What Happens If Your Investing App Goes Bust?
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- Опубликовано: 13 дек 2024
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RUclipsrs get slated alot for sensationalism but on the positive side I have learnt a great deal from channels like this to reduce downside risk. Great video Chapeau mate.
Thanks mate! I try to balance things even though the sensational side gets more views.
I typically refrain from commenting on RUclips videos, but this particular video is highly valuable and exceptionally well-explained. Thank you!
Thanks Daniel!
Thanks so much for this one; I was often wondering about this hypothetical scenario
Glad it was helpful!
Great video Toby and really well explained. This topic is very much misunderstood. I've heard more than one RUclipsr incorrectly say that your "investments are covered up to 85k".
This video is good timing. I recently opened a SIPP with ii and transferred my company pension in. Someone warned me that ii was not protected beyond 85k…having watched this I think they were partially correct, if I have over 85k as cash but once it’s invested it’s not at risk if ii went bust. I was planning to keep about 90k as cash in my drawdown bucket, so most of this would be protected.
@4:90 you wouldn't want the investment to be sold: taxable event, probably above CGT thresholds for the year etc.
No of course ideally you wouldnt want that, but it's possible it could happen if anther platform doesn't take over the investment :)
I have been looking for this answer for a while now. Thank you!!!
Toby thank you for such an informative video. The subject is something that’s been on my mind recently as I’ve moved old pensions into a Vanguard SIPP. It had family members worried too so this explanation helps greatly.
You're welcome! Glad it was helpful. And it's a great topic often very misunderstood.
This is so helpful! Thank you for this; I really have been wondering about putting my pension and ISA into different providers, to get under the £85000, but I'm no longer concerned. Fantastic video.
Think you got the Woodford bit wrong, the 70 p in the pound will be the total pay back. This will include all the money paid back in dribs and drabs plus a cash compensation, which will come early next year. Total compensation will be 70 p in the pound from when the fund closed.
Even worse then thank you!
this is a really great and much needed video.
Thank you for the support!
As someone who is FCA regulated (mortgage advisor) I can confidently say the FCA are super thorough and they should have existed a lot time before they actually did. Some many firms got away with dodging dealings and hurt a lot of customers.
Great comment. Yes from my limited knowledge it looks like so many of these controls are all relatively new, we should feel pretty lucky that we’re in a good place at the moment 👍
@7:00 another reason to not go for some actively managed fund taking 2% TER and trying to be one of those 12% who sometimes beat (e.g.) the S&P for one or two years...
Precisely mate! Couldn’t agree more. If you do want to risk something then keep it very small
This is a good point. You often think of schemes failing because of fraud or whatever. But any fund can choose to close and return cash to you
I had to explain this to my wife several times, she still thinks money is safer in the bank than on investments.
Yes the value can go up and down but as long as you pick the right things ie index funds sp500 etc and just hold through the bad times without panicking it is safe enough.
spot on Nigel, it's something that is very misunderstood!
Tell her the money in her bank IS invested already, the interest you receive is simply commission for lending the bank the money!
Toby. I need to know more about that wall/stock ticker display thing behind you! :)
Google the Divoom Pixoo 64 and you’ll find it. You can program all kinds of things in it!
Hi Toby, well prepared great content 👍 Thanks.
"Assistant to the regional manager"
"Under weaknesses..you've put Eczema"
@@TobyNewbatt… 😂😂😂
As always great video Toby, such a lot of hard work on your part.
Thanks a ton!
Thanks for the information
Thanks for the great vid, good work involving Ricky to explain so many situations.
So in theory you shouldn't keep over £85000 as cash in your stocks and shares ISA.
My personal view is that yes, cash is really the only real concern. So ideally spread it where you can if you have that much
Valuable advice, always scrutinize qn ETFs holdings too and make sure they are physical
Yes thats another key point buddy!
Could you elaborate?
I spread my index funds between L&G, HSBC and vanguard. I think the risk of failure is low, but in the unlikely event of one going, i can still access funds from the others while it's being sorted out.
Platform wise, I'm all in on ii. I actually started with alliance trust, but ii bought them. I do look nervously sometimes at the abdrn shakiness going on.
But I also hold three years of cash so if something happened to ii, i can afford to wait for the paperwork to reshuffle.
I like that idea of multiple provides make total sense to me mate
Great video and love the Office references
The Office is seared into my brain forever! Thanks Dave :P
Great video, thanks! Very much needed.
Very welcome!
You look a little like Ricky Gervais in your youtube thumbnail, at a glance:) Nice clear video, good information.
😂😂 thanks
You chose David Brent to fill me with confidence :-)
Great video, I’ve always wondered about that 🙌
Thanks for watching
Thanks for the info Toby although not a big fan of that program, the office. Due diligence is the key before investing.
What about fractional shares?
Again, investments are still invested as I said in the video the protections are not relevant to an investment in the same way as cash is. But more news on this story soon someone just sent me a screenshot about some new developments.
Great vid Toby sound advice as always keep them coming cheers Leigh
Thanks 👍
"The broker does not have access to that fund and they can't just dip inside that money and take that with them" @ 4:58 Could you please provide some reference to a law or something that evidences this? I'm afraid that my investment in the HSBC All world index will be basically gone in the event of HL collapsing as unlikely as that is, I'm just trying to understand what exactly will happen worst case scenario.
There's a huge number of financial rules and regulations that any of this happening. I'm not going to go into them in a comment but you can read all about them, search for the CASS rules online :)
If HL goes bust it has nothing to do with your HSBC fund. The HSBC fund still exists and the monetary value of the fund is based on the holdings of the fund. You would lose access to the fund for sure, but you don't suddenly lose everything.
@@TobyNewbattthanks for clarity. I have specifically read on HL’s website that they can sell client assets to cover admin costs though just today after digging and that’s what worries me. In other words, they could sell my holdings according to what THEY say and use the money for admin costs in the event they go bust.
Quick question mate, I’ve had a HL S&S ISA which I opened in 2021 and have contributed to it this tax year. In preparation for next tax year, can I open a T212 S&S ISA before March and not contribute to it just to have it open despite me having contributed to the HL one?
Yes that’s fine. You can open any account just don’t contribute to it until the new tax year.
Hey Toby Great video!
I have a Vanguard S&P 500 just rolling over; I'm still very new to this and I was wondering if you could explain what the 'end of tax year process' is like? Do you withdraw all your funds then start fresh in the new year or do you keep all money in there and add more? Also how do you withdraw from Vangaurd? Also if you pass the 20k allowance what do you do?
Thanks!
Hi Dan, you don't need to do anything at the end of a tax year as an investor (99% of the time). The tax year is when your allowances reset again so sometimes you might want to be smart if you have loads of cash sat around to make the most of your allowances.
2. if you want to 'withdraw' any investments its super easy. Depends on the platform and what kind of investment it is, but you will sell it, wait for settlement 1-2 days and then withdraw to bank account.
3. The £20k allowance is just the limit you can PUT IN across ALL of your ISAs per tax year. There is no limit to what your investments can grow to. If you are lucky enough to be able to invest more than £20k per tax year then you can consider adding to a pension next, or even just investing in a general account (there is no limit in a general account but then you are liable for taxes in the event of dividends and sales)
Real Estate is a pain in the ass but the one thing is good for is this situation, if your bank goes under you don’t lose your house
Just pray you don't lose your house in war, Civil war, nuclear accident or anything else not covered by insurance.
That's put my mind at rest, thank you.
Great video. I did look into this topic a while back I'm glad you just confirmed what I found out!!....... let's keep investing 👍👍👍👌👌👌
Glad it was helpful!
I went of the FCA site but couldn’t understand where to search.
So how about Australian brokerage company
Caleb & Brown? Do you know if we are covered with them as they have London office for UK clients.
What are some good apps for investing? I live in France, so not sure about the workings and laws of the apps and which are better for my situation
Thinking of adding a VCT to my portfolio. Do you have any videos on these or would you make one?
(I have a high tolerance for risk etc etc and have done my due diligence but would be interested to see your breakdown)
I’ve not covered this before but it’s a very low risk investment so do what’s right for you 👍
VCT annual fees are very high.
@@george6977 if high fees is what stands out about VCTs to you, then they probably aren’t for you
Great video 👌
Regarding the 1M covered for 6 months, what if you sell funds into liquid cash and leave it with the broker, then the bank with which the broker holds the cash goes bust? I understand that a broker might use multiple banks, but I keep it easy. Will the '1 million covered for 6 month' rule take effect there? You used the example of a sale of a house for that 1M cover, but a sale of funds scenario is more pertinent to your viewers. I personally felt the fear during 2008. Would it be 1M per bank in that scenario, or 1M per person?
Do we know if trading 212 isa trading section is FCA pritected ???
❤Another fabulous video ❤🎉
Thanks again!
Yeah, imagine trading 212 that you advertise, went bankrupt in 2022 that your vanguard SP portfolio from 200k lost 20% .
It will get liquid at -20%
That is why we should choose a broker that the underlying asset belongs to us and not to the broker in our behalf.
This is one more reason that trading 212 doesn't support to move your assets to another broker
Brilliant
Thanks for watching :)
I keep seeing lots of videos pop up on my You Tube news feed about how the stock market is about to have a massive crash in late 2023 - Tom Bileu etc. I watched one and now You Tube seems to be showing me every single video on this topic! Is anyone else seeing these videos or is it just me because I clicked one and now the algorithm is following me around!
Stock market crash headlines and videos always get attention it’s built into our DNA to focus on danger and do everything we can to avoid it.
Here’s my favourite quote that should answer your question though.
Pessimists sound smart. Optimists make money.
They make the videos for the clicks and it works every single time 😎
can’t be that great if they are issuing fines of that level
I once heard that you have to be careful with some uk brokers managing their funds from Ireland and you might not have the same level of cover or something along those lines.
I can’t remember what RUclips video I heard this from.
Have you any knowledge of this?
Hey Adam, you're talking about mutual funds and ETFs that are domiciled in Ireland and those are not covered by the FSCS protections. BUT as I explained in this video, the protections are not there to protect your investments from going up or down.
👍
Thanks for the reply.
That’s a little niggle I’ve had in the back of my head for years 😅
I came across it when I was first getting into investing and was doing my research on FSCS, etc. and must have miss understood.
Thankfully it didn’t stop me investing.
Thanks again for explaining this.
So a SIPP is only protected up to 85k per provider according to the screenshot in your video?
I would have thought you would get back the market price of the funds invested in the SIPP, like you would from an investment S6S account. So does this mean you shouldn't have more than 85k in a SIPP per provider?
Thanks for the video Toby, this was very useful info.
Hopefully you watched all the way through. Remember that once cash is invested its value is now inside the investment. If you have £300k inside a SIPP all invested into a global index fund it doesn’t matter if the provider goes bust. Your money remains invested.
The issue would be more about having lots of cash inside a SIPP not doing anything. And if that cash was above £85m then it could be at risk.
Hope that makes sense. Remember that the protection of £85k is not there to stop to losing money in an investment it’s really meant for cash and to protect against fraud.
@@TobyNewbatt Thanks, I watched the whole video and thought that would be the case, but got a little confused when it came to SIPPs. Thanks for clearing that up, much appreciated.
Stupid question incoming... do I actually "own" the stocks and shares / funds or whatever that I have accumulated on these apps / platforms?
Speaking as somebody relatively young and relatively new to investing.
200-300 years ago if you owned x amount of gold it'd be under the bed or maybe a certificate say so.
Today in an electronic world I'm less sure. Am I relying on emails and statements for ownership or have these platforms employed some sort of technical jiggery pokery whereby they actually own what I think I own?
I receive the benefits of my ownership in the form of dividends and profit when I've sold but if they actually own it that could be a game of musical chairs for me.
With the different platforms I notice different payment speeds of dividends when due. Sometimes days later than they should arrive so if I own the shares why the delay?
not a stupid question at all - in fact the answer is full of jargon and very technical (and weird!)
Ultimately the part that matters is you become the beneficial owner of the share when you make a trade and buy a share. But there's a long legal line to get there. Your shares are pooled into a large account, and those shares then held in under one from a much larger organisation (custodian). For example, this is why you see Vanguard, Blackrock, Schwab and others are the largest shareholders in companies. It's much easier than to show 50 millions individuals. Records are then held down the line as to who the actual legal beneficial owner is.
And fun fact before I make this comment too long - technically every single US stock at least is owned by a company called Cede & Company.
Some great videos on youtube explain this better than I ever could :)
In terms of delay sorry I can't answer that one. this is for the platforms to sort out and whatever processes they have in place.
The key thing to remember with any mutual fund where you own units, you do not have voting rights on the underlying shares. You just get the financial benefit.
This makes the institutional investors like vanguard very powerful because they exercise block votes on your behalf.
Most funds have a stewardship page where they set out their policies on how they vote on your behalf. L&G has a particularly good one.
Could invest in NS&I........unlimited cover
Yep for cash that’s a great option. But plenty of downsides too. Inflation will eat that alive!
depends where you are in your life plan. Post retirement may wish to switch to "safer" investments Perhaps a slow switch to cash. Probate which involves more than five investment companies may increase solicitor fees?@@TobyNewbatt
Then what do you do if you want to use the cash? It's alright if you have A LOT of cash to lock up. If not its no good.
What's the ticker screen you have on your wall?
check the description I have it there as so many people ask about it :)
So in T212 if I have ever have 200k worth of stocks and grow more over 1 mill those assets are secured I guess even if the broker goes to bust right?
It’s not that the stocks are ‘secured’ it’s just that because they are a stock the value has nothing to do with the broker therefore it’s not a concern. Cash is really what the protections are concerned about and making sure bank runs don’t happen as confidence in banks is ultimately what stops this whole thing falling apart 👍
Technically the markets look like a capitulation could occur in the next couple of weeks before we see any upwards momentum……..unfortunately
best never invest at all then James, the market could crash! :P
If I remember you said the exact same thing last year on my channel. Beter buy gold and hide in a bunker right?
Personally i keep my gold in a small safe.How much does a decent sized detached bunker cost?
How will compounding work if you split your SIPP pensions in 6 accounts up to 85k each? Is compounding affected by splitting them?
Nope :)
Maths doesn't care about how you split your accounts. 10% growth of £510k is the same as 10% growth of (6x£85k)
Kaboom 😂is the best 😂
So what do traders do over 500k
Im not sure if you have understood the video :)
So, the £85k protections are not for your investments, it is not relevant. It was designed for cash to be protected. The real protections are the other rules in place when an FCA regulated firm operates.
If you own £100k of `Apple Shares and your broker goes bust - you still own £100k of Apple shares. `you don't lose them.
Same if you have £1m in a mutual fund or an ETF - if the broker goes bust, or the fund manager. you still own the value of the shares.
The only issue might be some time to sort things out
Have you got any proof or any links for that please because trading 212 customer servise says its only 85k per person.
Great video as usual. So just so I have this correct...for example I'll use Freetrade with 100k in there. As long as I'm under 85k in cash on there I'm protected...if I was 100k in cash I'd lose 15k but if I was 100k in stocks it all would be safe it's only cash amount I would need to worry about? If the first part is correct. If Freetrade went under how do you prove what stocks you have with them, just in case you couldn't get on the app to see?
Yes in short. The way I view the protections is really in two parts.
1. It’s designed to stop bank runs and protect confidence in the banking systems.
2. It’s to protect against fraud
Obviously it’s not there to give you money if your investments go bang because you invested in bad choices.
In terms of who knows what you own. Freetrade will use a custodian who has to keep records of the owners. I don’t know who that is but for example trading 212 use interactive brokers as their next in line. So in the event of Freetrade going belly up the regulator would have to work with the custodian to ensure all the records are correct
@@TobyNewbatt Thanks for the reply. So that's great as I was planning on maxing out the 85k say on Freetrade then start a new one on Trading 212 then Vanguard and so on to protect myself as I thought it was 85k on the platform itself 😂 so thanks for clearing that up
@@neilrichardson5487 there's no real reason you should be keeping that much cash in a broker doing nothing. it won't be making any money. high levels of cash should be kept in either a money market fund, or a high interest savings account (or cash ISA).
you're investments don't need to be kept under 85k
I feel that my last question in your videos has prompted this video 😂 jokes...
Anyway one more question please so you mentioned you have 3 accounts so my question is simple and i believe i know the answer but your 20k allowance in uk is it personal or by account?
I have the perception that is personal allowance am I wrong? And apologies in advance if silly question😅
£20k is a personal allowance. And that’s PER TAX YEAR of NEW money. Remember I have been investing for many years. You can only put new money into one stocks and shares account per tax year
@@TobyNewbatt appreciate the reply
Thank you
I suppose if you did a pole one of my two brokers would be top of the list freetrade as likely to go broke
Thanks for my next community post idea Andy lol 😂😂
Glad to be of help 👍😊
I’ll vote for vanguard as least likely
The recession is here, mortgage rates still on the rise with higher imports and lower exports, yet the Fed is to lessen cost. Where do investors look at now for wealth gains? something will eventually break if they keep raising interests and quantitative tightening
Who is telling you mortgage rates are still rising?
Because you should stop listening to them. They are not.
I am a mortgage advisor as the lenders are “racing to the bottom” and have been for months.
Irrelevant, the economy is not the market
The signs are that rates will not continue to increase
It breaks in 2028...
Please please don’t scare me. 😂
David Brent has got your back don't worry :P
I found this video 👍
What happens if you portfolio is down 30% when they collapse? 😏
Then you get all your money back.....NOT :P
The illusion of safety. If Barclays, or another legacy bank goes down let’s be honest you ain’t getting doodle.
Well if an eathquake big enough happens we all die. The illusion of safety, more the like the illusion of getting a brain
use some US office clips!
😂👍
Some of us are from the US…really limiting that audience
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