Beaufort Securities


#1

So I’m reading some statements that clients are being stung to cover costs at Beaufort, i.e. money taken from their shares etc.

I thought client assets were ring fenced to protect against such things?

Also PWC are charging £100 million for their services in the administration? I think there is more than one criminal organisation at work there.


(Christopher) #2

@stephen I posted this over on the Monzo forum in reply to a comment about giving an example of ring fenced client money being put at risk owing to an FCA imposed winding up. There are some links in there with some background and analysis if that’s helpful.


#3

Good stuff, will check it out.


(Adam) #4

What happened at Beaufort Securities was a fraud.

Ring-fencing of clients assets doesn’t protect fully against fraud at a company. That’s why there is the FSCS (financial services compensation scheme). Unfortunately, for customers with large portfolios the FSCS protection has a limit and amounts over the limit that are not insured and could result in a complete loss. It’s the same story for banks that go bust due to fraud.

While I agree the top-end cost estimate made by PwC to wind up the company is excessive (and I would say seized on by journalists wanting to shout a big number), blaming PwC is missing the point.


#5

So is there any way to protect a larger portfolio? e.g. if I had £850,000 portfolio (:pray:) would I be best served having 10 broker accounts?


(Adam) #6

Yes, same story as bank accounts. Any amounts over the FSCS limit would be at risk in an adverse scenario. Extremely low chance based on historical precedence, but possible you could lose everything that’s not insured.

If you’re worried about it, diversification is a smart strategy in my opinion.


#7

You say lose everything not insured, can I insure my stock holding?


(Adam) #8

I’m no expert in insurance, but I think you can insure anything these days. Talk to @Rob, who is our guru and makes sure we are fully covered.

You raise a really good point in this thread though - nothing is guaranteed. Even cash accounts at banks that have been around for a quarter of a millennium. :racehorse:


#9

Would be a useful service if Freetrade offered insurance on portfolios over £85,000, under written by an independent insurer.

Maybe a tiered monthly fee depending on the size of the portfolio.


(Big Boss) #10

Interesting concept although I think it will be impossible or expensive for insurers to do. You could buy a put option and that’ll do the job (experienced traders only!). I’m not sure whether FT will offer options in the future?


(Viktor) #11

The new avatar is quality, @Justin :dog:


(Christopher) #12

Paper certificates (UK shares only) stored a safety deposit box? I am wincing at the thought of the associated admin and dealing costs!

I think the point you and @Adam make is really important, and always worth keeping in mind when choosing a company to manage your money or act as administrator to your investments. It’s so easy to get swept up in the hyperbole surrounding particular trends or businesses, and let our optimism bias take over.

It would be awesome if Freetrade produced a handy primer to explain how assets are held, managed and ‘protected’, and how Freetrade mitigate loses (with usual caveats) in the event of winding up, should holdings exceed the guarantee offered by the FSCS. I think it would help with the whole ‘demystification’ of investing, enhance trust and grow confidence.

FWIW, I think the biggest risk to wealth erosion for most private investors will be from market turmoil and the Next Big One, rather than say Freetrade running a bucket shop. [edit to add: Freetrade is NOT a bucket shop outfit]


#13

@adam or @Viktor do/will Freetrade provide a paper certificate service? I don’t mean trade in paper but allow a holding to be put into paper certificate so I can stuff it under my bed/safety deposit box etc.


(Christopher) #14

@stephen I fear the cost and simplicity advantage proposed by Freetrade will evaporate if they go down the paper certs route. Add to that you’d be restricted to a fairly narrow set of assets if you wanted to only hold them in certificate form.


#15

Fair enough. These are all (hopefully) future concerns because at the moment I am well within the £85,000 limit! :joy:


(Calum McWhir) #16

Let me complicate things further… cash and stock held with an eligible investment firm is only covered up to £50,000.

£85,000 is the limit covering consumer deposits with credit institutions only (and unfortunately it is not relevant that a broker would hold any customer cash with an underlying credit institution).

[Source]

Edit: Decent tactic is get your spouse to hold an account in their name and effectively double the limit. Not advice.


#17

Yes, you are complicating things further! :wink:

So no disrespect but when Freetrade finally floats/sells/etc and we’ve all made millions - I’m going to spread my cash around!


(Vladislav Kozub) #18

Good luck with those £11.95 trades with other providers :wink:


(Christopher) #19

@freetrade_cal you may have inadvertently made a case for polygamy! Definitely not advice.


(Tommy Lowe) #20

Poppycock I say! Every man and his dog will be giving free trades by then… DeZiro, Revolut, HL… :wink: