Stock and Shares - FCA protection

raaknao

Hi All

Hope you can advice.

i recently had my Selftrade account migrated to Interactive Investor. I now have an invested pot over £85k with II.

Does the same risk apply to Interactive Investor that if it went under I could lose anything over £85k?

Should I open an account with a different provider and spread the investment?

Any advice or reading appreciated, thank you all 

Albermarle

Firstly it is not  FCA protection but FSCS protection .

Your money is not invested in II but in the investments you have within it . If II went bust , you would still own those investments . More than likely another investment platform would just take over /absorb II customers onto their own platform.

In the very unlikely chance that there was some fraud or massive incompetence at II that cost you money, you would be covered up to £85K .
If you have cash held on the platform , this should be held with  a bank and their FCSC £85k would cover this .
Finally if one of the investment funds went bust through fraud or whatever you would have cover there as well.

Many Investors hold many times more than £85K with one platform, as it is perceived that the risk is very small, especially if it is a mainstream platform and mainstream investment funds .

dunstonh

Should I open an account with a different provider and spread the investment?

You haven;t said what the investments are.  For example,  pension and life funds get 100% FSCS protection with no upper limit.   Unit Trusts/OEICs get £85k per fund house.   ITs/ETFs/Shares get no FSCS protection. (a tiny number of ITs can be packaged in a product and get FSCS protection but rare on a platform).

raaknao

Hi Albermarie

Yes you are correct, it is FSCS not FCA, my mistake there.

Thank you, that really does help, I appreciate it. I am happy with II and their service so far and didn't want to open another provider unless it was high risk and wise to do so.

Hi Dunstonh

Thanks as well - it is self select shares. Therefore, from what you said shares itself do not get protection. I get this now, as you can lose it all if the company you have invested in goes bust.

Thank you both, that has helped. Anything else I should be thinking about?

jimjames

raaknao said:

Hi Albermarie


Thank you both, that has helped. Anything else I should be thinking about?

If you're worried about risk to the level of FSCS protection then are individual shares the right option? Have you assessed the risk of the ones you've chosen?

raaknao

Hi Jim

No issues on that front, all good; I’ve been doing it for many years.

There’s nothing wrong in asking questions to learn and educate? It was nice to talk to reaffirm what I thought. Thank you all.

dunstonh

There are no issues.  It was just that investors generally consider FSCS protection to be low priority with modern investments due to the way assets are ringfenced on platforms and that you still own the units in the fund even when a platform fails.

Share investing is considered the highest risk level (higher than unit trust/OEICs investing in shares).  So, there was the potential for a mismatch in risk if you were worried about the FSCS protection but using a higher risk investment type.

We have seen people in the past not actually understanding the risks they are taking.  So, highlighting it was helpful just in case you didn't realise.

valiant24

Albermarle said:

Your money is not invested in II but in the investments you have within it . If II went bust , you would still own those investments . More than likely another investment platform would just take over /absorb II customers onto their own platform.

In the very unlikely chance that there was some fraud or massive incompetence at II that cost you money, you would be covered up to £85K .
If you have cash held on the platform , this should be held with  a bank and their FCSC £85k would cover this .

I've tried to ask this before I think, but will have another go.

In a hypothetical case that I have (say) an ISA with (say) AJ Bell valued at (say) £500k.   £300k is invested in (say) a Vanguard Global Tracker, and £200k is just in cash awaiting an investment opportunity.

My understanding is that, should AJ Bell fail but not in a fraudulent fashion, my £300k is safe, but the £200k is at risk, with only £85k covered by the FCSC.

Thus the paranoid investor would invest any sums above £85k in something like Vanguard's Sterling Short-Term Money Market Fund ... even though this investment will likely lose in absolute value its OCF (about 0.12%/yr) in my example.

Is that correct?

Thanks
V

Linton

valiant24 said:

Albermarle said:

Your money is not invested in II but in the investments you have within it . If II went bust , you would still own those investments . More than likely another investment platform would just take over /absorb II customers onto their own platform.

In the very unlikely chance that there was some fraud or massive incompetence at II that cost you money, you would be covered up to £85K .
If you have cash held on the platform , this should be held with  a bank and their FCSC £85k would cover this .

I've tried to ask this before I think, but will have another go.

In a hypothetical case that I have (say) an ISA with (say) AJ Bell valued at (say) £500k.   £300k is invested in (say) a Vanguard Global Tracker, and £200k is just in cash awaiting an investment opportunity.

My understanding is that, should AJ Bell fail but not in a fraudulent fashion, my £300k is safe, but the £200k is at risk, with only £85k covered by the FCSC.

Thus the paranoid investor would invest any sums above £85k in something like Vanguard's Sterling Short-Term Money Market Fund ... even though this investment will likely lose in absolute value its OCF (about 0.12%/yr) in my example.

Is that correct?

Thanks
V

I do not think that is correct.  Firstly the cash held by AJBell would be ring-fenced and so not available to pay off AJBell's debts.  Secondly the money would be held in  bank accounts so for the risk to be real you would need the bank to fail, which I think is the major risk with cash held in investment accounts.  A J Bell also say that they hold significant cash reserves.

Albermarle

In addition I think most platforms do not just use one bank .
I know Fidelity use three banks in different percentages but not sure if your cash could end up just with one , or split across all three.
I think I read that HL do split customers cash up so any one client has no more than £85K in any one of the banks HL use.
No idea what Aj Bell or the other platforms do .

It all seems a bit theoretical as seems highly unlikely AJ Bell would go bust, and as Linton said your cash and investments are ring fenced anyway. Plus also highly likely a UK clearing bank in trouble would get bailed out /taken over.

Thrugelmir

valiant24 said:

Albermarle said:

Your money is not invested in II but in the investments you have within it . If II went bust , you would still own those investments . More than likely another investment platform would just take over /absorb II customers onto their own platform.

In the very unlikely chance that there was some fraud or massive incompetence at II that cost you money, you would be covered up to £85K .
If you have cash held on the platform , this should be held with  a bank and their FCSC £85k would cover this .

My understanding is that, should AJ Bell fail but not in a fraudulent fashion, my £300k is safe, but the £200k is at risk, with only £85k covered by the FCSC.

Would need to be fraudulent for the cash to go missing. The company's own cash and that of it's clients will be held and accounted for separately.