Beware the 'deal credit' offered by execution only stockbrokers

slabrum

I opened an Barclays Market Master account online at the end of June which was instantly approved for trading. I'd never dealt in shares before, but found the system to be easy to use. I loaded £300 into the account in order to benefit from a tip (which turned out good).

The next week I logged in and was surprised to be presented with an "available to invest" figure of several hundred pounds. This puzzled me, I looked for further information, and found that this was "dealing credit" that had been applied to the account automatically. I studied the information carefully. None of the settlement details of this "deal credit" were mentioned in the information panel.

I duly proceeded to purchase more shares with these available funds, thinking I would be prompted to settle the balance in due course.

In stead on Monday this week a plain looking letter arrived stating the overdrawn balance. I read half way down the letter and noted various payment options as well as a figure of 3.5% above base in interest, but read no further and instead filed the letter for action today. This very afternoon I have returned home to discover to my surprise five "contract notes" indicating automatic sale of my shares to fund the overdrawn balance. This has cost me a total of £114 in commission, not to mention the original commission I paid to buy the shares and in some cases their decline in value. I have spoken with frustration to Barclays Stockbrokers and was courteously advised that the actions in the letter I was sent on Monday had been followed through and my shares automatically sold in order to settle the balance.

What I was particularly surprised to hear was that the "deal credit" is not in fact credit of any kind and therefore not subject to the terms of the Consumer Credit Act 1974/2006 requiring that key financial information must be presented clearly, legibly and prominently.

I'm sure that Barclays Stockbrokers have operated within the relevant legislation and conformed to their own policies. I do not doubt that the full details of the service and the terms of this deal credit were presented to me at some point in the process. But I am writing purely from the point of view of customer experience in saying that this information could have been made clearer.

I'm back to thinking that if I want to invest in shares, I should go back to the high street and choose a reputable local broker.

sabretoothtigger

Doesnt sound very user friendly

Shares bought are paid for 3 days after so it sounds like they have allowed you to buy without restraint

turbobob

TD Waterhouse does the same. You can buy shares within your personal dealing limit, but it is your responsibility to ensure there are sufficient funds there on the settlement date to pay for them. As STT says, by default shares are settled three days afterwards (T+3 basis). If you don't have sufficient funds on the settlement date, they can if necessary sell your shares to cover the costs.

I duly proceeded to purchase more shares with these available funds, thinking I would be prompted to settle the balance in due course.

Best not to assume in future. A phone call would have avoided all this.

Reaper

When the settlement date comes round it has to be paid I can understand why they sold your investments to cover it. If they had not they would effectively be giving you a loan which is not the business they are in.

However my broker (X-O) removes the amount from my cash balance as soon as the trade has taken place which makes it clearer what you have left to spend. It would be much better if their web site had done the same for you.

sabretoothtigger

Barclays is a more professional broker. Im sure they made you sign all sorts of disclaimers. They'd probably let you buy covered warrants and all sorts that will go to zero quite often (or can make you rich)

I would have an account but they need triplicate of so many documents I cant be bothered paying for verified copies or whatever, Im not surprised to hear it was confusing to use.
x-o is ok except when you pay money in it takes a while to clear, prices move meantime where as barclays I guess lets you pay later, quite useful

I guess to a small extent this makes shares slightly leveraged, you have 3 days free interest on sums purchased. Most highstreet brokers dont allow you the advantage of this but they also dont always charge fees that barclays I think do.
Basically you got an old school broker there

I know someone who works for Barclays and Im fairly certain they'd be miffed you object to their superior service brokerage account

Reaper

sabretoothtigger wrote: »

x-o is ok except when you pay money in it takes a while to clear, prices move meantime where as barclays I guess lets you pay later, quite useful

I agree. The first time I used X-O I missed a great opportunity because I thought the money would be available instantly, as it had been with my old broker SelfTrade. Instead it was not available until the next day and I missed out.

Biggles

With a MarketMaster, the dealing limit is normally covered by a DD and deducted from your bank account automatically by the third day after the trade. This was all made very clear.

Did the DD bounce from your bank account? If so, you may have bank charges in addition to Barclays.