UK Question - Platform risk - Pillar 3

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buildingthefuture
Posts: 7
Joined: Wed Jul 15, 2020 9:20 am

UK Question - Platform risk - Pillar 3

Post by buildingthefuture »

Afternoon All,
Am i ok to be worried about platform risk at all?
Leaving the trials and tribulations of Stocks aside and concentrating on a slow and steady Index portfolio. I'm now wondering about de-risking the platform risk itself.
I worry that the more i hold in one platform that smaller the 85k cover that is offered looks.

I've been told to go and read the pillar 3 declarations of companies.
But can anyone translate what they are actually saying for me ?
For example http://www.aviva.com/pillar3 . I can't tell if provisions are good , bad or indifferent.

Any help gratefully recieved
Thank you
Valuethinker
Posts: 42408
Joined: Fri May 11, 2007 11:07 am

Re: UK Question - Platform risk - Pillar 3

Post by Valuethinker »

buildingthefuture wrote: Tue Apr 06, 2021 8:16 am Afternoon All,
Am i ok to be worried about platform risk at all?
Leaving the trials and tribulations of Stocks aside and concentrating on a slow and steady Index portfolio. I'm now wondering about de-risking the platform risk itself.
I worry that the more i hold in one platform that smaller the 85k cover that is offered looks.

I've been told to go and read the pillar 3 declarations of companies.
But can anyone translate what they are actually saying for me ?
For example http://www.aviva.com/pillar3 . I can't tell if provisions are good , bad or indifferent.

Any help gratefully recieved
Thank you
You are not covered to £85k on your portfolio cash? Platforms are not bank accounts?

It must be a risk but I can't tell you how big. I use Vanguard and I use one other platform, but that's historic rather than well thought out.
Valuethinker
Posts: 42408
Joined: Fri May 11, 2007 11:07 am

Re: UK Question - Platform risk - Pillar 3

Post by Valuethinker »

buildingthefuture wrote: Tue Apr 06, 2021 8:16 am Afternoon All,
Am i ok to be worried about platform risk at all?
Leaving the trials and tribulations of Stocks aside and concentrating on a slow and steady Index portfolio. I'm now wondering about de-risking the platform risk itself.
I worry that the more i hold in one platform that smaller the 85k cover that is offered looks.

I've been told to go and read the pillar 3 declarations of companies.
But can anyone translate what they are actually saying for me ?
For example http://www.aviva.com/pillar3 . I can't tell if provisions are good , bad or indifferent.

Any help gratefully recieved
Thank you
I quickly skimmed that and did not find much of use to personal investors.

There is a securities industry guarantee scheme.

If you hold all your cash in instruments - Money Market Funds, Short Term bond funds etc, then there should be minimal risk unless there is an outright failure to segregate client assets properly. If the platform goes bust, your assets just get transferred to another manager, eventually.
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Forester
Posts: 1946
Joined: Sat Jan 19, 2019 2:50 pm
Location: UK

Re: UK Question - Platform risk - Pillar 3

Post by Forester »

buildingthefuture wrote: Tue Apr 06, 2021 8:16 am Afternoon All,
Am i ok to be worried about platform risk at all?
Leaving the trials and tribulations of Stocks aside and concentrating on a slow and steady Index portfolio. I'm now wondering about de-risking the platform risk itself.
I worry that the more i hold in one platform that smaller the 85k cover that is offered looks.

I've been told to go and read the pillar 3 declarations of companies.
But can anyone translate what they are actually saying for me ?
For example http://www.aviva.com/pillar3 . I can't tell if provisions are good , bad or indifferent.

Any help gratefully recieved
Thank you
I split my ISA across two platforms, more for reasons of access in case one is down for a technical reason. The cost imposition of a second flat fee ISA platform is minimal.
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steve321
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Location: Southampton, UK

Re: UK Question - Platform risk - Pillar 3

Post by steve321 »

I don't know the answer to your OP but I think it's a great point.
I have some investments at a relatively unknown broker, and over time they have grown to a pretty large sum, over 1M£. I sometimes think I should move them to another broker but I haven't yet. I get good deals when they execute trades for me - and also I can't be bothered to do the paperwork.
What I do is I regularly check the share price of the brokerage company, which has been going up steadily. If it were to plummet I'd know there is a problem (though it might perhaps be too late by then). Probably will move those investments sooner or later.
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Valuethinker
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Re: UK Question - Platform risk - Pillar 3

Post by Valuethinker »

steve321 wrote: Fri Apr 09, 2021 11:02 am I don't know the answer to your OP but I think it's a great point.
I have some investments at a relatively unknown broker, and over time they have grown to a pretty large sum, over 1M£. I sometimes think I should move them to another broker but I haven't yet. I get good deals when they execute trades for me - and also I can't be bothered to do the paperwork.
What I do is I regularly check the share price of the brokerage company, which has been going up steadily. If it were to plummet I'd know there is a problem (though it might perhaps be too late by then). Probably will move those investments sooner or later.
I would be really worried about having GBP £1m at a broker I did not know a lot about.

If there is fraud, say, then the collapse will come in the share price far too late.

I would move half of it to a firm I at least had some idea about. (Not Hargreaves Landsdown tbh - their fees seem really high).
Oceanlon
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Re: UK Question - Platform risk - Pillar 3

Post by Oceanlon »

I assume by platform you mean broker or bank. I do split my investments as much as possible below £ 85000 per platform, except my ISA and pension. It's costly and creates complexity but it reduces risk.

"The Financial Services Compensation Scheme (FSCS) protects up to £85,000 per person, per financial institution".

The UK is not Greece or Cyprus, core tier ones have improved significantly, and investment bank retail activities have been ring-fenced from high risk investment banking. However, I will always remember that most of UK banks have been nationalised after the 2008 crisis. Just my take on it.
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Valuethinker
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Joined: Fri May 11, 2007 11:07 am

Re: UK Question - Platform risk - Pillar 3

Post by Valuethinker »

Oceanlon wrote: Sat Apr 10, 2021 10:56 am I assume by platform you mean broker or bank. I do split my investments as much as possible below £ 85000 per platform, except my ISA and pension. It's costly and creates complexity but it reduces risk.

"The Financial Services Compensation Scheme (FSCS) protects up to £85,000 per person, per financial institution".

The UK is not Greece or Cyprus, core tier ones have improved significantly, and investment bank retail activities have been ring-fenced from high risk investment banking. However, I will always remember that most of UK banks have been nationalised after the 2008 crisis. Just my take on it.
https://www.investorschronicle.co.uk/ma ... 20investor.

Worth a careful read. Yes the £85k protection applies (I didn't realise that) but there are other things that can go wrong. Certainly the client is in for a few months where their account sits, suspended.

The point is that your assets should be segregated, so as long as you do not hold too much cash in the account, if the platform provider goes broke, your assets are simply moved over to another provider.

https://moneyweek.com/488411/paying-to- ... hares-back

Note that in this case, clients were faced with £100m of insolvency charges to PWC. I believe (the first link) that this cost was eventually capped at £10k per client.

The short answer is you don't want your broker to go bust.
Valuethinker
Posts: 42408
Joined: Fri May 11, 2007 11:07 am

Re: UK Question - Platform risk - Pillar 3

Post by Valuethinker »

Oceanlon wrote: Sat Apr 10, 2021 10:56 am I assume by platform you mean broker or bank. I do split my investments as much as possible below £ 85000 per platform, except my ISA and pension. It's costly and creates complexity but it reduces risk.

"The Financial Services Compensation Scheme (FSCS) protects up to £85,000 per person, per financial institution".

The UK is not Greece or Cyprus, core tier ones have improved significantly, and investment bank retail activities have been ring-fenced from high risk investment banking. However, I will always remember that most of UK banks have been nationalised after the 2008 crisis. Just my take on it.
The nationalisation of RBS (80% owned by the government) and HBOS (44% of combined entity with Lloyds) as well as Northern Rock (100%) and some other lenders, actually saved the depositors. So, on balance, a good thing.

I agree though that it makes one question the probity of UK banking.
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