In Light of SVS, Should I Spread Investments Around Different Brokers / Platforms?

Alexland

Thrugelmir wrote: »

Secondly x-o has some 4 times the number of retail customers compared to SVS 's 28,000.

Although the bond highlighted the 28,500 client accounts the administrators are only claiming 13,500 unique clients so either each client had a couple of accounts on average or there were a lot of clients who departed in recent years.

I wonder how frequently Jarvis X-O are needing to explain the similar name issue with their clients?

Alex

masonic

lozzy1965 wrote: »

Not sure this statement is true. A quick google found this from the Telegraph from 2015:

"If you hold your investments with a fund shop or broker you are likely to use a nominee account. This ensures that your money is ring-fenced from the broker's own business.

Even if the broker were to collapse, creditors could not access this money.

You say your holdings are all well-known funds. If your broker went bust, you would still be the rightful owner of the units or shares in those underlying funds. Provided the broker had maintained its records properly, you would still be identified as the investor.

But what would happen if one of the fund companies went bust? A similar type of protection applies here, too. The fund firms should ringfence client money so even if they fail, their investors' cash and shares are still securely linked back to their names.

So what exactly does the £50,000 protection apply to?

The Financial Services Compensation Scheme (FSCS) covers investments up to £50,000 per person per institution. It is most likely to be paid where a regulated investment firm goes bust owing investors money as a result of having given bad advice or committing fraud.

Where investors lodge cash in their broker accounts the situation is slightly different.

With cash, the FSCS offers protection of £85,000. For brokers who use a third party, such as a bank, as the deposit taker, this limit applies."

None of that contradicts the statement I made: that administrators can lawfully use assets held in trust in a nominee account to pay their fees. This is not a theoretical point - client assets have been used in this way in previous administrations.

There is, of course, FSCS cover for this eventuality, and precedent for the FSCS covering the administration costs charged against client assets, up to the £85k limit.

masonic

Alexland wrote: »

Did we ever determine if running away with the money was considered a regulated activity?

One would argue that running away with the money, as opposed to investing it according to the client's instructions, would constitute the poor execution of a regulated activity, so presuming the company was authorised to carry out the service it should have been providing, what it actually did is of no consequence. Though this has yet to be tested with a real world example.

masonic

Malthusian wrote: »

As for SVS, I am intrigued by this minibond some people were invested in. Did SVS promote loan notes in itself to its clients? If so that's highly irregular, and another warning sign.

I would have been a customer at the time this was launched and I don't recall hearing anything about it. However, I can't rule out seeing it and instantly dismissing it.

I'm certain if someone had started a thread about this bond defaulting a month ago it might have assisted in the orderly wind-down of at least a few accounts.

scoot65

Many thanks for the detailed responses. Much appreciated!

I'm definitely going to stick to the larger platforms / brokers and don't intend to use the smaller ones.

It's re-assuring to know that the much larger and well known players i.e. Halifax, L&G etc etc have a lesser risk of experiencing major problems.

Given that iWeb are part of the much larger Halifax, I'm going to put this year's maximum ISA amount into my current iWeb S&S ISA and will also take a look at the alternatives mentioned by Alexland.

Many thanks again.

londoninvestor

Malthusian wrote: »

As for SVS, I am intrigued by this minibond some people were invested in. Did SVS promote loan notes in itself to its clients? If so that's highly irregular, and another warning sign.

Indeed - as could be said for firms that promote crowdfunded equity investments in themselves to clients, but that's probably another thread...

stphnstevey

Where and what information would you suggest to evaluate risk of failure?

Thrugelmir

Alexland wrote: »

I wonder how frequently Jarvis X-O are needing to explain the similar name issue with their clients?

Alex

Halve the number, still 50,000. Considerably bigger.

HL has over a million. In reality applying the same logic. Far fewer.