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  • FIRST POST
    • Audaxer
    • By Audaxer 17th Feb 17, 2:04 PM
    • 562Posts
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    Audaxer
    Financial Services Compensation Scheme query
    • #1
    • 17th Feb 17, 2:04 PM
    Financial Services Compensation Scheme query 17th Feb 17 at 2:04 PM
    I know that the FSCS limit for Investments is £50,000. Does that definitely mean that if the platform provider ceases trading, investors are only covered up to £50,000 despite the fact that their underlying investments may be in lots of different funds or companies that are still trading?
Page 1
    • Malthusian
    • By Malthusian 17th Feb 17, 2:12 PM
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    Malthusian
    • #2
    • 17th Feb 17, 2:12 PM
    • #2
    • 17th Feb 17, 2:12 PM
    The investors will have lost nothing in that case so the FSCS doesn't apply.

    The clients' accounts and their underlying investments will eventually be transferred to another platform who buys the client book from the administrator. In the unlikely event that a buyer can't be found, the investments would be transferred directly to the beneficial owners.
    • dunstonh
    • By dunstonh 17th Feb 17, 3:23 PM
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    dunstonh
    • #3
    • 17th Feb 17, 3:23 PM
    • #3
    • 17th Feb 17, 3:23 PM
    The scenario where the platform FSCS could apply is say if the platform told you it bought assets and it had not and then failed. i.e fraud. You would then be covered for £50,000. There are so few areas where FSCS protection on the platform is important. It is more applicable to the investments themselves but even then, it is a lower priority than cash deposits.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Audaxer
    • By Audaxer 17th Feb 17, 5:58 PM
    • 562 Posts
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    Audaxer
    • #4
    • 17th Feb 17, 5:58 PM
    • #4
    • 17th Feb 17, 5:58 PM
    That's good to know. I thought that had to be the case. I made this enquiry to Virgin Money a while ago and was told by their representatives that their S&S ISAs (including the Bonds and Gilts fund) were only covered up to £50k if they ceased trading. Was that incorrect as I thought they were just a platform provider?
    • Linton
    • By Linton 17th Feb 17, 6:54 PM
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    Linton
    • #5
    • 17th Feb 17, 6:54 PM
    • #5
    • 17th Feb 17, 6:54 PM
    That's good to know. I thought that had to be the case. I made this enquiry to Virgin Money a while ago and was told by their representatives that their S&S ISAs (including the Bonds and Gilts fund) were only covered up to £50k if they ceased trading. Was that incorrect as I thought they were just a platform provider?
    Originally posted by Audaxer
    The manage funds as well. Its £50K/company so I guess that using a virgin fund on a virgin platform could have the effect of reducing the total coverage. However since the circumstances where it could apply are unlikely anyway I cant see it as a major issue - the charges are a better reason not to use VM funds.
    • Audaxer
    • By Audaxer 17th Feb 17, 9:19 PM
    • 562 Posts
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    Audaxer
    • #6
    • 17th Feb 17, 9:19 PM
    • #6
    • 17th Feb 17, 9:19 PM
    The manage funds as well. Its £50K/company so I guess that using a virgin fund on a virgin platform could have the effect of reducing the total coverage.
    Originally posted by Linton
    Would the same then apply to say, an HL fund on a HL platform?
    However since the circumstances where it could apply are unlikely anyway I cant see it as a major issue
    It may be unlikely that the FSCS is necessary, but I think that used to be said about banks. More attention/publicity seems to be made as regards ensuring big savers do not exceed the £85k savings limit.
    the charges are a better reason not to use VM funds.
    Ha ha, why did I guess someone would mention the charges if I referred to Virgin.
    • bowlhead99
    • By bowlhead99 18th Feb 17, 5:16 AM
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    bowlhead99
    • #7
    • 18th Feb 17, 5:16 AM
    • #7
    • 18th Feb 17, 5:16 AM
    Would the same then apply to say, an HL fund on a HL platform?
    Originally posted by Audaxer
    Though they are sister companies, the FCA-registered "Hargreaves Lansdown Fund Managers" is legally a separate and distinct party from the fund platform operator "Hargreaves Lansdown Asset Management Limited" which is the stock-exchange member and has its own separate FCA licence, being approved for a different scope of activities.

    I haven't checked out Virgin as I'm not likely to be using them due to limited product range and high fees

    It may be unlikely that the FSCS is necessary, but I think that used to be said about banks. More attention/publicity seems to be made as regards ensuring big savers do not exceed the £85k savings limit.
    Because with a bank when you deposit funds those customer deposits can legally be used within the bank's own operations, lent out and such - that is the whole business model on which banking relies - and you might not get your money back if the bank fails to manage its assets sensibly, if there wasn't an industry-funded compensation scheme. And there are a greater volume of people using bank accounts than making S&S investments. So getting the message out about the limits, is important.

    With investments you are not depositing your money into HL or their competitors for them to use as part of their business operations ; they are a custodian or gatekeeper acquiring ringfenced assets for you, which they hold on your behalf (and someone else could pick up and continue to hold your assets if HL went out of business). So your recourse to FSCS is only likely to be needed in the case of largescale fraud, or for example bad investment advice if you choose to be an advised client instead of DIY execution-only and then they went bust before paying you off for your bad advice complaint. And yes their advisory bit has a separate FCA authorisation.
    Ha ha, why did I guess someone would mention the charges if I referred to Virgin.
    If Virgin didn't want to be known as an investment provider with high fee, they would have lowered the fees

    Statistically most investors are not going to need FSCS protection, so some people comparing providers would look first at things that would definitely be useful to them, like avoidance of high fees.
    Last edited by bowlhead99; 16-10-2017 at 7:30 PM.
    • Audaxer
    • By Audaxer 14th Mar 17, 8:25 PM
    • 562 Posts
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    Audaxer
    • #8
    • 14th Mar 17, 8:25 PM
    • #8
    • 14th Mar 17, 8:25 PM
    I was just looking at the IWeb site and came across the following page:
    http://www.iweb-sharedealing.co.uk/about-iweb/financial-services-compensation-scheme.asp
    where you will see it says:
    'Customer assets are segregated from the firm’s assets and so would be available to be returned to you in the unlikely event that we were to cease trading.'
    which is good, but a bit concerned that it goes on to say:
    'In the extremely unlikely event of this segregation failing then you would be able to claim under the FSCS up to a value of £50,000.'

    I thought there wasn't any chance of losing any funds if a platform provider ceased trading?
    • dunstonh
    • By dunstonh 14th Mar 17, 8:58 PM
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    dunstonh
    • #9
    • 14th Mar 17, 8:58 PM
    • #9
    • 14th Mar 17, 8:58 PM
    In other words, if a fraud has taken place that affects consumers funds then you are covered up to £50k
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • grey gym sock
    • By grey gym sock 14th Mar 17, 9:09 PM
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    grey gym sock
    you would have a claim against iweb for 100% of a loss due to fraud. it's just in case iweb had also gone bust, and so couldn't pay, that you could instead claim from the FSCS, and the latter claim would be limited to £50k.

    just because there is insurance against something, it doesn't mean it's at all likely that it will happen. the £50k FSCS cover for investment can be relevant for claims against some small dodgy firm of financial advisors; it's very unlikely to come into play for someone like iweb (which may not be huge in platforms, but is owned by the giant lloyds banking group), but it does apply in theory.

    you can probably take out insurance against (a.k.a. place a bet on) jeremy clarkson becoming the next archbishop of canterbury, but that doesn't mean it's got any chance of happening.
    • Audaxer
    • By Audaxer 14th Mar 17, 10:59 PM
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    Audaxer
    In other words, if a fraud has taken place that affects consumers funds then you are covered up to £50k
    Originally posted by dunstonh
    I know it's probably unlikely, but do some large investors split investments between platforms in case there was such a fraud in one of the platforms, as they would only be covered up to £50k?
    • jimjames
    • By jimjames 14th Mar 17, 11:31 PM
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    jimjames
    I know it's probably unlikely, but do some large investors split investments between platforms in case there was such a fraud in one of the platforms, as they would only be covered up to £50k?
    Originally posted by Audaxer
    Some might do but I have over the FSCS limit with one provider but different funds.
    Remember the saying: if it looks too good to be true it almost certainly is.
    • Linton
    • By Linton 15th Mar 17, 10:22 AM
    • 8,470 Posts
    • 8,404 Thanks
    Linton
    I know it's probably unlikely, but do some large investors split investments between platforms in case there was such a fraud in one of the platforms, as they would only be covered up to £50k?
    Originally posted by Audaxer
    After a lifetime of DC pensions and S&S investing one could easily end up with £500K in SIPPs and ISAs. Using 10+ different platforms would be a nightmare. I dont see it as an issue with mainstream providers, the risk being far less likely than those one takes every day simply living. At most it may be sensible to split £500K over 2 or 3 platforms.
    • ccie1793
    • By ccie1793 16th Oct 17, 6:16 PM
    • 1 Posts
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    ccie1793
    Standard Life - Fund of Funds
    I have been looking for a thread to cover this subject and wanted to clarify the position. I have a Standard life fund that invests in other SL funds - through my works pension scheme - its actually SL Passive Plus 3 Pension Fund. And the investment is over £500K.


    the SL literature says each fund - internal or external uses a Depositary and Custodian (D+C) to segregate the investments from SL.


    • there is a risk that SL goes bust - supposedly the D+C are independent so I still retain 100% ownership of the investments.
    • there is a risk of bad advice/fraudulent activity by SL - then the FSCS steps in
    • there is a risk of fraud by the D+C - then the FSCS steps in


    FSCS says:


    deposits up to £85,000 per person per firm;
    100% of the claim with no upper limit for claims relating to long term insurance policies (such as pensions and life assurance); and
    investments up to a limit of £50,000 per person per firm. These include for claims relating from bad investment advice, poor investment management or misrepresentation.




    I do worry about having everything invested with one provider BUT if it is just time to recover rather than any loss that is ok.


    Given that in this instance the investment is a Pension Fund - am I covered 100% by FSCS or is that just too easy and I have to look at the underlying investments to work out the risk?


    any help gladly received.
    • dunstonh
    • By dunstonh 16th Oct 17, 9:00 PM
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    dunstonh
    Given that in this instance the investment is a Pension Fund - am I covered 100% by FSCS or is that just too easy and I have to look at the underlying investments to work out the risk?
    Insured pension funds from the provider's own internal range is 100% protected with no upper limit.

    It when you use SIPPs (using regulated investments) or PPPs with external insured funds that you get the £50k per fund house protection.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Alexland
    • By Alexland 16th Oct 17, 9:44 PM
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    Alexland
    Junior ISA protection
    Another question I have been pondering.

    If holding a large adult SIPP with Interactive Investor they offer a free JISA - would the wrappers each have their own £50k FSCS protection as there are different beneficiaries in the same platform account?

    Alex
    • dunstonh
    • By dunstonh 16th Oct 17, 10:31 PM
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    dunstonh
    Another question I have been pondering.

    If holding a large adult SIPP with Interactive Investor they offer a free JISA - would the wrappers each have their own £50k FSCS protection as there are different beneficiaries in the same platform account?

    Alex
    Originally posted by Alexland
    in the case of II (and note that this is not all providers), it is per institution.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Alexland
    • By Alexland 16th Oct 17, 10:46 PM
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    Alexland
    So £50k total even if the SIPP was for the parent and the JISA was for a child in the same account? Wouldn't both the parent and child have individual claims on II for up to £50k? Similar to the 2x£85k that can be claimed on a joint bank account?
    • Keep pedalling
    • By Keep pedalling 17th Oct 17, 10:00 AM
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    Keep pedalling
    So £50k total even if the SIPP was for the parent and the JISA was for a child in the same account? Wouldn't both the parent and child have individual claims on II for up to £50k? Similar to the 2x£85k that can be claimed on a joint bank account?
    Originally posted by Alexland
    The JISA would be in the child's name so would get its own protection. You may have just a single account number to access your portfolio of products but each seperate wrapper within that portfolio will have its own unique identity.
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