Splitting accounts when £85k reached

[MyNameIsUrl]

With total investments above the £85000 compensation limit, do people feel it's necessary to split investment accounts over many brokers?

My impression is that many on these boards have portfolios considerably in excess of the limit, but I haven't seen much discussion regarding managing multiple accounts, with the extra admin and charges involved. How high would you go before splitting?

[swill453]

I'm sure others will supply more detail, but there isn't an £85,000 compensation limit on investments at a broker.

Scott.

[AleisterCrowley]

Should be safe, it will be a nominee account
https://www.investorschronicle.co.uk/20 ... ticle.html

[GeoffF100]

Investment accounts are different to bank deposits. See:

https://protected.fscs.org.uk/About-FSCS/

With a bank deposit, the bank does whatever it wants with your money. It usually lends it out. The bank promises to pay your money back, in accordance with the terms of the deposit, but may not be able to do so. The FSCS protects you in this event, up to £85,000.

With an investment account, the FCA rules say that your investments must be ring fenced. For investments, the FSCS protects you up to a loss of £50,000, in the event that the broker fraudulently violates the ring fencing, uses your money for his own purposes, and loses some or all it. It is very unlikely that a mainstream broker would manage to fraudulently use all of its clients' investments and lose all the money. There have been several cases where a broker has fraudulently used client assets. In most cases, it has just been some of the clients' cash that has been lost.

[paulnumbers]

With total investments above the £85000 compensation limit, do people feel it's necessary to split investment accounts over many brokers?

My impression is that many on these boards have portfolios considerably in excess of the limit, but I haven't seen much discussion regarding managing multiple accounts, with the extra admin and charges involved. How high would you go before splitting?

Depends on the broker. With IG Index I felt concerned above £50k. HSBC or Halifax I feel basically no concern whatever it's at. Not sure if this is rational or not.

[Alaric]

For investments, the FSCS protects you up to a loss of £50,000, in the event that the broker fraudulently violates the ring fencing, uses your money for his own purposes, and loses some or all it. It is very unlikely that a mainstream broker would manage to fraudulently use all of its clients' investments and lose all the money. There have been several cases where a broker has fraudulently used client assets. In most cases, it has just been some of the clients' cash that has been lost.

Here's an example.

http://smithandwilliamson.com/personal/ ... im-compens

Many of the securities flogged by Pacific Continental were next to worthless, but they still cocked up on the record keeping. But that's one of the circumstances where the compensation scheme comes into play. The system of the holding being in nominee accounts prevents the Company just walking off with whatever it likes as could be the case with a bank and certainly was with one of the Christmas hamper companies.

[Urbandreamer]

My impression is that many on these boards have portfolios considerably in excess of the limit, but I haven't seen much discussion regarding managing multiple accounts, with the extra admin and charges involved. How high would you go before splitting?

Well I have three accounts. The problem is as you suggest the extra admin. So yes while I should have more, I don't.

I need to remember a password and username for each. I also have to complie three times whenever the government changes the "money laundering" requirments.

The latest is MIFID II. At least it wasn't too bad as all I had to do was confirm that the previously supplied information was correct.

There is also the issue when you have amounts of cash too small to economicly invest, which added together would be worth investing.

Of course there is the issue of eggs and baskets. Also with more than one account you can compare them and decide what you like about each.

I would describe one of mine as VERY basic, but increadibly cheap (Selftrade). The second is still cheap (not as cheap) but gives slightly better service (A J Bell). Then I have a Rolls Royce account that charges a percentage to trade (Pilling & co). Believe me it's NOT cheap to change your mind or rebalance your portfolio when you pay such fees. Their service though is excelent and very suitable for those who have concerns about throwing £1000's about online (they only do phone trading).

One other thing to consider, fraud is very very rare. More common is a stock market crash / correction. You can easilly lose 30-50% of your theoretical wealth in such a correction, and they do seem to turn up quite regularly. What you need to do is consider the concept of risk. Risk is not just the likelyhood of a event but the consiquences. It may be unlikely that one of my accounts may vanish in a puf of smoke, but the fact that I have two more means that the damage would be little worse that a more normal correction in stock prices.

[tjh290633]

In my view, the downsides with plural accounts far outweigh any advantage. I had two when PEPs and ISAs had to be kept separate and it was a pain in the posterior. Unless you have a fly by night broker, I would stick with a single account.

TJH

[GeoffF100]

In my experience, having to dealing accounts is a nuisance. Having two stocks & shares ISAs is a real pain, and having two SIPPs does not bear thinking about. Having your dealing account, ISA and SIPP with different brokers is not too much of a problem.

I expect that the big online brokers with good reputations are all relatively safe. Small brokers and financial financial advisers (perish the thought) are much more problematic, despite being the premium service in many cases.

[Muddywaters]

CASS rules means it’s highly unlikely that you would ever need to call on the fscs if your with a half decent broker. It’s bordering on impossible when you get to the likes of hl Aj bell etc. IMO it’s not worth bothering splitting money across brokers

[Chrysalis]

Spouse and I have one SIPP, one ISA and one dealing account each, spread across three brokers (iWeb, YouInvest and Alliance Trust Savings). All accounts exceed the compensation limit by a considerable margin. I feel that three brokers is a compromise so that if one goes bad or there is some kind of problem leading to difficulty accessing the funds, at least it’s only a third of our portfolio, not all of it.
With cash I am a bit more assiduous about not exceeding the £85k, which probably isn’t rational, but there you go.

[AleisterCrowley]

http://www.telegraph.co.uk/finance/pers ... -bust.html
Short article from Telegraph:
If you hold your investments with a fund shop or broker you are likely to use a nominee account. This ensures that your money is ring-fenced from the broker's own business.

Even if the broker were to collapse, creditors could not access this money.
... If your broker went bust, you would still be the rightful owner of the units or shares in ... underlying funds. Provided the broker had maintained its records properly, you would still be identified as the investor.
etc

[toofast2live]

I have everything with HL. Holding etfs and ITs it’s ridiculous cheap. No way would I go for multiple brokers, as I would need about 10 of them. Unless there is fraud nominee accounts take care of everything

[AleisterCrowley]

I'm not too worried about Halifax(HSDL) defrauding their customers (there'd be a revolution, mobs on the streets, government declaring martial law etc)

[paulnumbers]

Provided the broker had maintained its records properly, you would still be identified as the investor.

Do the nominees also maintain records of the individual investors? I'd hope so. If not then if say a devastating loss of data occurred on the brokers side caused bankruptcy, having no traceback to individuals by the nominee might involve no recovery.

I keep plenty of statements / screen shots for this reason.

[paulnumbers]

Provided the broker had maintained its records properly, you would still be identified as the investor.

Do the nominees also maintain records of the individual investors? I'd hope so. If not then if say a devastating loss of data occurred on the brokers side caused bankruptcy, having no traceback to individuals by the nominee might involve no recovery.

I keep plenty of statements / screen shots for this reason.

[wanderer]

I split my investments across multiple brokers. This is because i find it easy to imagine a cyber-attack which sells all the assets in my account and then pockets the proceeds, leaving me with a restricted level of compensation if this action brings down the broker. Am I paranoid?

[Darka]

I believe the FSCS investment compensation limit will be lifted to £85,000 this year to bring it into line with cash deposits.

The FCSC have a consultation out, which ends today regarding this so hopefully an announcement will be made soon.

regards,
Darka

[GeoffF100]

With cash I am a bit more assiduous about not exceeding the £85k, which probably isn’t rational, but there you go.

It is rational. In the absence of a government guarantee, your money is much more at risk in a bank account than it is invested in government stock in a brokerage account, as has been explained.

Most broker accounts I believe use linked single name bank accounts as the feed in and out from the brokerage account.

It is always worrying if it is possible to change your nominated account online.

Most banks seem to have a flag if money movements of more than £5K are being made, often with you having to phone around and verify etc.

My bank does not always query movements ten times that. It may be possible to change my account settings so that they send me an email whenever this happens, but a hacker would turn that off before extracting my money.

[GeoffF100]

Something else that is very worrying is a current account that is linked to a bank account. Barclays have recently gone this way. This is a massive potential security risk. A hacker can then potentially get into both accounts in one go and siphon off your money.