What Happens If My Investment Platform Goes Bust?

A question I'm asked all the time is "What happens to my money if my broker/investment platform goes bust?" So in this video, we look at how to gauge the risk of loss and compare it with other risks, but also how regulators reduce this risk and how compensation schemes could help further. And we look at what nominee accounts are and how they work. Finally, we give one example where a fairly large UK broker did fail and the consequences of that failure.

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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.

[fredbloggs]

Hi Ramin, great video as always. Personal experience with the platform you mentioned going bust. I had well over the FSCS compensation limit invested with the company at the time. My funds were eventually returned minus a haircut (I think it was 10%) to cover the liquidation fees. That 10% was reimbursed by the FSCS compensation scheme, therefore I was made good on the full amount held with the firm. I thought you may be interested to hear of a real world experience. The protection system works!

[Jono-vysb]

Super video thanks. Could you do another one on what would happen if an ETF provider went bust?

[CMac]

Another great video. Fee risk isn’t something I really considered before. Most of my pensions are 1% annual fee. I saw a Global equity pension option recently for 0.4% so am probably going to switch to that.

[alistairrobinson]

Thanks for making this video, I’m often stressing about platform risk so will use more than one and stick with the larger ones 🙏

[mgb]

Political Risk eg Pension Lifetime Allowance being relaxed by one politician and subsequently restricted once again by another politician or the impact of Brexit on the economy/financial services etc

[janeknight]

I accept your point about fee risk but as you enter retirement an easy to use platform moves up the things to consider. This always seems to be more expensive ☹️

[mmcatamm]

Could you a review about eToro as an investment platform ?

[DavidYoung]

FTX ... enough said about unregulated platforms

[timetraveller]

Invest engine charge zero platform fees..I moved over from Fidelity and have been very happy do far

[garyten]

I believe the investment platform is just the access to the investments, so it should not hold anything other than your cash.
When you use, or invest through, the platform, eg Interactive investor, your mony is used to buy a fund, ETF, Investment trust, and its them that have your money, so even if the platform went bust, your investment is still secure with who ever you invested with.
I believe this is how it was explained to me many years ago.

[arturo]

An average of 0.20% total fees seems impossible to me, even using Vanguard.

[phesho]

Thank you for this video. So is my money only protected up to £85k per platform?

[markukblackmore]

A master class in clear communication.

[nigelbriggs]

Segregation via custody accounts (inc in ETFs) for securities, government guaranteed cash to a limit

[enigma]

Would you spread your assets across more than one platform to mitigate platform risk? I was going to consolidate on a single platform but I got cold feet.

[iestynjones]

Would you consider interactive investor, ii, to be a reputable platform?

[RobCLynch]

I wonder if Raman meant to not pay more than 0.2% for an actual fund/per fund, because Fidelity uk charges 0.3% just for the platform fee and ive seen many worse than this.

[kyungshim]

All the securities traded on the clients' account on these trading platforms or brokers are held by a custodian which is a separate entity to the broker firm. Therefore, these securities are not part of the broker's assets. Even if the broker goes bust, these securities can not be claimed by the creditors. So, the risk to the account clients is zero.

[selwynhammond]

There is an example of this exact thing happening here in the UK in the FT today and it seems to have taken a long time to resolve and in the meantime the investor/pensioner has no access to their money for a long period of time. The lesson from that is clearly have more than one platform or pay a higher fee for a well known platform brand that is too big to fail.

[timetraveller]

Great detail as usual. I would say that behavior is the biggest risk. If a bank run happens in the UK, I can see everyone pulling out cash, which is the worst thing to do. My bighest concern with splitting allocations across different platforms is how this would effect compounding..so all of my money in one platform would compound bigger and better than all my money invested over 4 platforms? There's a great you tube video on how charlie munger suggests that once you reach 100k in a fund then you can take the foot off the gas a little?