fscs guarantee on investments

enthusiasticsaver

Can someone clear up a question on the FSCS compensation scheme on investments please? As far as I can see it is set at a maximum 100% on the first £50000 per person per firm or broker. Does this mean that you should not go above £50000 per platform?


I have just started investing with Cavendish online - initially monthly with just the Vanguard LS funds but will be transferring a lump sum in a few months meaning there will be more than £50k in there. As I understand it the guarantee only covers me if Cavendish online went bust (they are authorised according to the FSCS website) but if they went bust I would presumably still have my funds anyway and I know they are not covered as that is the risk of investing so does it matter if there is more than £50k with one firm?

InvestInPoker

enthusiasticsaver wrote: »

but if they went bust I would presumably still have my funds anyway and I know they are not covered as that is the risk of investing so does it matter if there is more than £50k with one firm?

Yes if they went bust Vanguard would still have your funds invested. One would hope that if one of these investment platforms goes bust it will be done in an orderly manner whereby another platform swallows them up and everyones holdings are transferred fairly seamlessly. In the event of sudden insolvency without somebody immediately buying them there might be a bit of a wait whilst everything is figured out but you would get access to your investments eventually in my opinion.


If you go into the factsheet of the funds you hold they will say (at the bottom usually) what the actual depository for the fund is, in the case of Vanguard LS 60 (I just picked one at random) it appears to be State State Trustees ltd. Other funds use different banks or whatever.


A situation where your funds may be at risk from your platform going bust would be something like you have sold a fund but not reinvested the money yet and it's sitting in a "cash park" or something. Or perhaps you have sold a fund to withdraw to your bank but they have not processed the withdrawal yet. In both these cases I believe you would be protected up to £50,000 like you describe from the client account protection scheme.


To answer your other question, is it safe to have more than £50,000 invested via one platform well that is personal preference. You can only reduce risk by spreading around - although different fees apply on different platforms and you incur benefits by having large amounts invested at some. For me the biggest issue is potential unauthorised access to my accounts. In the USA Fidelity state on their website that losses due to unauthorised access will be refunded and there is also the option to have RSA token security on your account. I cannot find any provider in the UK that provides this reassurance to customers, or a level of security for account access that I consider fully secure. It is always wise to not have all your eggs in one basket.