FSCS protection for investment platforms

artydave

In the remote possibility that an investment platform goes bust, it appears that you only have £85K of protection. I say 'only'. That might be a lot to some people, but for anyone who has been investing for many years and perhaps has a SIPP as well, you could easily have a more that that, if not a lot more !

My question is that I ONLY have investment trust shares. If a platform went bust, surely those shares would still exist and so I wouldn't be affected ? No ? Or is my simplistic assumption not correct - does the investment platform also hold the money that those shares are worth ?  I can't see how that works, as the share price changes daily and so that money held cant change daily - can it ?

Hopefully someone can shed some light on this. Thanks in advance.

Albermarle

My question is that I ONLY have investment trust shares. If a platform went bust, surely those shares would still exist and so I wouldn't be affected ?

You would still own those shares. There might be some temporary problem accessing them whilst the platforms problems were resolved , probably by being bought by a competitor.

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artydave

Albermarle said:

My question is that I ONLY have investment trust shares. If a platform went bust, surely those shares would still exist and so I wouldn't be affected ?

You would still own those shares. There might be some temporary problem accessing them whilst the platforms problems were resolved , probably by being bought by a competitor.

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Thanks Albermarle. 

Audaxer

artydave said:

In the remote possibility that an investment platform goes bust, it appears that you only have £85K of protection. I say 'only'. That might be a lot to some people, but for anyone who has been investing for many years and perhaps has a SIPP as well, you could easily have a more that that, if not a lot more !

My question is that I ONLY have investment trust shares. If a platform went bust, surely those shares would still exist and so I wouldn't be affected ? No ? Or is my simplistic assumption not correct - does the investment platform also hold the money that those shares are worth ?  I can't see how that works, as the share price changes daily and so that money held cant change daily - can it ?

Hopefully someone can shed some light on this. Thanks in advance.

Yes, you would still own the shares if the platform went bust. The £85k FSCS guarantee also covers funds (OEICs), so if you had more than £85k invested with one fund house and it went bust, you could lose some of your investment. However the FSCS guarantee doesn't cover Investment Trusts in the unlikely event one of them went bust. 

phillw

Isn't FSCS protect for uninvested funds? For when you're either about to buy or have just sold shares?

Albermarle

phillw said:

Isn't FSCS protect for uninvested funds? For when you're either about to buy or have just sold shares?

The platforms keep their cash with the usual big banks AFAIK. Usually more than one, although they all seem to split it up differently. So here you have also the usual £85K cover for a bank going bust. The caveat is if you already had money with that bank separately, the cover is £85K overall per bank, plus some banks are linked together.

phillw

Albermarle said:
So here you have also the usual £85K cover for a bank going bust. The caveat is if you already had money with that bank separately, the cover is £85K overall per bank, plus some banks are linked together.

Can you find out what bank your money is in? Because that sounds rather flawed.

Albermarle

You have to have a search around their website. For example from Fidelity

We spread any cash you hold across several banks for your security. The banks we work with include:
 

• Barclays Bank Plc
• HSBC Bank Plc
• Royal Bank of Scotland Plc
• Lloyds Bank Plc
• Bank of America N.A.

dunstonh

My question is that I ONLY have investment trust shares.

Investment trusts do not get FSCS protection.  So, nothing on that side.

 If a platform went bust, surely those shares would still exist and so I wouldn't be affected ?

Correct.  This is why platform level FSCS is not considered to be that important.

In the past where platforms have failed, the FSCS worked differently to deposits in that the cost of the administrator was paid by the FSCS (up to £85k per person and its never got close to that level being required).

When doing your platform research, aim to use a platform that use a low level of illiquid assets.    Those with low levels will be marketable and bought as a going concern long before it fails.   Those with high levels of illiquid assets are not marketable and there will be little or no interest in taking them on.   Plus, administrator costs balloon significantly with illiquid assets as it can result in the administrator having to carry on for decades.

I always filter out the platforms with higher volumes on illiquid assets.

wmb194

phillw said:

Isn't FSCS protect for uninvested funds? For when you're either about to buy or have just sold shares?

The FSCS coverage for investments effectively covers maladministration e.g., if you bought 100 shares in a company but it turned out that the broker for some reason only owned 90 shares then the FSCS would make good on the missing 10 shares, up to £85k in value. IIRC it also covers broker wind-up costs. I seem to remember it being mentioned in relation to SVS's wind-up and transfer of assets to ITI.

Some brokers are more explicit about where they hold customer funds than others - usually split between at least four institutions - but Barclays is easy: you have the option to have it all held with its bank.

GeoffTF

artydave said:

My question is that I ONLY have investment trust shares. If a platform went bust, surely those shares would still exist and so I wouldn't be affected ?

That should be the case, but shares have gone missing from some rogue brokers. When a broker goes bust, the administrators can use your assets to pay their fees. Sometimes, people with over about £1 million invested have lost money. Problems have occurred when brokers advised their clients to buy rubbish, bought it themselves, got into trouble, and dipped their fingers into client assets. The big execution only brokers should be safe, but if you have a big account, be careful who you trust.