Moneyfarm: is Cash ISA protected by FSCS?

masonic

pecunianonolet said:

eskbanker said:

pecunianonolet said:

They clearly say that your funds are not exclusively deposited with banks and building societies and most certainly will be going into QMMF's, which are not covered by the FSCS

Where do they say that clearly for cash ISAs?

It is on the ISA page as well as on any other page. So in that case I would assume that they invest cash. They not say explicitly that they don't. Even if they don't, it is highly misleading having this statement on this specific page. 

masonic said:

QMMFs are covered by the FSCS if they are UK domiciled, and whether or not it is UK domiciled, you'd still have FSCS protection if MFM went bust. I'm not aware of any evidence that QMMFs are in fact used in any cash ISAs, at MFM or elsewhere. I think the FCA would take a dim view of that as it would place an unreasonable risk on the provider, given the characteristics of a cash ISA.

You are probably right, however, it is not specified anywhere and I remember the numerous conversations when Trading212 started to pay interest for uninvested funds in their S&S ISA and you had to agree that you are accepting the risk and that all or part of your funds may be invested. This was before they introduced a Cash ISA where they explicitly stated that funds are held with reputable banks. At least they tell you before which ones they use. 

The absence of proper T&C's and answers to some basic questions make them unusable for me. Even if they would pay me 6%+, I would not trust them.

The Boosted Rate T&Cs make interesting reading (from Section 8):

https://www.moneyfarm.com/uk/cash-isa-boost-tcs/

I think this is enough to suspect a regulatory breach that warrants reporting to the FCA - capital at risk warnings must be more prominent than this, especially when a consumer would assume the product is risk-free. How many cash ISA customers would realise they are agreeing to put their capital at risk in agreeing to these terms? Perhaps it is some sort of oversight, but those terms are specifically for the cash ISA boosted rate promotion, so should not mention risk if there is none.

masonic

The FCA seem to be taking the concern I've raised seriously, although as expected they cannot tell me what action they are going to take. It will be interesting to see if anything changes on the Moneyfarm website in the coming weeks.

_Anna_

Dear all, I am copying below the FCA reply.

"Please note, MFM Investments Ltd trading as Moneyfarm do not have banking permissions to offer Cash ISA's, it may be that this firm is acting as what we call a deposit aggregator. . Deposit Aggregators are providers of intermediary services who sit between savings account providers and retail customers. Deposit aggregation is not a specific regulated activity, which means this falls outside our remit and we don't have specific rules that apply.
 
You can read more about deposit aggregators on our website - Obtaining Deposits via Deposit Aggregators. Please contact the firm and ask them clarify if they are working as a deposit aggregator and if so, who is their partner bank and what protections are you eligible to. Please also let us know of their response."

masonic

In the interests of openness, my query and response followed a different path. Here is the response, which provides a good summary of my concern (note the little white lie - I was never considering opening this cash ISA).

"I understand you were considering saving into a cash ISA advertised by MFM Investment Ltd. The product is advertised as a cash ISA in which you can "Enjoy tax-free growth, daily interest, flexible access, and no fees. All with the security of FSCS protection up to £85,000". However, hidden in the terms and conditions of the product is a capital at risk warning.
This was not made clear in the headline or summary information. You believe there is a very real risk that this financial promotion could mislead consumers in its current form. I appreciate the time you've taken to contact us."

<snip register check and 'what we do' paragraph>

"I have shared the information you provided with my colleagues who supervise MFM Investment Ltd. We expect financial services firms such as MFM Investment Ltd to follow our rules and meet our standards when dealing with consumers. We appreciate members of the public raising their concerns with us, because this can be a valuable source of intelligence which better enables us to supervise the conduct of the firms and individuals we regulate."

_Anna_

Dear all, 
I have just found out that there is a similar situation with Trading 212 Cash ISA: the interest is quite high; according to their web site, they are covered by FSCS protection; however, I did not find Trading 212 on the FSCS web site. Does anyone may comment on this?  Thank you.
https://www.trading212.com/isa?cash-isa=&promo-code=MSE&lid=6b8iu3ifrk7g

masonic

_Anna_ said:

Dear all, 
I have just found out that there is a similar situation with Trading 212 Cash ISA: the interest is quite high; according to their web site, they are covered by FSCS protection; however, I did not find Trading 212 on the FSCS web site. Does anyone may comment on this?  Thank you.
https://www.trading212.com/isa?cash-isa=&promo-code=MSE&lid=6b8iu3ifrk7g

You need to search for the relevant partner banks. T212 are clear that cash ISA savings are not invested in QMMF.

Use https://register.fca.org.uk/s/ to check investment firms for authorisation and eligibility for FSCS cover.

moi

They really are a bit odd. A "Your Moneyfarm Cash ISA is waiting to be funded!"  email from them appears to contradict itself in one paragraph.

"Your savings with Moneyfarm are safeguarded by the Financial Services Compensation Scheme (FSCS)"

  Ok, sounds good

"As the money in your Cash ISA will be held in qualifying money market funds (QMMFs) your capital can be at risk." 

  So it's not possibly QMMFs, or partly QMMFs, "Cash ISA will be held" in QMMFs.


😕😕😕

masonic

moi said:

They really are a bit odd. A "Your Moneyfarm Cash ISA is waiting to be funded!"  email from them appears to contradict itself in one paragraph.

"Your savings with Moneyfarm are safeguarded by the Financial Services Compensation Scheme (FSCS)"

  Ok, sounds good

"As the money in your Cash ISA will be held in qualifying money market funds (QMMFs) your capital can be at risk." 

  So it's not possibly QMMFs, or partly QMMFs, "Cash ISA will be held" in QMMFs.

😕😕😕

It's not a contradiction. UK domiciled QMMFs will benefit from the FSCS protection for investments. This does not protect against investment risk, only fraud or the costs of returning assets if the QMMF provider should fail. Losses due to the underlying bonds in the QMMF falling in value would not be protected.

This is the meat of the concern I raised with the FCA. Consumers are likely to mistake this for a deposit account rather than an investment with capital at risk. They will not necessarily understand the differences between FSCS protection for savings vs investments and that they would not be able to claim if the QMMF simply fell in value. Another aspect that I did not raise, is that Moneyfarm is promising a specific rate of interest, so what happens if this cannot be achieved by the QMMF?

At least there is now a clear statement that this is what is happening (albeit at this late stage). They need to make their capital at risk warning more prominent.

They currently state on their website "FSCS protection does not cover changes in investment value due to market fluctuations" without informing consumers that market fluctuations can apply to QMMFs.

moi

masonic said:

moi said:

They really are a bit odd. A "Your Moneyfarm Cash ISA is waiting to be funded!"  email from them appears to contradict itself in one paragraph.

"Your savings with Moneyfarm are safeguarded by the Financial Services Compensation Scheme (FSCS)"

  Ok, sounds good

"As the money in your Cash ISA will be held in qualifying money market funds (QMMFs) your capital can be at risk." 

  So it's not possibly QMMFs, or partly QMMFs, "Cash ISA will be held" in QMMFs.

😕😕😕

Consumers are likely to mistake this for a deposit account rather than an investment with capital at risk. They will not necessarily understand the differences between FSCS protection for savings vs investments and that they would not be able to claim if the QMMF simply fell in value. Another aspect that I did not raise, is that Moneyfarm is promising a specific rate of interest, so what happens if this cannot be achieved by the QMMF?

Well quite! They offer the choice of Invest with a S&S ISA or Save with a Cash ISA. I didn't know a Cash ISA savings account could "invest" cash in at-risk markets. "Investments can go down in value as well as up, and you may get back less than you put in" is obviously the case for "investments", but odd for a "savings" account🤯
I don't think I'll be funding this one!

sdm1985

Trading212 is 5%+ and I will go back to them, as they were great. 

Where and how can I find my Moneyfarm cash isa account number? 

Thanks