The Lemon Fool

mc2fool wrote:More than one.

I wouldn't go mad with it, I'd say no more than three. And see if you can find some logical split, esp. for reinvestment of dividends etc.

GrahamPlatt wrote:Five would be my thinking.
The late great Gengulphus once addressed this question and was a little more relaxed than I am.
Can’t find his post on the topic. Anyone?

mc2fool wrote:More than one.

I wouldn't go mad with it, I'd say no more than three platforms. And see if you can find some logical split, esp. for reinvestment of dividends etc.

DrFfybes wrote:
we will take from ABRDN (looks wrong, I've forgotten which letters they aren't using this month).

monabri wrote:

DrFfybes wrote:
we will take from ABRDN (looks wrong, I've forgotten which letters they aren't using this month).

Glad to see that it is not just me that has to look up which letters are omitted and in what order !


a b x r d x x n

scrumpyjack wrote:One good one is enough IMO.

monabri wrote:

DrFfybes wrote:
we will take from ABRDN (looks wrong, I've forgotten which letters they aren't using this month).

Glad to see that it is not just me that has to look up which letters are omitted and in what order !


a b x r d x x n

GrahamPlatt wrote:
Five would be my thinking.

The late great Gengulphus once addressed this question and was a little more relaxed than I am.

Can’t find his post on the topic.

Anyone?

Gengulphus wrote:
Put another way, if someone has a million and holds it all in a single account, then if they were to suffer the complete loss of that account and just get the FSCS compensation for it, their fortune would drop 91.5%, from £1m to £85k. At an assumed portfolio yield of 5%, that's an income fall from £50k to £4.25k - which could leave them struggling for enough income to live on, or even not just struggling, but with a hopelessly inadequate amount if they have too little income from other sources.

If they instead split it equally between two accounts, then if they were to suffer the complete loss of one of those accounts and just get the FSCS compensation for it, their fortune would drop 41.5%, from £1m to £585k. At the same assumed portfolio yield of 5%, that's an income fall from £50k to £29.25k - which is still quite a bit more than an average salary in post-tax terms due to definitely not paying National Insurance on it, and more so if the account is an ISA or SIPP. The loss of £20.75k of income will doubtless force them to tighten their belts quite a lot, but it won't reduce them to penury.

If they instead split it equally between three accounts, then if they were to suffer the complete loss of one of those accounts and just get the FSCS compensation for it, their fortune would drop about 24.8%, from £1m to about £751.7k. At the same assumed portfolio yield of 5%, that's an income fall from £50k to about £37.58k - which is still well over an average salary even in pre-tax terms. And that income drop is little worse (if worse at all) than what the pandemic has inflicted on many HYPers this year, and what the financial crisis did a bit over a decade ago.

Putting a great deal of effort into reducing the potential size of a loss further doesn't make sense if it has an extremely low chance of happening and one is accepting much higher chances of similar-size losses by being invested in the stockmarket at all! So in principle, if one has a million in one's HYP, I would regard an equal split between two or three accounts as perfectly adequate for reducing the potentially-devastating size of losses from massive fraud / broker failure, bearing in mind the extremely low chance of those risks actually materialising (*). For considerably larger sums, I might upgrade that by one, to three or four accounts, and circumstances can force the split between accounts not to be equal, which might upgrade it by a few more - e.g. if someone's wealth arrives very rapidly, e.g. from a Lottery win or major inheritance, it might take quite a lot of years to grow their tax-sheltered accounts to anything like the same size as their unsheltered accounts. But anything beyond about half a dozen accounts would IMHO almost certainly be complete overkill for managing massive fraud / broker failure risks even in pretty extreme circumstances.

Or much more briefly, reducing massive fraud / broker failure risks by splitting one's portfolio across multiple accounts is subject to a strong law of diminishing returns, with the first few extra accounts getting most of the benefits.

Dod101 wrote:

scrumpyjack wrote:One good one is enough IMO.

Indeed. But how do we define a ‘good one’?

Dod

Itsallaguess wrote:

GrahamPlatt wrote:
Five would be my thinking.

The late great Gengulphus once addressed this question and was a little more relaxed than I am.

Can’t find his post on the topic.

Anyone?

Absolutely....

Gengulphus wrote:
Put another way, if someone has a million and holds it all in a single account, then if they were to suffer the complete loss of that account and just get the FSCS compensation for it, their fortune would drop 91.5%, from £1m to £85k. At an assumed portfolio yield of 5%, that's an income fall from £50k to £4.25k - which could leave them struggling for enough income to live on, or even not just struggling, but with a hopelessly inadequate amount if they have too little income from other sources.

If they instead split it equally between two accounts, then if they were to suffer the complete loss of one of those accounts and just get the FSCS compensation for it, their fortune would drop 41.5%, from £1m to £585k. At the same assumed portfolio yield of 5%, that's an income fall from £50k to £29.25k - which is still quite a bit more than an average salary in post-tax terms due to definitely not paying National Insurance on it, and more so if the account is an ISA or SIPP. The loss of £20.75k of income will doubtless force them to tighten their belts quite a lot, but it won't reduce them to penury.

If they instead split it equally between three accounts, then if they were to suffer the complete loss of one of those accounts and just get the FSCS compensation for it, their fortune would drop about 24.8%, from £1m to about £751.7k. At the same assumed portfolio yield of 5%, that's an income fall from £50k to about £37.58k - which is still well over an average salary even in pre-tax terms. And that income drop is little worse (if worse at all) than what the pandemic has inflicted on many HYPers this year, and what the financial crisis did a bit over a decade ago.

Putting a great deal of effort into reducing the potential size of a loss further doesn't make sense if it has an extremely low chance of happening and one is accepting much higher chances of similar-size losses by being invested in the stockmarket at all! So in principle, if one has a million in one's HYP, I would regard an equal split between two or three accounts as perfectly adequate for reducing the potentially-devastating size of losses from massive fraud / broker failure, bearing in mind the extremely low chance of those risks actually materialising (*). For considerably larger sums, I might upgrade that by one, to three or four accounts, and circumstances can force the split between accounts not to be equal, which might upgrade it by a few more - e.g. if someone's wealth arrives very rapidly, e.g. from a Lottery win or major inheritance, it might take quite a lot of years to grow their tax-sheltered accounts to anything like the same size as their unsheltered accounts. But anything beyond about half a dozen accounts would IMHO almost certainly be complete overkill for managing massive fraud / broker failure risks even in pretty extreme circumstances.

Or much more briefly, reducing massive fraud / broker failure risks by splitting one's portfolio across multiple accounts is subject to a strong law of diminishing returns, with the first few extra accounts getting most of the benefits.

https://www.lemonfool.co.uk/viewtopic.php?f=15&t=26584&p=363299#p363299

It will probably be worth the OP reading the whole of the above linked thread...

Cheers,

Itsallaguess