stock broker - which are safest?

economic

Hi

i have a substantial amount of my wealth with one broker (TD direct) and as markets have risen its gone up a lot more. its got me thinking if the broker goes down then will my investments be 100% safe:?

is everyone happy with having a lot in one broker? do you split it? or is having it all with one ok and i am worrying about nothing?

are some brokers safer then others? do you recommend safe brokers? TD direct has about 200k customers. it got me thinking that if TD went under and customer money with it then it wouldnt be an issue as its "only" 200k people, most who probably have very little in their accounts.

Linton

Unlike the case with bank deposits, money or investments held with a platform isnt owned by the platform. It is ring-fenced and cant be used to pay the platform's debts. In practice what would probably happen if a broker failed is that the customer base would be taken over by another broker.

£50K is protected by the FSCS but it is difficult to see how this might apply - gross fraud and incompetance perhaps. It seems extremely unlikely that this could happen with a mainstream provider. So the advice would be: go with a mainstream provider. Any one regularly discussed on these forums would qualifty.

Malthusian

If TD Direct goes down you will have lost nothing. The shares will still be there. They would most likely be transferred to another stockbroker who bought the client book from the administrator, or failing that transferred into your name directly.

Cash in TD Direct's client account may be at risk if TD Direct have not been segregating it properly, but you would be eligible for the FSCS in that case.

Nothing is 100% safe but if your shares are with a well-known and well-established broker it's close enough.

economic wrote: »

TD direct has about 200k customers. it got me thinking that if TD went under and customer money with it then it wouldnt be an issue as its "only" 200k people, most who probably have very little in their accounts.

TD Direct has £14 billion under management (so on average £70,000 per customer). I don't understand what you mean by "not an issue". It is true that it wouldn't be a major issue if they weren't down - just a minor inconvenience, at worst a temporary loss of access, while the assets were transferred to a different nominee.

If you think that nobody would take any notice and the customers would lose their money then of course they would and of course they wouldn't. Firstly because as has been mentioned, the customers would have lost nothing. Secondly because TD Direct do have a very large sum of money under management, and if by some freak of circumstances the customers actually did stand to lose it, it would cause a major crisis of confidence in the stockbroking industry and in equity investment in general. Nobody wants that.

economic

thanks i feel more reassured now.

do you have a list of the well known and well established brokers? i still prefer to use at least 2 brokers for my investments.

thanks

soulsaver

Whilst none are likely to cause a problem - the least likely to go bust is HL - partly because they are relatively expensive and partly being a listed FTSE 100 company.
FTSE 300 listed companies have collapsed before but they are few and far between.
Connaught were reported as being the first FTSE 250 company to go bust in 100 years,

Ifts

From the Monevator blog:

Investor compensation schemes – are you covered?

EdGasket

I use 3 brokers; wouldn't be happy with it all in one. The exception is my SIPP as it is not cost effective to have several pension pots.
Main brokers would be:
TD Direct
AJ Bell
x-o (Jardine)
Hargreaves Lansdowne
Halifax / iWeb
Barclays,
LLoyds

Probably a good few others too.

Wasn't there some news about TD DIrect selling their sharedealing customers accounts to Interactive Investor?

Edit: Yes here: https://www.moneymarketing.co.uk/interactive-investor-acquires-td-direct/

economic

what about IG?

EdGasket

economic wrote: »

what about IG?

Primarily spread bet outfit

economic

EdGasket wrote: »

Primarily spread bet outfit

yeh but they do stock dealing/ isa etc. are they safe?

Malthusian

Probably as safe as anyone. However I would expect a bookmaker to be at a higher risk of going bust than a well-established investment platform.

Whoever heard of a bookmaker going bust? Well, it happens. When most of your clients have an average lifespan of a few months before they lose their shirt, rather than holding their assets for many years as a fund supermarket's or stockbroker's would, it follows that the health of the business depends on recruiting new punters to replace the ones who go bust. I don't expect IG Group will go bust but it's a more volatile sector than long-term investment.

There are enough very large and well-established stockbrokers out there that I don't see the need to spread risk by putting your money with a bookmaker.