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AskAsk

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Albermarle

AskAsk said:

I have all my investment with Hargreaves Lansdowne as I think they are quite safe as a broker.  If they go under, my investments should still be fine right?  As they are held in investments so if HL goes under, I would still own those investments?Correct 

So the danger would be if they don't actually buy the investments and just pocket your money and pretend you have those investments, or they sell them and don't let you know. Correct  This would be fraud and I understand that the FSCS protects you in these circumstance up to 85k but anything above this limit is not protected.Correct

Any thoughts?  I don't really like the idea of using more than one broker but may be I should think about this?

Thoughts are that it seems highly unlikely that large scale  fraud of such kind could take place in a large respected organisation like HL, without it being noticed . If some small scale fraud happened , or more likely some admin/IT blunder than I am sure HL would move quickly to compensate anybody affected .

Linton

You are correct that the investments you make through HL or any other legit provider remain your property and cannot be used by HL, or whoever, to pay their debts.

The fraud scenario really is one for the films.  HL are a large highly profitable regulated FTSE100 company employing (I just checked) 1700 people.  They have £120Bn held on behalf of 1.5M customers.  For someone to syphon off money yet to give all the appearance of the shares being real without someone noticing seems beyond credibility.  HL dont need to syphon off money, they make a lot of it simply doing normal business.

1882

I had my stockbroker go bust many years ago and it took them a long time (at least 6months IIRC) to sort things out and in the meantime I was unable to sell shares I had with them as they were held in their name. This could have had disastrous consequences and  I did lose some value as I would have cashed them in earlier. 

Thrugelmir

AskAsk said:

Albermarle said:

AskAsk said:

I have all my investment with Hargreaves Lansdowne as I think they are quite safe as a broker.  If they go under, my investments should still be fine right?  As they are held in investments so if HL goes under, I would still own those investments?Correct 

So the danger would be if they don't actually buy the investments and just pocket your money and pretend you have those investments, or they sell them and don't let you know. Correct  This would be fraud and I understand that the FSCS protects you in these circumstance up to 85k but anything above this limit is not protected.Correct

Any thoughts?  I don't really like the idea of using more than one broker but may be I should think about this?

Thoughts are that it seems highly unlikely that large scale  fraud of such kind could take place in a large respected organisation like HL, without it being noticed . If some small scale fraud happened , or more likely some admin/IT blunder than I am sure HL would move quickly to compensate anybody affected .

then if fraud is not likely, then the risk would be that HL goes under all by itself! 

in this case, my money should be protected as they are invested and haven't been pocketed by HL.

I'd be more concerned about what you've invested in. Polly Peck, Maxwell Publishing, Enron, Wirecard , Patisserie Valerie , Northern Rock to name a few

Albermarle

 then the risk would be that HL goes under all by itself! 

Also seems highly unlikely . If somehow they started struggling , probably they would be bought by another platform before anything untoward happened.

jamesd

The first thing that is likely to happen is losing access to your money for many months or years if the firm enters administration. While your money is initially safe, the administrator can and probably will seek a court order allowing them to charge investors by deducting from their investments. The court will almost certainly grant this because the alternative consequence is far worse, like not having the resources to correctly work out how much is owned by each investor.

Your investments and cash are held via client money arrangements and are separate from HL's own assets. Daily reconciliation of assets owned by clients and client account balances is mandatory for all firms.

Ensure that you have enough diversification so that the few years loss of access scenario doesn't unduly hurt you.

dunstonh

i would expect the money back in about 6 months as that is the timescale for the financial ombudsman to get round to sorting anything out.  a few years is a bit of a stretch.

The FOS doesn't get involved with firms in default.

If you are using liquid assets, you are likely counting in months.  If you use illiquid assets, you are likely talking in years or even decades.

why would the investors be charged?  they hold the investments and that is protected so that should go back to the investors. 

The cost of the administrators needs to be covered.  in reality, the FSCS would step in and there is £85k per investor available to cover the administrator.   Those with liquid assets could be sorted quickly and efficiently.  Those with illiquid assets could find they lose more.

The reality is that a platform with mostly liquid tradeable assets would find a buyer before it failed.  Even if an administrator was called in, it would be sold as a going concern on the cheap.    If the platform is heavy in illiquid assets or non-mainstream assets, then its less likely to be bought and would need to be wound down. 

John464

AskAsk said:

why would the investors be charged? 

When any firm goes bust people might say why does the administrator get paid (usually very well paid) when we don't
The answer is simple.
If the administrator is not guaranteed payment he won't take the job on.
But - HL fees are legendary so I can't see any risk of them going bust
They are highly profitable because they are ripping you off legally without any fraud
I'm more concerned about cyber attack
Their site has been down before
But I don't know enough about it to assess the risk of that.
So I'm split about 50/50 between 2 brokers (X-O and ishares)

Aegis

John464 said:

AskAsk said:

why would the investors be charged? 

When any firm goes bust people might say why does the administrator get paid (usually very well paid) when we don't
The answer is simple.
If the administrator is not guaranteed payment he won't take the job on.
But - HL fees are legendary so I can't see any risk of them going bust
They are highly profitable because they are ripping you off legally without any fraud
I'm more concerned about cyber attack
Their site has been down before
But I don't know enough about it to assess the risk of that.
So I'm split about 50/50 between 2 brokers (X-O and ishares)

It's hard to believe they used to be pretty much the cheapest discount broker!

Albermarle

so if i have cash in my account with HL as i have not yet invested them, that is just as safe as the investments because they are held separately from HL's own money?

Your cash is kept separate and is held with one or more of the banks HL use.

Somewhere on the HL website there is an explanation of how they hold your cash.