Restricted advisor - benefits vs disadvantages

dunstonh

Audaxer said:

dunstonh said:

The explanation of the different levels of FSCS protection is long and complicated and depends on the assets you use.   For example, Investment Trusts and ETFs do not get FSCS protection.  Whereas OEICs and UTs do.    Life and pension funds get more protection still.   Shares get no FSCS protection.   Then you have adviser level protection and platform level protection.   

I was concerned at first about Investment Trusts having no FSCS protection, but I was convinced by previous posts on this site, that the risk of loss is miniscule in that there was only likely to an issue if there was a major fraud in the company. Am I still right in thinking that with the long-standing mainstream Investment Trusts that risk is minimal?

I wouldn't be giving it a second thought as long as you remain in the mainstream.  If your platform is well capitalised and profitable and the assets you use are mainstream and regulated, the chance of you having to use the FSCS is minuscule.

ColdIron

An Investment Trust is a company in its own right just like British American Tobacco or Carillion(!), the only difference is they deal in financial assets instead of ciggies and no one will underwrite company losses or their failure. Companies go bust all the time. Don't forget that when you buy shares in an IT you are not handing over your cash to the IT as you do with open ended investments, rather you are giving it to the seller in exchange for their shares

GeoffTF

dunstonh said:
It is illiquid funds that can have difficulties and if you look at the small number of failures over the decades, it is the illiquid funds that have been the problem. So, you avoid illiquid funds.  

Open ended funds are liquid as long as they trade, but the underlying assets can become illiquid, and trading of the fund then gets suspended. With ITs and ETFs there is both the liquidity of the fund and the fund and the liquidity of the underlying assets to consider. These funds can continue trading if their underlying assets become illiquid, but they will usually trade at a discount to net asset value. The funds themselves will then usually become less liquid, and the market spreads will increase as a result. Historically, illiquid assets have given better long term returns than liquid assets to compensate for the risk and inconvenience of holding them. Nonetheless, most people should probably avoid them.

GeoffTF

Audaxer said:

dunstonh said:

The explanation of the different levels of FSCS protection is long and complicated and depends on the assets you use.   For example, Investment Trusts and ETFs do not get FSCS protection.  Whereas OEICs and UTs do.    Life and pension funds get more protection still.   Shares get no FSCS protection.   Then you have adviser level protection and platform level protection.   

I was concerned at first about Investment Trusts having no FSCS protection, but I was convinced by previous posts on this site, that the risk of loss is miniscule in that there was only likely to an issue if there was a major fraud in the company. Am I still right in thinking that with the long-standing mainstream Investment Trusts that risk is minimal?

You do not need to worry about the security of mainstream ITs. You have even less cause to worry about the security ETFs from the likes of Vanguard and Black Rock. You have lots of cause to worry about your investments losing value though.