What happens if HARGREAVES LANSDOWN goes BUST? What happens to my investments and how much is safe?
We’ll look at how this kind of event would impact on the various types of holdings to get a better sense of the risks and also the protections that are in place to attempt to mitigate those issues. I’ll also be referencing what happened at Beaufort Securities, a brokerage that went bankrupt in 2018 and left around 16,000 customers wondering what would become of their investments.
This is made more complex due to a general investment account, ISA or pension being potentially made up of different assets that are also treated differently according to the protections in place for each. And we have to be mindful of what element is actually insolvent whether it’s the underlying asset, e.g. the bank account in the case of cash, the fund or Hargreaves Lansdown themselves. For example a bank that the platform uses to hold client cash could fail. We also need to be mindful that although we are talking about the possibility of failure it is important to keep it in perspective and consider the likelihood of an actual failure.
First up is cash, we are all likely to hold some cash in our accounts, so whether we have a SIPP or ISA we will likely have some money held in the cash account. The company’s policy on cash held in the account is to only use institutions with a UK banking licence which are covered by the Financial Services Compensation Scheme (FSCS). And the FSCS is backed by government and protects clients’ deposits up to £85,000 in the event that a bank, building society or credit union defaults.
Client money held within the HL Service and the Portfolio Management Service is deposited across a Treasury Committee-approved panel of institutions with UK banking licences, excluding the HL Cash ISA which is held solely with Lloyds Bank plc. The full panel of approved institutions they use and actively hold client money with is Bank of Scotland Plc, Barclays Bank Plc, Goldman Sachs International Bank Plc, HSBC Bank Plc, Investec Bank Plc, Lloyds Bank Plc, Santander UK Plc, Lloyds Bank Corporate Markets and the UK regulated branches of Qatar National Bank SAQ, Emirates NBD PJSC and Bank of Montreal.
The balances are not distributed evenly across the banks as each bank has their own scale and appetite, but they do manage balances on a pooled basis with consideration as to what that means for clients on an individual basis. They did say in correspondence with myself that they are aware of the minimum balance held in cash with HL before a client would be potentially above the FSCS protection limit, but this changes intraday as the balances with each bank change.
🗒 Please note:
The information provided is based on the current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.
All references to taxation are based on my understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances.
This channel is for information and education purposes only. Any information or guidance given does not act as financial advice. Please consult a financial adviser if you are unsure in anyway.
Keep in mind that the value of your investments can go down as well as up, so you could get back less than you invest.
⭐ My aim is to provide education and guidance to help individuals understand pensions, investments and protection.
#hargreaveslansdown #goingbust #fscs
