Personal account dealing

Tom_Jenk

Hi all

I hold a number of execution only accounts & am shortly joining an investment firm an in admin role. Their personal account dealing paperwork has arrived asking for what accounts I hold, but it states in t&cs that execution only accounts held externally are prohibited. Can anyone tell me what my options are? I'd like to leave the accounts where they are ideally. I only deal in funds, not sure if this matters. Thanks in advance

bowlhead99

Unfortunately, personal account dealing policies differ from firm to firm so nobody knows what your firm will tolerate.

You may find that your OEICS and unit trusts - or something where the manager makes the decisions for a regulated collective investment scheme - are all allowable. You are not having a broker deal on a market to execute a transaction for you; you are merely subscribing or redeeming from a fund to deal at some future price which is out of your control, as is the make-up of the underlying assets. As such it would be very difficult for you to either deal contrary to the interests of the firm's clients, or for you to act on insider information in relation to a particular stock or commodity.

If they won't allow external accounts perhaps they will allow internal accounts and you can move your holdings to them and have your trades subject to disclosure/ approval. Or pehaps their policy language is archaic and they don't literally mean that you must take up an expensive discretionary managed service to avoid being accused of being on an "execution only" funds product for your long term savings or retirement.

Tom_Jenk

Thanks bowlhead, good insight there

I have monthly direct debits set up to automatically buy different funds so it seems daft to get permission each month

Discretionary accounts are OK they say, but they're going to be costly Vs DIY

I do have done equities right now but not many & I'm happy to sell those as I would see their concern there

How is reporting done after any initial heads up? Is there such thing as my statements being automatically sent to my new work or is it all on me to report?

bowlhead99

Tom_Jenk wrote: »

How is reporting done after any initial heads up? Is there such thing as my statements being automatically sent to my new work or is it all on me to report?

Some brokers have a feature where they can just email any contract notes to a designated compliance email address. TD Direct is one. I've never bothered to set it up as I don't have to report open ended funds or investment trusts which are the majority of what I use these days and if my employer doesn't need to see everything I'm not going to have him get sent everything just for fun, as it's a waste of time as well as the invasion or privacy.

The type of transactions which need pre clearance or might be subject to embargo or closed periods or need disclosure will vary from firm to firm so it's impossible to speak in anything other than very general terms about some other company's policy. So, check with your employer if you want to know more.

Tom_Jenk

Thanks Bowlhead - it turns out they would be reported via contract notes, they'd send out duplicates.

I've got some further questions if anyone is able to help I'd be very grateful.

So my company have said advisory/execution only accounts with external firms are prohibited. They've then said discretionary accounts are ok, as are "regular savings plans in collective investment schemes, or with friendly society's". The concern I have is my SIPP.

My pension pot is too small (below £50K) to be discretionary managed - that's not an option.

I now feel I've got two options, transfer to my new employer, or look into the collective investment scheme. The former I'm investigating their charges & structure. On the latter, it was my assumption that if I went to a bog standard UK pension firm like L&G or Standard Life that these would be collective investment schemes, but then both L&G Standard Life state that because I'm either picking a fund or an investment plan based on risk, this is classed as execution only.

Are there any pensions out there which a) I can transfer a SIPP into, b) are not execution only & c) fall into a collective investment scheme?

bowlhead99

I think there is scope for some confusion here.

When you are investing in a choice of funds via a platform or a pension provider or wealth manager: at one end of the scale it can be full discretionary management where a manager decides what funds or other assets you should hold in line with the parameters you gave him, and he makes those choices and buys and sells them from time to time; or it can be advised by an adviser but you still take decisions on whether to switch funds or investments; or it can be purely 'execution only', in that the platform or pension provider is telling you that they will do whatever you say but anything they tell you does not constitute advice - they are merely executing the transactions of your choice.

Your employer is saying they will give you carte blanche to use a full discretionary service, but they don't want you making your own choices on exactly what gets bought and when, because you might decide what should get bought is 500,000 Lloyds shares at opening of business tomorrow morning before their client can get his order for 50,000,000 in, or you might decide you want to short the oil market on the same day that they are telling their clients to buy it.

So, there are different products and what standard life might offer is that you come to them advised, or you come to them execution only. But neither of those things mean it isn't a collective investment scheme. Standard life are simply telling you that sure, you can be our customer and if you pick the fund we will put your money into it but it is 'execution only', don't come blaming us for your choices if those choices turn out to be unsuitable for your needs. We just executed the transactions, so if you chose not to get advice from a regulated independent financial advisor, and the choices were terribly inappropriate, you have no come-back. So they are simply your servant and you are having them execute transactions for you.

But despite your employer saying 'execution only accounts are not OK', because he doesn't want you buying those 500,000 Lloyds shares or a big Brent Crude short within your SIPP, your employer is not going to begrudge you having a perfectly mainstream pension plan which buys 'normal' funds on a regular basis.

How do we know this: well, he has specifically said you can invest via a regular savings plan in a collective investment scheme. He is not going to force you to get some discretionary manager to choose which collective investment schemes, he is going to let you pick yourself, so if you want you can put £500 a month into Scottish Mortgage Investment Trust investment plan and £250 into L&G Multi-Asset Fund regular ISA investment plan and so on. But they should be regular plans so there is no potential for accusations of impropriety and dealing on insider info or contrary to a customer's interests.

A collective investment scheme is where a number of people put their money into a pot with a view to a fund manager collectively managing their assets co-mingled together, and providing everyone with a share of a portfolio of diversified assets on a collective basis. So a 'fund' like an OEIC or unit trust is a collective investment scheme, and an investment trust is a collective investment scheme, and you can say that a traditional personal pension plan which holds a selection of funds is a type of collective investment scheme - at least, it's simply a collection of collective investment schemes.

I hold multiple 'collective investment schemes' within my Youinvest SIPP, and contribute to them on a regular basis via direct debit. However, as you probably know from having a SIPP yourself, that tax wrapper is able to utilise a relatively full-featured investment platform which offers individual shares, bonds and all sorts of ETFs and structured products. While I *could* simply use it to contribute regularly to two or three collectives full stop, I don't - and if my firm actively prohibited execution-only platforms, which is what it is, I wouldn't try to convince them it was fine.

However, if you open up a personal pension - rather than a full-featured SIPP -with Standard Life or their rivals (e.g. you can use Cavendishonline to open up an account with Aegon or Aviva which charges 0.4% fee on a pension of £50,001), and you contribute £x per month into one standard managed mixed asset fund, it would be very harsh of your employer to say that was breaking the rules. Especially when they have said that could instead commit your £x a month to an equivalent mixed asset OEIC via a regular savings plan *not* with a pension company and they wouldn't bat an eyelid.

There is no practical difference between the two, because with a 'regular savings plan' in a collective you can still swap it to another plan from the same manager from time to time, just as you can swap funds and proportions with a pension plan manager. Loads of your fellow employees will have pension pots with mainstream pension companies from previous employments which have a choice of funds within and they will not all be moving them to the company scheme.

That said, if you are concerned, just move your SIPP into the company pension plan and move it out again once you've served your time and moved on to a different employer.