Postby BobbyD » June 8th, 2018, 2:05 pm

stevensfo wrote:
It seems that a change i9n the law in 2011(?) allows fees of administrators to be charged against the assets 'ring fenced' if these fees are being used to sort out the return of these assets to the beneficial owners.


If there is not a penny left in the company then unless funds are made available from somewhere to allow for the repatriation of those assets to their rightful owners they will remain ring-fenced and out of reach of everybody, including those rightful owners.

That money has to come from somewhere and there aren't a lot of alternatives. Throw in £50k FSCS and the number of people losing a penny will be minuscule. Perhaps people would be happier if they were offered the alternative of retaining ownership of 100% of their holdings, but never regaining access to them?

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Re: Legalised theft of your PORTFOLIO

#144536

Postby Lootman » June 8th, 2018, 3:38 pm

BobbyD wrote:Throw in £50k FSCS and the number of people losing a penny will be minuscule.

But the amount that small number of people will lose is far from minuscule.

The US scheme for protecting investors covers $5 million, I believe. One hundred times as much. Seems like a better idea.

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Re: Legalised theft of your PORTFOLIO

#144538

Postby scrumpyjack » June 8th, 2018, 3:50 pm

The problem with compensation schemes is that someone else has to pay for it, usually the prudent end up bailing out the imprudent.

In the case of Beaufort it is hard to see why any sensible prudent investor would have chosen them as their broker, or stayed with them if they absorbed another broker.


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