FSCS and investment platforms

dllive

Hi,
Does the FSCS cover the first £85k if any investment platform (Hargreaves, Vanguard etc...) go kerput?
If thats the case, do investors spread their portfolio around multiple platforms with about £85k in each?
Thanks

Prism

That only relates to £85k of cash held in an investment platform or if there is a major fraud where they don't actually invest your money at all.

I wouldn't worry too much about it. If you had £1m that would mean finding 12 different platforms..

dllive

Unfortunately I dont have £1m. And if I did Id certainly find the time to spread it around 12 platforms!
But what happens - theoretically - if someone has their pension and life investments with Hargreaves and they go bust? Do they lose everything?

Prism

All of the money invested in shares and funds would still be there and transferred over to another platform. You could be locked out from accessing it for a time so if you wanted to withdraw any of those funds during that time you might be better having at least two platforms. You might struggle to find 12 though.

Albermarle

Normally if you invest via HL ( using them as the example ) your money will actually be in various funds and maybe some in cash.

As I understand it , the platform ( HL) is covered for £85K . However if they went bust your money would still be in the funds , so would not be lost anyway . So basically the £85K only really covers you in case of some massive fraud or mega incompetence where you lose money.
Each fund house ( Vanguard, Blackrock etc ) is covered separately for £85K 
Also cash held with HL is held in separate bank accounts also covered for £85K.
The general feeing amongst regular posters on this platform is that the chance of a mainstream platform or fund house going under is so small , that it is not worth worrying about . Probably there would have to be a financial armageddon like we have never seen before ( aftermath of global nuclear war for example ) at which point all money as such would be worthless anyway .

dllive

Albermarle said:

....Probably there would have to be a financial armageddon like we have never seen before ( aftermath of global nuclear war for example ) at which point all money as such would be worthless anyway .

... or a global pandemic? 

fwor

In that instance, Hargreaves Lansdown are simply the holder of the records that show where your money is invested. They don't actually hold the invested money itself, except during the period that a sale or purchase is under way.

So no, you would not lose everything. In theory, investment funds that were in transit (i.e. proceeds from a sale, or funds paid by you but not yet transferred to the fund management company) could be at risk, though I believe there are rules in place to ensure that client funds are kept separate from the financial operations of the company itself.

dunstonh

Unfortunately I dont have £1m. And if I did Id certainly find the time to spread it around 12 platforms! 

Why would you do that? 

But what happens - theoretically - if someone has their pension and life investments with Hargreaves and they go bust? Do they lose everything?

Any funds that hold HL shares will lose some of their value.  Chances are the platform itself would remain trading with an administrator looking for a buyer.  However, worst case scenario, you would not be able to trade for some months but your funds would be re-registered with a new platform.  

Alexland

dllive said:

do investors spread their portfolio around multiple platforms with about £85k in each?

While we don't religiously observe the limit it is a consideration so we hold different types of accounts with different providers and spread across a few different fund managers. As seen in the SVS thread it can be worrying to wait months to find out if your assets are safe or lost due to fraud, etc.

Albermarle

I do not think though you can compare SVS to a platform run by Vanguard, Fidelity , HL etc in terms of safety .

dunstonh

As seen in the SVS thread it can be worrying to wait months to find out if your assets are safe or lost due to fraud, etc.

SVS is not comparable as they were a DFM that operated niche portfolios in high-risk illiquid assets.  They were a very niche non-mainstream option.   They were also a small player with repeated regulatory breaches (the repeated regulatory breaches was cited as one of the reasons the FCA shut them down).         Very different to a platform that is just acting as a software provider and administrator.

While we don't religiously observe the limit it is a consideration so we hold different types of accounts with different providers and spread across a few different fund managers. 

Using multiple fund houses is one way to spread FSCS protection. Although using the same fund house on multiple platforms does not give you extra FSCS protection.  It is £85k per fund house (when looking at the FSCS protection at fund level).