All investment with Hargreaves Lansdown?

sva19

Currently I have 2 (Husband and wife)x Stock ISA with Fidelity funds network. Pensions with Prudential and a HL Sipps Pension.

I am considering moving my stock isa to HL as their fees are cheaper for buying and switches. The question is it it safe to have 2 x Stock ISA and a SIPPS pension with one compnay (all eggs in one basket)

authentic

H&L are brokers/money supermarket. Therefore your money is with the companies in question, not H&L., probably the exception being cash ISA.

This is my understanding but I may be wrong. Anyone has a different view, please share it.

JamesU

Currently I have 2 (Husband and wife)x Stock ISA with Fidelity funds network. Pensions with Prudential and a HL Sipps Pension.

I am considering moving my stock isa to HL as their fees are cheaper for buying and switches. The question is it it safe to have 2 x Stock ISA and a SIPPS pension with one compnay (all eggs in one basket)

I thought it was £48K through FSCS but on checking it seems to be £50K now. As with banking, I personally would keep funds larger than £50K with different institutions to minimise the risk even if that risk is minimal. More experienced experts on this forum may be able to clarify just what amount would be covered, where and for what reason. H-L provides a nice funds platform so this is an important issue for lots of investors here. Obvious starting point is to keep accounts in seperate names to double the coverage. Assuming the coverage really exists of course....and is not just "likely" (see below). Go to H-L website, move to open ISA, move to FAQs, scroll to "How safe is your investment" and read points 1-7, Section 4 in particular, here is part of it:

"Investors are likely to be covered by the provisions of the Financial Services Compensation Scheme (FSCS), if Hargreaves Lansdown ceases trading. It can award up to £50,000 (increased from £48,000 in January 2010) in compensation to any one investor where they decide that an investment business is in default and is unable to satisfy any claims against it. In addition, if one of the banks which we use for depositing cash balances is declared in default, each individual is entitled to up to £50,000 in total in compensation for losses across all their deposits with that institution. Full details of the FSCS detailing the restrictions and financial limits that apply are available on request from the FSCS.

I would also be interested to hear other views on this thread regarding compensation in the event of default at H-L, even if it is a remote possibility (as was the case with banks previously).

I am not a financial expert.

dunstonh

I thought it was £48K through FSCS but on checking it seems to be £50K now.

It went to 50k in January

As with banking, I personally would keep funds larger than £50K with different institutions to minimise the risk even if that risk is minimal.

Why? What benefit is there when using unit linked funds? Certainly, if your holding is going to be in cash then fair enough. However, with unit linked funds there is no point.

I would also be interested to hear other views on this thread regarding compensation in the event of default at H-L, even if it is a remote possibility (as was the case with banks previously).

The assets are held under a trust in the pension and ringfenced. A similar arrangement exits with the ISA and unwrapped holdings. You are not investing in HL. HL are facilitating the purchase of your investments. They do not own those investments.

This doesnt apply to all providers. For example, the Pru pension mentioned may not be ringfenced if its one of the old pensions. If its unit linked it will be.

JamesU

Why? What benefit is there when using unit linked funds? Certainly, if your holding is going to be in cash then fair enough. However, with unit linked funds there is no point.

Fine, so it is safe to put the funds in one place with HL because the funds are held in trust elsewhere. Hence this is why it is not necessary to cap at £50K at HL. Sounds good to me, and I can now change my personal opinion on this.

But are the unit linked funds safe irrespective of the amount invested? If there is a default somewhere down the line there is a default. I have little understanding on how this works, but when you say “with unit linked funds there is no point” it is not clear to me conceptually why there is no point e.g. Because there is no possibility of default on this kind of fund (Bernard Madoff lurks in my mind)? Because there is minimal risk of default but a risk all the same? Because if there is a default it will be with the fund itself and that is why there is no point?

Is the easiest conclusion that one simply does not hold more than £50K in a single fund within the portfolio and ensure that this fund is covered by FSCS? Or is this also irrelevant? Either way I guess there are no further issues here as many investors are unlikely to invest in a single fund to this excess based on diversity requirements and size of overall investment.

JamesU

I am definitively not a financial expert.

cloud_dog

JamesU wrote: »

But are the unit linked funds safe irrespective of the amount invested? If there is a default somewhere down the line there is a default.

JamesU, I'm sure dunstonh will be along to give perhaps a more definitive explanation but....

You are confusing two aspect wrt a collapse. The £50k limit is wrt to the finacial institution 'holding' your cash. Your default/Madoff reference relates to the underlying investment exposure.

So if you invested £100k via HL in 'Dodgy Income Fund' and HL went bust you would still have your £100k in 'Dodgy Income Fund'. If 'Dodgy Income Fund' had 50% of its investments in Madoff then the fund (and you) would have lost 50% of your investment.

The above example is fairly simplistic but hopefully gives an insight.

JamesU

You are confusing two aspect wrt a collapse. The £50k limit is wrt to the finacial institution 'holding' your cash. Your default/Madoff reference relates to the underlying investment exposure.

[FONT=&quot]CloudDog, Yes I am fine on this point as long as it refers to the real cash in the portfolio rather than part of the "cash value" of funds, and I am certain you are referring to the former. The cash aspect is covered in T+Cs by HL quite well and dunstonh has also commented on this too.

I am also clear on the safety of funds wrt HL as clarified in the thread above.
[/FONT]
So if you invested £100k via HL in 'Dodgy Income Fund' and HL went bust you would still have your £100k in 'Dodgy Income Fund'. If 'Dodgy Income Fund' had 50% of its investments in Madoff then the fund (and you) would have lost 50% of your investment.

The above example is fairly simplistic but hopefully gives an insight.

[FONT=&quot]Excellent example for illustration. Yes, it is a fund issue and not an HL issue. Exactly the point I was trying to make in conclusion in the thread above i.e. if you have X number funds in the portfolio and one of these funds, a "dodgy income fund" of value between £1 and £50K defaults, is this covered to £50K by FSCS? I guess this depends on the fund.

sva19 was enquiring about the risk of harmonising portfolios to a single provider and this is clarified in the thread. But when I thought through sva19's provoking question I could not differentiate between the provider/cash/fund issues wrt to where any risks were and how they would be covered. Much clearer now on the provider, cash and fund elements. There will always be an inherent risk of a dodgy fund and this may or may not be covered by FSCS.

Thanks for your feedback on this, really appreciated.

JamesU


[/FONT]

cloud_dog

JamesU wrote: »

There will always be an inherent risk of a dodgy fund and this may or may not be covered by FSCS.

Generally speaking investments are not covered by the FSCS scheme.

Jake'sGran

A lot of my funds are with them because they were bought through them for the
initial charge refund and I have just passed another one to them.
It will be sold and the proceeds invested in another fund. It had not occurred to me that the money is not safe except that none of us know what will be safe this year.

My only gripe with HL is that they send so many leaflets etc in the post. I have a large collection of their return envelopes!

Sparky47

Jake'sGran wrote: »

My only gripe with HL is that they send so many leaflets etc in the post. I have a large collection of their return envelopes!

If you ask them to stop sending information through the post they will, however in my experience if you ask then to stop some items, they stop everything.

As they have just moved offices, you can probably get rid of your envelopes !

sva19

Thanks for all comments .

Can I confirm the below.

So in 25 yrs time my HL SIPPS is worth £200K and HL ISA £100K all in various funds.

If HL run into problems, are the SIPP and ISA still safe as all the funds invested in are still OK.

Am I correct in assuming the only issue I need to be concenrned with is one of the funds going bust, not HL?

Is there alternative to HL ISA who also have fair low or no inital charge and No switch charges?

thanks