Platforms – a valuable shield against fraud

Investment platforms have been around in the UK for nearly 20 years, and after a slow start, today are used by over 90% of Financial Advisers as a simpler and more efficient way to manage clients’ portfolios. Today there are more than 30 platforms available in the UK, despite some notable big players exiting the market, AXA and American Express among them.

Platforms charge clients a fee for acting as custodians; typically somewhere between 0.25% and 0.4% per annum, but the services available differ widely, as does the level of customer experience, and long-term financial sustainability.

The boiler room fraud

A newsletter last week from a Venture Capital Trust (VCT) manager, warned clients to be wary of unsolicited emails and phone calls from “companies” offering to buy their VCT shares. Often the offer sounds like a good deal but the scammers require an upfront fee or bond that will be refunded if the sale does not go through. This sounds all too familiar – but how do the scammers know someone owns these shares in the first place?

VCTs are shares, and the list of shareholders is a public record, meaning that it is easy to identify shareholders and target them for a scam. This is true of all listed companies – if you hold shares directly, your details are in the public domain. Your postman will also be delivering an extraordinary amount of additional post.

Your shield against fraud

Some platforms are able to hold shares in clients’ accounts, which has a number of advantages;

Shares are held in the custodian’s name – shielding your personal details from scammers

You receive one consolidated tax report each year instead of dividend vouchers from numerous companies

It dramatically reduced the amount of correspondence – platforms advise of any corporate actions and, if you’re interested, company reports are available online.

Conclusion

Platforms are not right for everyone, and not all platforms are able to hold shares, but for many people they provide a convenient way of holding their investments, and can be a valuable protection against the prying eyes of scammers. Speak to us to review whether a platform is the right solution for you, or if you want to hold existing shareholdings on your platform.

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