Should I spread investments across multiple fund manager companies

[Binlid]

I’ve been struggling with a problem for some time and wondered if anybody could offer some advice.

Last January, I left my financial advisor (so I can’t ask them anymore) as once everything had been set up I couldn’t see the point of paying them 0.75% of my investments every year when nothing changed.

My investments are currently split 3 ways, a pension fund (Royal London), an investment platform (Parmenion) organised by my ex-financial advisor and a Fidelity account with funds invested by me that were outside the control of my previous financial advisor. The value of each of the three parts is broadly the same.

I am happy with everything except the Parmenion setup and have decided to move off this platform for the following reasons:

1. As I don’t have a financial advisor, I have very limited access to the information of this platform (All went through my ex financial advisor)
2. The Actively managed part of (50%) has been making a loss. Even in these times outperformed by tracker funds.
3. The Actively managed fund does not have references I can use with the Morning Star tools to help with investing decisions

Parmenion is made up of 50% in a Fidelity tracker and 50% Actively Managed fund(PIM).

The problem is where do I go….

My first thought was to move it all over to Fidelity with my other investments –

o Vanguard tracker into Vanguard tracker
o PIM actively managed into Fidelity’s 5 top funds

However, I don’t like having all my eggs in one basket. If Fidelity went the way of Leeman brothers I would be in a right mess. Even if appropriate, the FSCS 85k protection would not cover it. Therefore, should I spread it around and minimise the risk.

In the past, when I had discussed this topic with my financial advisor, he told me not to worry because Fund Manager companies like Fidelity & Parmenion can’t use the underlying assets to offset their financial problems. i.e. the assets belong to you not the fund manager. In the event of a Leeman Brothers type failure, whilst you would probably have to wait while the liquidators sorted it out, you would get your money back eventually

So what should I do ? Spread it around to mitigate the risks of failure or put it all with what you know. In my case that would be Fidelity, who I think are excellent, although I have not really used anybody else. Hargreaves Lansdown & Blackrock come up in searches but maybe these are a bit more focused on Americans.

Your thoughts

Thanks in advance
Binlid

[monabri]

I'd suggest opening an iWeb account and transferring your Vanguard fund to them. Opening an iWeb account is currently free. IWeb is backed by Lloyds Banking Group. iWeb do not charge a custodial fee.

[Redmires]

I would start by having a trawl through the excellent Monevator blog site. A quick search finds this article, but there are many more useful ones if you search. The comments after the article feature much useful info as well. My understanding is that the funds themselves are ring fenced but could take some time to be returned should the platform fail.

https://monevator.com/investor-compensation-scheme/

As for brokers, I agree with the last post about Iweb. There's no platform fee and transaction fees of £5 per trade. If you don't trade (just hold) then there's no annual fees etc. It's also part of Lloyds Group. Too big to fail ? Well, the government bailed them out the last time

https://monevator.com/find-the-best-online-broker/
https://monevator.com/compare-uk-cheape ... e-brokers/

[monabri]

With regards to the FSCS..it is potential "losses" upto £85k that are covered. Your assets should be in "ringfenced accounts" so - in the event of a catastrophe - you should be ok.

What has happened in the past (see SVS Securities ** or Beaufort Securities which were both closed by the FCA) is that a Special Administrator was appointed to transfer the assets (shares and cash) from the failed company into another platform.

1. The Special Administrator (SA)wants paying for their services. They charge a high hourly rate for these services and they book a lot of expensive hours. The cost for SVS Securities was in the millions for the SA to handle the transfer (£23 million ?).

2. What's "Special" is that the administrators can fund their work by charging you a percentage of your assets..a typical rate is ~10% of your shares and 10% of cash. Thus, if you have assets above £850k held under one licence, there is a risk of financial loss (10% hit on £850k). To avoid thousands of individual claims to the FSCS, they have stepped in to deal with the SA directly and to pay their fees.

3. The main issues are - the transfer might be to a platform that you do not want to transfer to *** (ok you can move your assets at a later date). The second issue is the time it takes to transfer your assets to the new platform. During this fraught period you have zero access to your assets. Dividends that accrue build up in your account but you cannot access them until the transfer is complete.



** I have the t-shirt in this one. SVS Securities were too small an outfit - stick with the big platforms.
*** Like a transfer to ITI Capital, comrade.

[mc2fool]

With regards to the FSCS..it is potential "losses" upto £85k that are covered. Your assets should be in "ringfenced accounts" so - in the event of a catastrophe - you should be ok.

I just want to emphasise the shoulds in the above. The shoulds might not have happened because of fraud or poor bookkeeping or just plain extreme cockup. While rare there have been cases where the administrators couldn't reconcile what (little) was ringfenced with either the broker's records or those of the clients, and the clients got just the FSCS payout. See viewtopic.php?p=549616#p549616 and follow through the chain of links.

Having said that, if you stick to the big guys there's a lot less chance of that happening and a lot more chance of them sorting it out if it does, and I wouldn't worry about Vanguard or Fidelity. Nevertheless, while the chances of anything nasty happening with them is extremely small, it's pretty cheap insurance to not put all your eggs into one basket, and I echo the recommendations for IWeb.