extremely passive buy and forget investor

[valueinvestor123]

Hi, I am a very inactive investor but from time to time notice some of the shares disappearing from my broker.
I don't usually read and participate in corporate actions (too many broker accounts/don't have time) but I am not sure the brokers handle things correctly. (All nominee). Does anyone else notice this?

For example I held shares in a company called Kommunale Wohnen (ticker: BIW). In 2016, they seem to have been taken private and delisted and investors should have received cash 10,80 Euro per share: http://www.kwg-ag.de/investor-relations ... e53f2ae4e3

(last paragraph)

However I never received anything and when I inquired with my broker, they said that they deemed the shares 'worthless' as the company has been 'dissolved'. But that doesn't seem to be true! Question: how do I get my money back and how can I avoid brokers messing things up?
I try to now buy mostly large to mid caps as there seem to be (hopefully) less exotic types of corporate actions (I don't think I have ever not received either new shares or some cash from de-merging/dissolving/delisting of large caps; except Mapeley, though they are not that big and almost or pretty much went bust anyway). I don't mind companies going bust but I do mind brokers not handling things correctly because that is not part of the risk I am prepared to be exposed to. There's enough risk already with companies going bust/market risk etc but brokers messing things up is totally unnecessary.

Do you guys all stay on top of you shares? I have 200+ holdings and have absolutely no inclination to reply to corporate actions nor check that brokers handle them correctly and hope they are designed with passive investors like me in mind. But I doubt this is the case. But there doesn't seem to be much recourse for me to get them to fix the mistakes.

[valueinvestor123]

PS: And the other broker where I also held some BIW, said that the cash should have been received by August 2017 but there is no sign of any cash actually paid into the account when I inquired further. They are investigating it. I don't understand how this can happen.

Apart from this nuisance, things have been great. Since 2006 when i started investing, my portfolio increased around 10 fold so I shouldn't complain too much. Now been shopping again during the market weakness. Probably more to come. (I always buy too early).

[Dod101]

With respect you are anything but passive. Maybe you could be called laissez faire. You seem to be quite active but there is not much point in being active in buying cheaply if you are letting things slip with your current holdings and frankly you have only yourself to blame if you are not keeping a grip on what is going on. That of course is not easy with 200 + holdings. If were you I would substantially reduce the number of holdings so that you make the job of monitoring easier, or simply buy one or more truly passive funds.

For myself I certainly keep on top of my shares and what is happening with them but I have only about 30/35 shares at any one time.

Dod

[SalvorHardin]

I second what Dod101 has said. You've got far too many holdings to keep an eye on. Also to assume that the brokers get everything correct all of the time is a bit of a leap of faith, especially when it comes to the more exotic holdings (e.g. foreign listings where the native language is not English, American limited partnerships, etc.).

Kommunale Wohnen was taken over in 2016. You should have received 10.8 euros per share. There are a few articles online about it. My German isn't very good, but it seems that they were bought by the Austrian property company Conwert Immobilien, which seems to have since been bought by Vonovia.

Chase up the brokers and double check your statements for 2016. It is possible that they converted euro proceeds into sterling (e.g. ISAs are forced to do so) and it isn't properly described as such.

I currently have 36 holdings which I monitor fairly closely (22 operating companies, half of whcih are foreign, and 14 investment trusts). I get all the official announcements by email. I always check my records against the various brokers' statements (and the online accounts where applicable). If there is any discrepancy I contact them immediately (I've only had to do this three times in 35 years).

A key reason why I do this is that I live off my investments and have done so since retiring 15 years ago, so I keep a close eye on things.

Mistakes do happen, I've had 30% dividend withholding tax incorrectly taken from non-taxable capital proceeds and 75% of the value of a shareholding go missing because of an incorrectly recorded demerger.

I try not to go above 40 holdings. 200 holdings would probably give me a nervous breakdown!

I keep my own spreadsheets which detail every transaction, dividend received, etc. as well as doing a weekly portfolio valuation. In addition to making it easy to check the brokers' statements this makes doing my tax return an absolute doddle.

[Gengulphus]

Do you guys all stay on top of you shares? I have 200+ holdings and have absolutely no inclination to reply to corporate actions nor check that brokers handle them correctly and hope they are designed with passive investors like me in mind. But I doubt this is the case. ...

It isn't. They are designed with investors who want pretty direct ownership of individual shares and other securities in mind. I say "pretty direct" because ownership in a nominee account is a bit less direct than ownership in a CREST account or by certificate is, but that's basically only as a custodian, not as a manager. They don't make voting decisions for you or decisions about how to deal with corporate actions for you any more than they make buying/selling decisions for you. What looks like the broker telling you what they're going to do for you is a matter of the company having told them (as they're registered with the company as legally holding the shares) about the vote/corporate action, asking for a response and saying how the company will treat a failure to respond. That request for a response is something the broker can't make a decision about, as it goes beyond their custodian-like role, so they pass summarised information about what the company is doing and the request for a response on for you to respond or fail to respond to. Your response (if any) has to go back to the company via them, since the company won't realise that you are someone who legally has the right to make decisions about the shares - and what looks like them telling you about what they'll do if you fail to respond is usually (*) in essence just a matter of them passing your failure to respond on to the company.

Basically, owning individual shares comes with the responsibility for making decisions about their votes, corporate actions that require decisions, etc, or accepting the consequences of failing to do so. If you don't want that responsibility, you will need to pay someone to take it on for you - the standard ways are instead to invest in 'fund'-type investments (investment trusts, unit trusts, OEICs, ETFs, etc), accepting the fact that they have management fees, or to use a higher level of broker service than the usual cheap execution-only one (**).

All that said, it sounds as though in the particular case you highlight, the broker has failed in its custodian-like role, as (at least as I understand it) that role does entail establishing and holding ownership of the assets you're entitled to, including dividends, capital distributions, takeover proceeds, etc. I can't be certain about that though, because I don't know German law and so cannot be certain that you are actually entitled to the proceeds concerned. I find it conceivable that you're only entitled to them if you claimed them in some way - but only conceivable: I don't think it's at all likely.

(*) I say "usually" rather than "always" because it can happen that the broker's terms & conditions say that they'll take a particular action for you if they don't hear from you - IIRC I've encountered this in the case of a broker whose terms & conditions said that they would accept a recommended takeover offer if they didn't hear from the customer. At least for UK companies, a takeover offer (as opposed to a takeover done by a scheme of arrangement) is in legal terms just the offeror making an offer to buy your shares from you for a particular price and you deciding whether you want to sell at that price. If you don't accept, no contract to transfer your shares to the offeror is formed and so the offeror doesn't acquire your shares - and the offeror cannot legally say "we'll assume you accept this offer unless you tell us otherwise". So if a broker were to decide to accept a takeover offer for you without you telling them to do so, they would be acting beyond their powers just as much as if they decided to sell your shares on the market without you telling them to do so - unless they're acting in accordance with standing instructions from you, which is what that clause in the terms & conditions of the broker concerned effectively was.

(**) Which are basically classified into two categories: advisory, where the broker gives you advice about the decisions you're responsible for making but doesn't make them for you, and discretionary, where the broker makes them for you. It sounds as though you feel your ideal would be an account where the broker made the corporate action decisions for you (to take them off you) but left you to make the buy/sell decisions (to allow you to continue to indulge your taste for investing in a huge number of companies), but I have no idea whether that's available - though some doubts that it is because the line between the two types of decision is somewhat blurred!

... But there doesn't seem to be much recourse for me to get them to fix the mistakes.

If they're an FCA-registered UK broker, the recourse would be a complaint: gather your facts about just what happened and what they did wrong, then pursue it through their complaints procedure, including taking it up to the Ombudsman and/or legal action if they fail to resolve the complaint internally to your satisfaction. It does involve a fair amount of work and has a risk of not reaching an outcome you find satisfactory if either you've got your facts wrong or you skimp on the work, and if you dislike that work and risk enough, your alternative is to write it off to experience.

If they're not an FCA-registered UK broker, what recourse there is depends on what type they are.

But for your wider problem, there's a fundamental conflict between your desire to own a portfolio of a huge number of individual shareholdings, in a variety of different countries and with different brokers, and your desire not to have to deal with the resulting large number of corporate actions, presumably under the legal systems of all the countries concerned. You need to resolve that conflict, either by substantially reducing the number of securities you're invested in (which involves selling a lot of the shareholdings, possibly replacing whole categories of them with similar 'fund'-type investments), or by grasping the nettle of dealing with the corporate actions despite your distaste for doing so, or by accepting whatever mess and losses might result from carrying on as you are. And you don't actually say how many broker accounts are involved, just that there are "too many" of them, but reducing their number might help as well.

Gengulphus

[Lootman]

I try not to go above 40 holdings. 200 holdings would probably give me a nervous breakdown!

I keep my own spreadsheets which detail every transaction, dividend received, etc. as well as doing a weekly portfolio valuation. In addition to making it easy to check the brokers' statements this makes doing my tax return an absolute doddle.

Having had 200 holdings in the past, I concur, especially since like the OP I do not have a lot of patience for the bookkeeping part of the work. The good news is that with 200 holdings any error is probably not going to represent a significant percentage of my portfolio whilst, if it did, then I'd probably notice.

So my advice to the OP would be to do what I have been doing for the last few years, and simplify. This can be done easily within an ISA since there are no tax implications. Whilst in my taxable accounts, I sell off a few each year, trying to keep within my annual CGT allowance and taking losses where I can to accelerate that process.

It's probably also an age thing. I can't be bothered these days with all that spreadsheet lark, except for recording my realised gains and losses, where I have to. For the most part I trust my broker to get things right and I am not aware they have erred much if at all.

Finally, with fewer holdings, each one matters and is there for a reason. With 200 there is a risk that none of them individually make much difference to anything - you're almost running your own index fund.

[TraderTed]

I don't know how big your holdings are but if they are a decent size you can't beat holding your own electronic share certificates in your own name using a personal CREST account. Costs a little more per trade but if you buy and hold this shouldn't work out too much more expensive and you don't have to worry about your broker going bust and the FSCS insurance only being £50k.

Try the broker called Redmayne. Seems to be the cheapest right now for a personal CREST account.

[TahiPanasDua]

Redmayne's website does not give details of charges for this type of account, merely asking you to request details. This could be an ominous sign. (Ye olde "Prices on Application"?) Got any indicative figures?

On reading their regular charges, I managed to resist a run to the medicine cabinet for a quick beta-blocker.

TP2.

[everhopeful]

I cannot understand how one would accumulate a holding of 200 shares without devoting a considerable amount of thought to the process. The share you mention is pretty exotic and some research must have gone into the purchase. Perhaps the answer is to spend some of the time spent on the purchase process in monitoring the performance of what you have bought. If you are not monitoring what you have then deciding when to sell must be difficult and has presumably contributed to holding such a large number of shares. I have 58 holdings some of which are fixed interest and all in ISAs. I spend a good deal of time monitoring things and keeping up to date with the financial press etc. I am retired however and have the time. When I was working I had a smaller portfolio. As has been said by others it might be wise to reduce your holdings and restrict yourself to less esoteric investments.

[jackdaww]

I don't know how big your holdings are but if they are a decent size you can't beat holding your own electronic share certificates in your own name using a personal CREST account. Costs a little more per trade but if you buy and hold this shouldn't work out too much more expensive and you don't have to worry about your broker going bust and the FSCS insurance only being £50k.

Try the broker called Redmayne. Seems to be the cheapest right now for a personal CREST account.

===========================

having a crest account sounds a good idea .

but can you have that in an ISA ?

if not then i suspect there would be a serious CGT issue with 200 holdings that have ten bagged.

[tjh290633]

Having a crest account sounds a good idea .

but can you have that in an ISA ?

if not then i suspect there would be a serious CGT issue with 200 holdings that have ten bagged.

No, you cannot have a Crest account inside an ISA.

TJH

[TraderTed]

Sadly you can't have a Personal CREST account ISA.

There is no technical reason why people should be force to have an ISA in a Nominee account though!

FSCS guarantee is only for £50k and it really puts a large ISA at risk of a broker collapse and becoming part of the receivers assets.

[DrBunsenHoneydew]

FSCS guarantee is only for £50k and it really puts a large ISA at risk of a broker collapse and becoming part of the receivers assets.

Just to note that the FSCS guarantee for investments rises to £85000 from April 2019, bringing it in line with deposit protection.

However, if the adviser or company is still operating and gave you negligent service, you could be compensated to a maximum of £150,000 plus interest. You would need to make a claim to the Financial Ombudsman Service, rather than the FSCS, which covers for insolvent providers.

[jackdaww]

Sadly you can't have a Personal CREST account ISA.

There is no technical reason why people should be force to have an ISA in a Nominee account though!

FSCS guarantee is only for £50k and it really puts a large ISA at risk of a broker collapse and becoming part of the receivers assets.

=====================

isnt it the nominee trustee collapse rather than broker ?

[valueinvestor123]

Do you guys all stay on top of you shares? I have 200+ holdings and have absolutely no inclination to reply to corporate actions nor check that brokers handle them correctly and hope they are designed with passive investors like me in mind. But I doubt this is the case. ...

It isn't. They are designed with investors who want pretty direct ownership of individual shares and other securities in mind. I say "pretty direct" because ownership in a nominee account is a bit less direct than ownership in a CREST account or by certificate is, but that's basically only as a custodian, not as a manager. They don't make voting decisions for you or decisions about how to deal with corporate actions for you any more than they make buying/selling decisions for you. What looks like the broker telling you what they're going to do for you is a matter of the company having told them (as they're registered with the company as legally holding the shares) about the vote/corporate action, asking for a response and saying how the company will treat a failure to respond. That request for a response is something the broker can't make a decision about, as it goes beyond their custodian-like role, so they pass summarised information about what the company is doing and the request for a response on for you to respond or fail to respond to. Your response (if any) has to go back to the company via them, since the company won't realise that you are someone who legally has the right to make decisions about the shares - and what looks like them telling you about what they'll do if you fail to respond is usually (*) in essence just a matter of them passing your failure to respond on to the company.

Basically, owning individual shares comes with the responsibility for making decisions about their votes, corporate actions that require decisions, etc, or accepting the consequences of failing to do so. If you don't want that responsibility, you will need to pay someone to take it on for you - the standard ways are instead to invest in 'fund'-type investments (investment trusts, unit trusts, OEICs, ETFs, etc), accepting the fact that they have management fees, or to use a higher level of broker service than the usual cheap execution-only one (**).

All that said, it sounds as though in the particular case you highlight, the broker has failed in its custodian-like role, as (at least as I understand it) that role does entail establishing and holding ownership of the assets you're entitled to, including dividends, capital distributions, takeover proceeds, etc. I can't be certain about that though, because I don't know German law and so cannot be certain that you are actually entitled to the proceeds concerned. I find it conceivable that you're only entitled to them if you claimed them in some way - but only conceivable: I don't think it's at all likely.

(*) I say "usually" rather than "always" because it can happen that the broker's terms & conditions say that they'll take a particular action for you if they don't hear from you - IIRC I've encountered this in the case of a broker whose terms & conditions said that they would accept a recommended takeover offer if they didn't hear from the customer. At least for UK companies, a takeover offer (as opposed to a takeover done by a scheme of arrangement) is in legal terms just the offeror making an offer to buy your shares from you for a particular price and you deciding whether you want to sell at that price. If you don't accept, no contract to transfer your shares to the offeror is formed and so the offeror doesn't acquire your shares - and the offeror cannot legally say "we'll assume you accept this offer unless you tell us otherwise". So if a broker were to decide to accept a takeover offer for you without you telling them to do so, they would be acting beyond their powers just as much as if they decided to sell your shares on the market without you telling them to do so - unless they're acting in accordance with standing instructions from you, which is what that clause in the terms & conditions of the broker concerned effectively was.

(**) Which are basically classified into two categories: advisory, where the broker gives you advice about the decisions you're responsible for making but doesn't make them for you, and discretionary, where the broker makes them for you. It sounds as though you feel your ideal would be an account where the broker made the corporate action decisions for you (to take them off you) but left you to make the buy/sell decisions (to allow you to continue to indulge your taste for investing in a huge number of companies), but I have no idea whether that's available - though some doubts that it is because the line between the two types of decision is somewhat blurred!

... But there doesn't seem to be much recourse for me to get them to fix the mistakes.

If they're an FCA-registered UK broker, the recourse would be a complaint: gather your facts about just what happened and what they did wrong, then pursue it through their complaints procedure, including taking it up to the Ombudsman and/or legal action if they fail to resolve the complaint internally to your satisfaction. It does involve a fair amount of work and has a risk of not reaching an outcome you find satisfactory if either you've got your facts wrong or you skimp on the work, and if you dislike that work and risk enough, your alternative is to write it off to experience.

If they're not an FCA-registered UK broker, what recourse there is depends on what type they are.

But for your wider problem, there's a fundamental conflict between your desire to own a portfolio of a huge number of individual shareholdings, in a variety of different countries and with different brokers, and your desire not to have to deal with the resulting large number of corporate actions, presumably under the legal systems of all the countries concerned. You need to resolve that conflict, either by substantially reducing the number of securities you're invested in (which involves selling a lot of the shareholdings, possibly replacing whole categories of them with similar 'fund'-type investments), or by grasping the nettle of dealing with the corporate actions despite your distaste for doing so, or by accepting whatever mess and losses might result from carrying on as you are. And you don't actually say how many broker accounts are involved, just that there are "too many" of them, but reducing their number might help as well.

Gengulphus

Gosh, I see that I have already written about it...Just to update that I still haven't managed to receive a satisfactory answer from the broker regarding the corp action of this share. They brokers keep saying that they need to check with the 'custodian' to find out what happened and not answering/delaying.
I may need to complain formally.

I also still haven't managed to resolve the issue of having too many shares (and too many brokers...). I did some trimming a year or so ago, removing low/no-yielders and non-relevant shares; I also only try to buy from the Ftse 350 universe only (hopefully this would reduce errors by brokers, if they have to fulfil the same corp action for many other customers), with the exception of some ITs. I have not reduced the number of brokers. Not actively at least. Which i suppose was not a bad thing since one of them (SVS Securities) has gone bust and I have been waiting to access the shares for almost a year. But I think that having more than 2-3 is possibly not necessary.

To be honest, I was simply under the impression and sold on the idea (in 2006, when I started investing) that a do-nothing approach was the best course of action. I underestimated how much work could go into corp actions/admin and that 'do-nothing' only implies the selling/buying/tinkering.... I still am not convinced I would prefer a few ITs instead of many HYP-type holdings. If something were to go wrong with an IT, it would affect a big proportion of the assets. Whereas a corporate action gone wrong, would not affect the assets that much (as someone said). But it is still irritating since I am not certain there is a strong incentive fro nom brokers to get things right...

[XFool]

Eek! Just noticed how old this thread and the OP are. So, most likely simply disregard.

------------------------------------------------------------

Do you guys all stay on top of you shares? I have 200+ holdings

Why???

and have absolutely no inclination to reply to corporate actions nor check that brokers handle them correctly and hope they are designed with passive investors like me in mind.

Oops!

But I doubt this is the case.

Quite so.

Possibly taken over by a company called Vonovia

https://petrusadvisers.com/media/2016_04_4.pdf

But there doesn't seem to be much recourse for me to get them to fix the mistakes.

You'd have to find the details of the offer, then track back on the paper or online records of your broker to see if a transaction was listed at the time. You should then either be satisfied or, if you disagree, take it up again with your broker.

[XFool]

Gosh, I see that I have already written about it...Just to update that I still haven't managed to receive a satisfactory answer from the broker regarding the corp action of this share. They brokers keep saying that they need to check with the 'custodian' to find out what happened and not answering/delaying.
I may need to complain formally.

Bad luck, I hope it gets sorted out in the end.

I also still haven't managed to resolve the issue of having too many shares (and too many brokers...).

Pardon me for asking, how many brokers do you have?

I did some trimming a year or so ago, removing low/no-yielders and non-relevant shares; I also only try to buy from the Ftse 350 universe only (hopefully this would reduce errors by brokers, if they have to fulfil the same corp action for many other customers), with the exception of some ITs. I have not reduced the number of brokers. Not actively at least. Which i suppose was not a bad thing since one of them (SVS Securities) has gone bust and I have been waiting to access the shares for almost a year. But I think that having more than 2-3 is possibly not necessary.

Yes. You seem to be having the same problem with too many brokers as you have with too many shares, IMO. But I'm a 'less-is-more' man, myself.

To be honest, I was simply under the impression and sold on the idea (in 2006, when I started investing) that a do-nothing approach was the best course of action. I underestimated how much work could go into corp actions/admin and that 'do-nothing' only implies the selling/buying/tinkering.... I still am not convinced I would prefer a few ITs instead of many HYP-type holdings. If something were to go wrong with an IT, it would affect a big proportion of the assets.

What would "go wrong" with some large, ordinary ITs - that couldn't go wrong with say a broker? OK, split capital trusts in the 2000s, but that was something of a one-off, with more 'exotic' ITs.

[valueinvestor123]

Eek! Just noticed how old this thread and the OP are. So, most likely simply disregard.

------------------------------------------------------------

Do you guys all stay on top of you shares? I have 200+ holdings

Why???

and have absolutely no inclination to reply to corporate actions nor check that brokers handle them correctly and hope they are designed with passive investors like me in mind.

Oops!

But I doubt this is the case.

Quite so.

Possibly taken over by a company called Vonovia

https://petrusadvisers.com/media/2016_04_4.pdf

But there doesn't seem to be much recourse for me to get them to fix the mistakes.

You'd have to find the details of the offer, then track back on the paper or online records of your broker to see if a transaction was listed at the time. You should then either be satisfied or, if you disagree, take it up again with your broker.

No, it’s still relevant...I can be slow at replying...still haven’t sorted out the issue and have not received a satisfactory reply from either of the brokers. I’m surprised that both of them would mess up with the same share. Surely other people held it. I know it’s been taken private and the company renamed itself Vonovia. But shareholders were supposed to receive 10,80 euro per share. One of the brokers said they credited the account yet when I ask for confirmation, they don’t reply. The other broker is saying that the shares were marked down as ‘worthless’. When I say that that is not what happens, they also go quiet. What other routes are there to focus their minds?

Why 200 holdings...I don’t often sell. And whenever I have new money to invest, I look at the current available universe of HYP type shares, as if I was buying a new portfolio. Also if two shares from same sector yield similarly, I tend to go for the one that I don’t have instinctively, just to get some extra diversification (probably not necessary). So it builds up over time. Like tarot cards.

[valueinvestor123]

Gosh, I see that I have already written about it...Just to update that I still haven't managed to receive a satisfactory answer from the broker regarding the corp action of this share. They brokers keep saying that they need to check with the 'custodian' to find out what happened and not answering/delaying.
I may need to complain formally.

Bad luck, I hope it gets sorted out in the end.

I also still haven't managed to resolve the issue of having too many shares (and too many brokers...).

Pardon me for asking, how many brokers do you have?

I have about 4, my wife has 3. One of my brokers went into admin last August (Svs securities). It was the dodgiest of the lot. They kept calling me trying to constantly sell stuff...I should have known better. But the prices were good...I’m really annoyed how a lot of them ‘suck you in’ with good prices, just to change their terms and conditions to suddenly introduce an ‘inactivity fee for the greater good of all investors’. Because apparently, investors need to be encouraged to be more involved in their portfolios. Pathetic.

[vagrantbrain]

Maybe having a bit of an indignant strop and muttering about fraud or theft might concentrate minds?

If you've got a couple hundred shares mainly from the FTSE 350, and don't have much interest in micromanaging your portfolio, perhaps a FTSE350 tracker would be a simpler option? It'd certainly make issues like errant corporate actions someone elses problem!