Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Welcome to Merrin Talks
Speaker 1: Your Money, the personal finance edition of Marin Talks Money.
Speaker 1: In these bonus podcasts, we talk about the best strategies
Speaker 1: for making the most of your money. I'm Maren thumsat
Speaker 1: Web and with Me Senior, a border and money Distilled
Speaker 1: author John Stapback. Hi. Hi, right, So this week we
Speaker 1: are answering a question from Mike.
Speaker 2: I'd love to know your thoughts on the possible risks
Speaker 2: in having all of your DC pension invested in one fund,
Speaker 2: such as, for example, the Vanguard Life Strategy Fund, given
Speaker 2: that the FSCs limits are only eighty five thousand. I've
Speaker 2: kind of thought about this as my pension pot has increased.
Speaker 2: I've wondered if it should be spread around a number
Speaker 2: of similar passive funds from different providers.
Speaker 1: Gosh, well, there's quite a lot in here because it's
Speaker 1: not really about one fund, but it's about one provider,
Speaker 1: isn't it.
Speaker 3: Jump Well, the FSCs is basically where do you go
Speaker 3: if all the else fails and so, say you're broker
Speaker 3: goes bust, Say the platform that you're on goes bust,
Speaker 3: and then not only that it terms out, it goes
Speaker 3: bust and your money isn't where it should be. Because
Speaker 3: the key thing if you're using a platform like how
Speaker 3: gas lines down or an interactive investor for example, then
Speaker 3: your assets should be separated so that even if the
Speaker 3: platform provided breaks down, then your money is there somewhere
Speaker 3: and then it's just a matter of trees there.
Speaker 1: Yeah, I mean that's absolutely key. So everything that you
Speaker 1: hold in an ISA or a pension or anything like
Speaker 1: that is effectively held in a kind of trust structure
Speaker 1: for you. So whatever goes wrong at the broker, that
Speaker 1: structure still exists and your money is still inside it.
Speaker 1: So you only run into a problem where you might
Speaker 1: need back up from the FCFC if there's some kind
Speaker 1: of fraud involved or your money has been moved out
Speaker 1: of these these trust structures into something else. Right, So
Speaker 1: it's it's incredibly unlikely unlikely that if you're broke a
Speaker 1: where to go bust, which does happen, if you're broke
Speaker 1: away to go bust, you might need recourse to them.
Speaker 1: Is that fair?
Speaker 3: Yeah, it is unlikely. I mean it's obviously it would
Speaker 3: be a hassle in a nightmare if your broker goes bus,
Speaker 3: then brokers do go bust, smaller brokers. You know, over
Speaker 3: the years writing about this stuff, you know, there's always
Speaker 3: every kind of like three or four years is usually
Speaker 3: a story about some broker that most people probably haven't
Speaker 3: heard of, and often what happens. One of the problems
Speaker 3: is that even if there isn't actual fraud, and sometimes
Speaker 3: it is fraud, but if there isn't freud, there's sometimes
Speaker 3: just really sloppy paperwork, and you know, the people who
Speaker 3: have got to go to the FSCs and having to
Speaker 3: wait for ages. That's broadly speaking, what this is for.
Speaker 3: And really, I do think that this is a really
Speaker 3: good question, because it's not like this is a similar
Speaker 3: thing with bank accounts. So we all remember the financial
Speaker 3: crisis and how everyone actually got clued up on the
Speaker 3: FSCs very quickly after that, and we all know that
Speaker 3: you shouldn't hold more than eighty five thousand pounds with
Speaker 3: any one bank sort of like banking group, per person,
Speaker 3: because if your bank did end up having a run
Speaker 3: on it and there was another two thousand and eight situation,
Speaker 3: then you're only covered up to the eighty five thousand,
Speaker 3: excepting certain minimal circumstances.
Speaker 1: And something to say there by the way, is that
Speaker 1: if you have cash, right, if you have cash at Hugger's,
Speaker 1: lamsown or one of the other broadkers, in one of
Speaker 1: those active saving schemes, whatever it is, that money is
Speaker 1: likely to be spread across different banks as well. And
Speaker 1: it's eighty five thousand for each of those.
Speaker 3: Yeah, and that's both checking. If you're worried about it,
Speaker 3: then you should check with your platform exactly how it
Speaker 3: does that. And most of the you know, the platforms
Speaker 3: will explain that to you. The price should be something
Speaker 3: on their website, but if you can't find it, then
Speaker 3: just email and ask them about it.
Speaker 1: Well, here, listen, I'll read you the bit from huggris
Speaker 1: lansdown website. Money you having an Isora funder a share
Speaker 1: account is held in legally separate trust accounts across the range.
Speaker 1: If you get regulated banks, this means your cash you're
Speaker 1: held separately to Hl's cash and it is reconciled daily.
Speaker 1: So that's the basics.
Speaker 3: That a reputable platform will keep it an eye on
Speaker 3: all this stuff. This is something you really do have
Speaker 3: to consider if you're someone who does have more than
Speaker 3: eighty five thousand pounds, and frankly, if you have a
Speaker 3: pension that's going to be worth that's going to fund
Speaker 3: you in retirement, then you probably will have a pension
Speaker 3: that's worth more than eighty five thousand pounds. And although
Speaker 3: things like brokers going bust doesn't happen very often, this
Speaker 3: is one good reason why you do need to keep
Speaker 3: an eye on the you know, the solvency of your broker,
Speaker 3: and the easiest way to do that is to use
Speaker 3: one of the big ones for at least art of
Speaker 3: your pension pot, even if you've got a broker that
Speaker 3: you prefer that's you know, smaller or more obscure or
Speaker 3: cheaper or whatever. Because one of the important things with
Speaker 3: this kind of situation is how politically sensitive it is.
Speaker 3: And if you can sit there and say, this company
Speaker 3: that I am invested with, would it going bust be
Speaker 3: a front page headline scandal story, I think answers yes,
Speaker 3: then that's actually an extra layer of protection for you
Speaker 3: because politicians will react if that happens, Whereas if it's
Speaker 3: just some pidly wee relatively recent startup that nobody else
Speaker 3: knows about, then you are going to be on your
Speaker 3: own as far as you know, getting your money back
Speaker 3: goes beyond the connective SCS limits. So I think that's
Speaker 3: that's a really important element to think about if you
Speaker 3: are someone who's in the situation of, you know, being
Speaker 3: able to think about this.
Speaker 1: Of course, that's not what startup brokers want to hear,
Speaker 1: is it that there are these these massive motes around
Speaker 1: the big guys for that very reason? But I agree
Speaker 1: with you, you know, it's one of the reasons to have
Speaker 1: a big name broke up. Interestingly, though, I still have
Speaker 1: my assets spread across three different organizations.
Speaker 3: I think that's sensible for actually.
Speaker 1: Come to think of it, simply simply because of admin. God,
Speaker 1: I hate admin. I hate admin, and I can't imagine
Speaker 1: having all my assets held on one platform it going
Speaker 1: bust and then two years of admin and form filling
Speaker 1: and all that. I don't think I could stand it.
Speaker 3: Oh the way they'd be hairlish, and it's like, it's
Speaker 3: just there's different levels of here. There's there's a level
Speaker 3: of hell where you have to eat two years for
Speaker 3: your ices, and there's a level of hell we are
Speaker 3: your ices actually weren't near anymore.
Speaker 1: That's the worst layer of hell. I don't think any
Speaker 1: of the organizations I'm with would get me into that situation.
Speaker 1: But you know, who knows, never say never, Terrible things
Speaker 1: happen out there in the world of money.
Speaker 3: We know that, no, absolutely, And I think I think
Speaker 3: the other point, I mean, the answer makes questions specifically,
Speaker 3: actually question he's asking a little bit easier to my mind,
Speaker 3: because really what he's talking about is having it all
Speaker 3: in one fund. And don't get wrong, I mean, Vanguard
Speaker 3: falls very squarely into the headline, you know, political protections,
Speaker 3: kind of like a company if that went, but then
Speaker 3: that would definitely be a front page story. But you know,
Speaker 3: it's very easy. He just put some of your money
Speaker 3: into a different passive fund that is doing basically the
Speaker 3: same thing. That's a fairly low ADMIN solution. I can
Speaker 3: see why you might not want to have more than
Speaker 3: one pension platform if you're only you know, if you're
Speaker 3: only just over the limit and you're like, oh god,
Speaker 3: I hate the ADMIN and I don't want to move
Speaker 3: money to you, and I don't want to do this.
Speaker 3: But with that, that's just a pretty straightforward matter of
Speaker 3: taking a chunk of your pension money and putting it
Speaker 3: in a slightly different index fund.
Speaker 1: I mean, I just think, I mean, I would never
Speaker 1: just rely on one fund for everything. I mean Vangguard
Speaker 1: Life Strategy Fund. I mean, this is a well established strategy,
Speaker 1: is a well established company. But why would you put
Speaker 1: everything into one thing? Ever? Ever, I mean, I don't
Speaker 1: think that the Vang Life Strategy Fund is going to
Speaker 1: end up being wound down. I don't think it's going
Speaker 1: to not have enough assets in it to be viable.
Speaker 1: You know, none of those things are likely to happen.
Speaker 1: But again, why not just have a couple of different things?
Speaker 3: Yeah, I think this is one of those questions a
Speaker 3: very basic level, just don't have all your eggs and
Speaker 3: one basket. Also, the more eggs you've got, the more
Speaker 3: baskets should going to required if you want to be
Speaker 3: able to sleep socadly and.
Speaker 1: Obviously, I mean you can take eggs baskets, how many
Speaker 1: As you get more eggs, you need more baskets. Is
Speaker 1: that that's what you're saying, Yes, diversify, have a couple
Speaker 1: of baskets, move the eggs around them.
Speaker 3: I think it's possible. Probably overly neurotic about this, but
Speaker 3: the deeper you want to go into it, I have
Speaker 3: to see I'm not you know, low with as I
Speaker 3: am to mention the competition. The money Vator blog is
Speaker 3: very good on this stuff for people who want to
Speaker 3: go deep down into you know, exactly which kinds of
Speaker 3: funds are protected and all that sort of stuff. As
Speaker 3: I say, I think you can probably it would probably
Speaker 3: be easy to get a bit too you not to
Speaker 3: give about this, but at the same time it's definitely
Speaker 3: something you should think about, certainly, especially if you are
Speaker 3: going with small, more vulnerable providers, then you should be
Speaker 3: paying more attention to this stuff. You know, if you
Speaker 3: do have all your money we big brand names that
Speaker 3: have got that, you know, headline protection, then you can
Speaker 3: probably be a bit more relaxed about it. But if
Speaker 3: it's anything off piecet, then just make sure you know
Speaker 3: what you're doing.
Speaker 1: And just be clear that you know you can not
Speaker 1: this PARTICULARTF. But other atfs, they do get delisted, they
Speaker 1: do get wound down, and then you do wait for
Speaker 1: a bit of your money to come back, but it
Speaker 1: does come back. And it's the same with investment trusts
Speaker 1: for example. Every now and then they get wound down,
Speaker 1: right and then the money will the money will turn
Speaker 1: up in your bank account of it actually, and the
Speaker 1: same with other types of funds. Okay, but one thing
Speaker 1: to add to that, John, and I think you know
Speaker 1: about this is that you do not get FSCs protection
Speaker 1: anyway from investment trusts and ETFs. Is that right?
Speaker 3: Yeah? I mean that's moving in your or ticktatorory. If
Speaker 3: you're bordering a bit of that too much.
Speaker 1: All right, well we'll leave it there. But the word
Speaker 1: last thing I wanted to mention is just to be
Speaker 1: absolutely clear, you will not get any compensation from the
Speaker 1: FSCs or indeed from anybody else if you just make
Speaker 1: a bad choice, if you choose a terrible fund and
Speaker 1: it falls ninety percent, I'm afraid that's on you. Bad
Speaker 1: choices have consequences, so let's try not to make too
Speaker 1: many of those. Thanks for listening to this week's meren
Speaker 1: Talk to Your Money. If you like us, share, rate, review,
Speaker 1: and subscribe wherever you listen to podcasts. Also, be sure
Speaker 1: to follow me in John on x or Twitter at
Speaker 1: marinusw and John Underscore Stepic. This episode was produced by Semasadi,
Speaker 1: Production support and sound designed by Moses and Questions and
Speaker 1: comments on this show and all our shows are always
Speaker 1: welcome our show. Email is Marimony at bloomberg dot net.