Holding all investments with one service (in this case HL) - good or bad idea?

Birchwood

Is having all my investments held with one service a good idea?

I currently have a Stocks & Shares ISA and a SIPP with Hargreaves Lansdown, and plan on opening a Lifetime ISA soon.

Currently I have around £45k worth of investments held there in various funds and shares, so would (I think) be covered by the FSCS if anything happened to HL.

However I hope obviously the investments will grow over time.

Let's say in years to come I have £500k of money saved up, in shares and funds, in my various HL accounts.

I'm unclear on the following...

If, for some unimaginable reason HL went under - where would I stand? Would I only be eligible for the £50k the FSCS could pay, or would I in fact still 'own' all £500k of those shares and funds anyway, as HL are just the broker?

I can't imagine what would happen to take HL down, but you never know.

Am I simply worrying about nothing? Or would it be prudent to have my investments spread across as many different services as I feel I can easily manage?

Thanks all

bowlhead99

Birchwood wrote: »

Let's say in years to come I have £500k of money saved up, in shares and funds, in my various HL accounts.

I'm unclear on the following...

If, for some unimaginable reason HL went under - where would I stand? Would I only be eligible for the £50k the FSCS could pay, or would I in fact still 'own' all £500k of those shares and funds anyway, as HL are just the broker?

Yes you would still 'own' those shares and funds anyway, and some other business else would no doubt come along to take the role of intermediary and acquire the ongoing customer revenues that go with running a "£50bn+ of assets under administration" fund platform / brokerage business. However, while it got sorted out you might have problems liquidating, changing or moving your holdings.

The caveat to that is that if the reason HL went under is that there was a monster fraud and you had never actually owned the assets (e.g. some rogue agent in HL was sending you fake contract notes and reporting as if they had bought and sold the various funds for you, but actually they just pocketed the cash and then some years later flew off to a country without an extradition treaty never to be seen again)... then you are only covered by FSCS for your losses up to 50k (85k has been announced from next year).

There is only a small risk of insurmountable platform failures or major problems when using mainstream assets on a well established and FTSE-listed high profile investment service, but it should not be completely ignored as the risk is not zero.

For example: if all HLs systems and records are somehow destroyed and it takes a £500m investigation to figure out who owns the fifty billion of assets before they can be given back to investors like yourself, and HL go out of business so can't come up with the £500m from their own bank account... that would be 1% of all the assets lost, but apart from the time and hassle, 1% of your £500k balance is easily covered by FSCS - it's only £5k.

But, waiting 6 months for the records to be sorted could prevent you cashing out your assets to buy a new car, and then if there's a stock market crash you might find that you only have £100k in your lambourghini fund instead of £200k by the time your assets are liquid again (not because your shares have been 'lost', but just because the market went down), and FSCS won't cover the full extent of your problem.

Similarly if there is fraud then it depends on the nature of the fraud. If there was a £500m fraud where all customers between account number xxxx and account number yyyy had the entire contents of their portfolio snaffled (including yours), but all customers from account number aaaa to wwww and zzzz onwards were fine: HL will need to compensate you the whole amount of your account, and should not touch the other people's accounts to 'share the problem'. However, compensating all those customers from xxxx to yyyy (including your £500k) might send them out of business. If you don't get your assets back you can ask FSCS for compensation, but you may be well over what FSCS will cover.


At £45k I would not worry about platform risk. However at £500k it is more of a potential issue and it doesn't hurt to have your £200k ISA separate from your £300k SIPP. But breaking it down further into a £50k ISA1 and £50k ISA2 and £60k ISA3 and £40k ISA4 etc will be a hassle, especially as you rebalance your portfolio from time to time, and it will be more costly to administer as it is more efficient to work with bigger numbers with one provider who gives you the benefit of 'economies of scale' on platform fees, transaction fees etc.

chockydavid1983

I would be nervous about having £500k with one institution.
I'm thinking of separating into £100-150k chunks once I get over 6 figures.

seacaitch

bowlhead's pretty much said it all.

My prime responsibility in overseeing my investment portfolio, which I entirely rely upon financially, is as a "risk manager".

Low-probability but high-impact risks, such as a broker or other provider I rely on somehow folding/being defrauded/etc, that could cause losses/liquidity issues/mucho hassle for me is something I seek to mitigate against, where doing so is relatively easy and cheap to accomplish.

I have a fairly large portfolio and use multiple brokers and providers for this reason. My partner has a smaller portfolio so has fewer providers, but a similar approach.

No single point of failure. No great worries if a major snafu occurs with one of them.

Sleep easy at night.

OldMusicGuy

I have well over 500K with HL and feel that the concerns about a major loss with them are so small as to not be worth worrying about. I sleep easy at night.

DennisTenus

OldMusicGuy wrote: »

I have well over 500K with HL and feel that the concerns about a major loss with them are so small as to not be worth worrying about. I sleep easy at night.

Wow the fees you pay them a month must be quite a bit!

ColdIron

Not if they are investment trusts, company shares or ETFs which are free when unwrapped and capped in ISAs and SIPPs

DennisTenus

ColdIron wrote: »

Not if they are investment trusts, company shares or ETFs which are free when unwrapped and capped in ISAs and SIPPs

Why are those cheaper??

Birchwood

OldMusicGuy wrote: »

I have well over 500K with HL and feel that the concerns about a major loss with them are so small as to not be worth worrying about. I sleep easy at night.

And I thought I was doing alright with £45k

Seriously though, thank you all for the replies - especially the very detailed one from you bowlhead99. That's all good info to know, thanks.

The general theme seems to be do what I can easily (i.e. feel like I have the time and inclination for) to mitigate risk but really, don't worry too much about having it all with one service - especially at the moment with the current value of my investments.

Thanks again!

ColdIron

DennisTenus wrote: »

Why are those cheaper??

Because they don't apply the 0.45% annual charge on them (or cap them), only funds

https://www.hl.co.uk/investment-services/fund-and-share-account/charges-and-interest-rates

DennisTenus

ColdIron wrote: »

Because they don't apply the 0.45% annual charge on them (or cap them), only funds

https://www.hl.co.uk/investment-services/fund-and-share-account/charges-and-interest-rates

Sorry yes I know they don't but just wondered why the don't charge as much for those, not as much admin for them?