Question
i have a Henderson Global Growth in an ISA and the AXA Framlington Health fund outside of an ISA, both held directly with the fund managers. I have also recently invested in Fidelity UK Smaller Companies through the Cavendish Online supermarket.
I feel I should re-register the first two investments via a supermarket/broker to reduce fund charges, but I am still unsure of the safety of using supermarkets and the fact that they own the nominee account tf things go wrong.
Can you advise on using supermarkets and whether to use the same broker or different brokers?Answer
There are basically two levels of risk (ignoring falling stock markets causing losses).
At the fund level your money is held by a 'custodian' (often a bank) separate from the fund manager, so even if the fund management company goes bust your money/fund holding should be unaffected. If fraud is committed, e.g. someone illegally dips their fingers into your fund, and the fund manager is insolvent hence unable to make good the loss, the Financial Services Compensation Scheme (FSCS) will step in and compensate for up to £50,000 of losses (per person per fund management company) provided the fund is authorised by the Financial Conduct Authority (FCA).
The above applies whether you hold funds directly with the fund manager or via a platform (another word for supermarket).
You're right that platforms normally use a nominee account to hold your cash and funds. Again, this must be ring fenced from the platform business, but if fraud takes place you could lose money. If such an instance if the platform is insolvent and unable to compensate the FSCS should step in and compensate for up to £50,000 per person per platform.
Provided the broker you use doesn't own the platform or ever hold your money then they shouldn't add any risk to the process. At worst, if they go bust you'll just have to appoint another broker as agent, which requires a simple letter or form, to continue receiving trail commission rebates if applicable.
Cavendish Online uses the Fidelity FundsNetwork platform/supermarket, which I'd rate as one of the safest based on Fidelity's financial strength. Personally I'd be comfortable holding more than £50,000 on Fidelity's platform. But since we can never say never, consider limiting your total holding to £50,000 per platform if you want peace of mind that you're fully covered by the FSCS.
i have a Henderson Global Growth in an ISA and the AXA Framlington Health fund outside of an ISA, both held directly with the fund managers. I have also recently invested in Fidelity UK Smaller Companies through the Cavendish Online supermarket.
I feel I should re-register the first two investments via a supermarket/broker to reduce fund charges, but I am still unsure of the safety of using supermarkets and the fact that they own the nominee account tf things go wrong.
Can you advise on using supermarkets and whether to use the same broker or different brokers?Answer
There are basically two levels of risk (ignoring falling stock markets causing losses).
At the fund level your money is held by a 'custodian' (often a bank) separate from the fund manager, so even if the fund management company goes bust your money/fund holding should be unaffected. If fraud is committed, e.g. someone illegally dips their fingers into your fund, and the fund manager is insolvent hence unable to make good the loss, the Financial Services Compensation Scheme (FSCS) will step in and compensate for up to £50,000 of losses (per person per fund management company) provided the fund is authorised by the Financial Conduct Authority (FCA).
The above applies whether you hold funds directly with the fund manager or via a platform (another word for supermarket).
You're right that platforms normally use a nominee account to hold your cash and funds. Again, this must be ring fenced from the platform business, but if fraud takes place you could lose money. If such an instance if the platform is insolvent and unable to compensate the FSCS should step in and compensate for up to £50,000 per person per platform.
Provided the broker you use doesn't own the platform or ever hold your money then they shouldn't add any risk to the process. At worst, if they go bust you'll just have to appoint another broker as agent, which requires a simple letter or form, to continue receiving trail commission rebates if applicable.
Cavendish Online uses the Fidelity FundsNetwork platform/supermarket, which I'd rate as one of the safest based on Fidelity's financial strength. Personally I'd be comfortable holding more than £50,000 on Fidelity's platform. But since we can never say never, consider limiting your total holding to £50,000 per platform if you want peace of mind that you're fully covered by the FSCS.
Read this Q and A at http://www.candidmoney.com/askjustin/882/should-i-use-more-than-one-fund-supermarket-for-safety
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