Stockbrokers for Investment Clubs Sep’25

johncalvert

Can I throw something else in here.  We have now sold all our stocks and moved them into our associated bank account.  We will make a decision next week as to whether to wind up, go with one of the stockbrokers mentioned on this forum......or form a limited company.
Has anyone else thought about this approach?  Family Investment companies are well established, and apparently you can also form Friendship Investment companies.  It is easy and inexpensive to set up a company.   Once set up the administration is similar to that for an investment club, but the company bears responsibility for income tax and capital gains tax.  There will be some extra administration as annual returns will have to be completed, etc, which I don't think will be too onerous, having completed many in the past.  The other extra administration required would be, that as monthly subscriptions come in, and new shares are issued, companies house records need to be updated.  AJ Bell does accept Limited Company Dealing Accounts, with the same charges as for individual accounts, so cost effective.  
Your thoughts and comments would be much appreciated.

TBICInvestmentClub

We too are a 10 member investment club that has been going for over 20 years in Teddington, SW London. We have liquidated our portfolio with ii and transferred funds back to our investment club account, then distributed 70% of funds back to members. The remaining 30% we would like to continue investing.

We recognise that brokers probably don't want to deal with investment clubs due to increased regulation and that the reductions in the annual CGT allowance have also made them less attractive as ISAs and SIPPs can be used instead.

We have been following this forum to see what approaches were being adopted and it seems that three brokers keep getting mentioned, GHC, CFM and IBKR. All seem to have some disadvantages particularly when compared to ii. This is just a summary, GHC - high dealing costs, CFM - very small and IBKR - requesting individual tax UTR numbers for members. Some issues seem to be being worked through with these brokers with varying degrees of success.

We have looked at forming an LLP which doesn't seem too onerous to set up and manage with annual reporting being abridged accounts for a micro entity and a confirmation statement. Also some ad-hoc reporting depending on changes to designated members, new or leaving investment club members etc. The big advantage is that it is tax transparent so individual club members are still responsible for reporting their share of income tax and capital gains in their annual self assessment. We may also need an LEI but previous posts have indicated that's not a problem to get.

Can we now find a broker who will allow the LLP to sign up? The LLP should hopefully satisfy the broker's money laundering, KYC and regulatory concerns. We trade internationally mostly UK, Europe and US. 

If anybody has any broker recommendations please let us know. Given 'johncalvert's' previous post I'll contact AJ Bell to see what their policy is. 

Also any comments on our LLP approach as to whether it would be a solution or not would be gratefully received.

findthetruth

Re Ltd Companies, LLPs and Family Investment Companies.
I am no expert on these but I believe Interactive Investments would consider them.
I have worries about how profits are taxed however. Individual club members have varying tax positions, with many of them, perhaps, not liable to tax at all as gains will be within their allowance. These companies APPEAR to have to be taxed on profits whatever. But I’m not sure about this.
On a different subject, we have been advised by OptionsDesk that they would need to charge approx 5% on our £55000 portfolio to make it worth their while. Not for us…
We await our final rejection form IBKR

poseidon1

johncalvert said:

Can I throw something else in here.  We have now sold all our stocks and moved them into our associated bank account.  We will make a decision next week as to whether to wind up, go with one of the stockbrokers mentioned on this forum......or form a limited company.
Has anyone else thought about this approach?  Family Investment companies are well established, and apparently you can also form Friendship Investment companies.  It is easy and inexpensive to set up a company.   Once set up the administration is similar to that for an investment club, but the company bears responsibility for income tax and capital gains tax.  There will be some extra administration as annual returns will have to be completed, etc, which I don't think will be too onerous, having completed many in the past.  The other extra administration required would be, that as monthly subscriptions come in, and new shares are issued, companies house records need to be updated.  AJ Bell does accept Limited Company Dealing Accounts, with the same charges as for individual accounts, so cost effective.  
Your thoughts and comments would be much appreciated.

I am familiar with Family Investment Companies which are a very specific entity used by very wealthy families as a direct alternative to discretionary trusts for IHT planning purposes. These are neither cheap or straightforward - see link below

https://www.findawealthmanager.com/knowledge/benefit-family-investment-company/?utm_source=google&utm_medium=cpc&utm_campaign=&utm_agid=&utm_term=&creative=&device=t&gad_source=1&gad_campaignid=19307939458&gbraid=0AAAAADyFcgDrnbvm6KJNaJ77RBMAdSxvo&gclid=CjwKCAjw3tzHBhBREiwAlMJoUhrCIVcYxix7UxPFVDLizgGL8zq7isFxNT4v2JVOYtqRkJaeXfdPWBoC0lAQAvD_BwE

Cannot see how a Friendship Investment Company can possibly be considered a like for like alternative to an Investment Club structure.

As you rightly point out there will be corporation tax payable on investment income and gains possibly at rates higher than a member would personally face unless they are higher rate tax payers across the board. There will be an issue of how you capitalise a new company ( shareholder loans or injection of equity)?

If members wish to leave, you will need a cross shareholders agreement dealing with such voluntary exits as well as what happens on death of a member.

Sale/ purchase of a member's shareholding could trigger a  personal CGT liabilty on shares sold and this would be over and above the  corporation tax already paid at company level ( double taxation!), not to mention the formal reallocation of shares amongst the remaining shareholders following an exit. Once up and running,   admitting potential new member shareholders would probably not be reccomended  ( create new shares or existing shareholders partially divest?).

In terms of running costs unless you have a tame accountant in your midst, annual accounting, tax and Companies House compliance will likely  be noticeably more costly compared to current club compliance arrangements, thereby impacting on investment returns compared to the investment club structure.

Seems to be me if you are serious about this a lot more research and feasibility costings required.

In the meantime  @TBICInvestmentclub's suggestion of an LLP  structure might have more going for it. 

Bearing in mind LLPs are entities accorded an HMRC UTR, such a structure may well pass muster with IBKR where investment clubs in the USA are similary structured as partnerships with IRS tax identifier numbers.

Whispering

In my view things need to be kept as simple, as now, with invidual members reporting their share of profits and losses in their returns to HMRC based on club treasurer's records showing their indivdual share. 

Can someone signed up to one of the brokers now taking on clubs please advise if things are remaining that simple, including US trading? 

Driverxyz

A comment on LLPs.  Companies House says "LLPs are not applicable for all activities, for example, non-profit making activities". Are investment clubs profit making concerns?

RealTreasurer

Like a previous comment I like to keep things simple, but not too simple. Putting everything in an individuals name seems fraught with problems. It is not just a capital gains tax liability, remember dividends and interest get reported to HMRC. I have a French bank accounts that reports interest directly to HMRC (it would nice if they actually paid any). I trust my colleagues, but after Covid we realised that if something happened to the individual named in the account, everything would be locked and then try convincing the authorities it is not really their assets.

IKBR, or IKUK their UK branch, looks interesting, but seem to be US focussed and seem to give conflicting advice as to how to set up an account. Do they really know what they are doing for a UK investment club account? Some people seem to get it set up and some get rejected. Can those who have succeeded advise if it all seems O.K. please.

poseidon1

RealTreasurer said:

Like a previous comment I like to keep things simple, but not too simple. Putting everything in an individuals name seems fraught with problems. It is not just a capital gains tax liability, remember dividends and interest get reported to HMRC. I have a French bank accounts that reports interest directly to HMRC (it would nice if they actually paid any). I trust my colleagues, but after Covid we realised that if something happened to the individual named in the account, everything would be locked and then try convincing the authorities it is not really their assets.

IKBR, or IKUK their UK branch, looks interesting, but seem to be US focussed and seem to give conflicting advice as to how to set up an account. Do they really know what they are doing for a UK investment club account? Some people seem to get it set up and some get rejected. Can those who have succeeded advise if it all seems O.K. please.

No contributor to this thread has been successful with opening an IBKR account.

One got close but was ultimately unambiguously rejected. The nature of the rejection ( no club UTR and no legal personality) suggests others should cease wasting their time.

Oldhead45

We are in a queue at CFM who appear to be overwhelmed - they don't call back and I've yet to find out if anyone has been on boarded there.

Extinctclub1

LIC2000 said:

Mintonite said:

We are looking at going with GHC as they are very responsive, although more expensive than some of the other options, such as CFM.  The GHC application form has a space for an LEI number - does anyone know if this is essential to sign up with GHC please - I note the previousdiscussions above regarding IB's requirment.

An LEI is required. Our application initially didn't have one but they insisted. Acquired an LEI very quickly from LEI Register using constitution, last minutes and bank statement as proof of identity. Our GHC application approved very quickly after supplying them with the LEI.

Our experience was the same - easy to get a LEI register with constitution and broker note, and account with GHC set up the day they received our application. Just waiting for II to transfer our portfolio now.