FSCS protection

[Andyf (Andy)]

Curious to find out whether people split their investments across multiple platforms if you have significantly over £85,000 to invest to make use of the FSCS protection.

[daba]

Glad somebody else have same thought.

I do, this year will be my last year saving to my ISA on freetrade. I will stop topping up at around 60K to give some room of possible investment growth to be covered by FSCS protection.

I like the platform though really, effective and low cost. I don’t know any other platform with similar quality. Probably vanguard.

[Eden]

No. There’s no reason to, and I believe that people may be misunderstanding what the protection is for.

[lizmcp]

The £85k only applies in the case of fraud or moving to another broker. Otherwise your assets are ringfenced: you own the shares, and cash is held in a separate account. In the case of freetrade going bust, there may be a transaction cost in moving to another broker, which would be covered up to the £85k. The only way you would lose is if the entire operation of freetrade is fraudulent, i.e. you do not own actually the shares, and the cash has not been ringfenced as required, or if the cost to change broker exceeds £85k.

[Rob14 (Rob)]

There were £1M+ SIPP’s transferred in, which is a strong vote of confidence as these are such long term products.

[daba]

@lizmcp

The only way you would lose is if the entire operation of freetrade is fraudulent,

Thats actually my reason. I am not saying freetrade may be a fraud, it’s just for my peace of mind.
To be fair, it’s not only freetrade, I probably will have multiple accounts across multiple platforms and all of them will be below the FSCS protection.

[Eden]

At some point when your more comfortable you may want to reassess your risk. You’re essentially costing yourself money and unnecessary management to mitigate a risk which essentially doesn’t exist

[daba]

I’m okay paying extra costs, it’s like an insurance policy for me. I will just have to find the cheapest insurance.

I am a buy and hold etf index investor, I distribute my holding evenly between ishares and vanguard etf for world tracker in case one of them may be fraud, which sounds totally ridiculous.

Plus it’s nice to back the competitors, It wouldn’t be fun if freetrade were the only game in town.

[ralf]

I accidentally started off all this discussion in another thread.

Can a moderator move

Freetrade Competitors

You say this is an “out there” idea, but if you consider GME, it’s clear that even if the brokers have been buying something, it’s not necessarily a sure thing that they’ve actually bought real shares. And even though I’ve invested quite a lot into e.g. Amazon and Google, I still don’t own a full share of them. That just pushes the problem further down the line. OK, so if FT goes bust the protection will cover the assets they are directly looking after. But if for example all our shares are …

to

Freetrade Competitors

Why do you think that the shares don’t exist? You seem to be confusing share ownership and shorting or options on shares. Using your example of GME if you buy a share then you own it - end of story. I’m not sure where you have seen reliable evidence that more GME shares are circulating than actually exist - that sounds like either nonsense or a misunderstanding around shorting.

to here?

[ralf]

BTW, it seems that this is the most useful answer to my original question about FSCS protection:

Client money protection

There are helpful contributions above from @BOOM, @thinking_hydrogen, @Eden and @AJHY, great to see community members helping community members. Just to help remove the confusion, the most helpful official webpages are: NewRegister (See “How customers are protected?”) Keeping your money safe (See “Freetrade is part of the Financial Services Compensation Scheme”) It is worth keeping in mind that, while you are protected under the FSCS scheme as detailed on the Keeping your money safe webpage, …

and specifically this link:

https://freetrade.io/security?_ga=2.90715736.331840718.1620026841-630429401.1615560107

[alternate]

What bank / financial group does Freetrade use for their FSCS protection? I couldn’t find this information on the official FAQ, and I’d like to avoid accidental mixing of Freetrade protected quota with other investment platforms’ quotas backed by (potentially) the same bank.

[JimmyJ]

What you are referring to applies to banks which are owned by the same institution. Since Freetrade isn’t owned by a specific banking institution, the “quota sharing” as it were wouldn’t apply.

The FSCS explained: are my savings safe? - Which?

[Eden]

I believe (correct me if I’m wrong) that it would apply for any cash deposits in GBP which are not invested as these will sit with freetrades bank. Eg your cash deposits in freetrade would share the same combined protection of your own bank account if they are under the same bank

Haven’t checked in a while so I may be wrong. Certainly that doesn’t apply to investments

[Lonli-Lokli]

Do you think there will be more than 10 cheap brokers in UK in 10+ years?

[Bob1 (Bob)]

Question if I may?

What is protected by FSCS?

I understand its £85k per person per institution.

Thats straightforward with savings.

With a S&S ISA…whats protected?

For example…I invest £20k today and in 5 years it’s done well and worth £85k in stocks.

Is my £20k deposit covered , or my £85k worth of stocks?

[lizmcp]

Neither. If you own the shares, you still own the shares whatever happens. The scheme protects cash, so if you had up to £85k in cash, that would be protected. If there were a fee element to transferring your shares to a new broker, that would be covered up to £85k.

[Bob1 (Bob)]

Ok, that makes sense, thank you.

So the shares arent protected because they are mine due to the whole ‘nominee account’ set up…and I have to believe FT, when they say they bought them for me, they really did ?

Not that I dont believe them…but thats the situation?

[lizmcp]

Yep. The only thing to worry about is that the whole thing might be a scam. But if that were the case, you’d think they’d have taken the money and run by now.

[Eden]

That’s not quite right. the scheme does primarily protect cash, this is the simplest part. but it can also protect from mis-selling, and other things like fees if a broker goes into administration, or shortfalls.

for example.

in the past FSCS has covered administration fees associated with the costs involved in administrating the failure of a broker and the transfer of assets etc. rather than put these costs on the clients, the FSCS was used to cover the costs

they have in the past covered shortfalls in assets or money. This is not shortfalls in the sense of the performance of an assets, but most likely shortfalls in things like missing assets, missing money, etc.

they can cover issues with being mis-sold products due to false or fraudulent advice

and the can cover issues in shortfalls in cash

@Bob1

So the shares arent protected because they are mine due to the whole ‘nominee account’ set up…and I have to believe FT, when they say they bought them for me, they really did ?

As a FCA regulated broker, Freetrade has to ring-fence (unless you give them explicit permission; you haven’t) assets. Assets are held under Freetrade Nominees Limited or a sub-custodian.

this is in there terms as well which you should read over. Freetrade | Terms & Conditions

you can also read more here Keeping client money and safe custody assets protected

20.1. We act as the custodian of the Investments in your Freetrade Account(s), which means that we keep them in safe custody for you and treat them as ‘client assets’, in accordance with Applicable Requirements.
20.2. Your Investments will be kept separate from our own assets and title to your Investments will be registered in the name of either:
20.2.1. a nominee company which will have legal title to the Investments while you retain beneficial ownership; or
20.2.2. a sub-custodian located outside the UK. We’ll only do this where the relevant Investments are subject to the law or market practice of a jurisdiction outside the UK and where we have taken reasonable steps to determine that it is in your best interests to do so, or that it is not feasible to do otherwise, because of the nature of the applicable law or market practice.