[PaulB]

I'm guessing that many people here have investments/pensions etc held by the likes of Hargreaves Lansdown or that type of organisation. Whilst it's accepted that equities can go down as well as up, are there any protections from the fund supermarket its self going bust.? I'm assuming that most or even all keep *our* money and investments ring fenced from their own assets. Is that a safe assumption or do some do this and others don't?

What's confused me is that there is an FSCS scheme but it's only £50K *as opposed to £75k (shortly to rise to £85k?) for banks.

[KingJames]

Once your money is in funds you are at risk from the fund not the fund supermarket. The fund supermarket e.g. Hargreaves is a risk while you hold cash with them and they have a special page explaining special protections for that as far as I know. Your cash should be in client accounts in Hargreaves name anyway so they and their creditors can't get at it so the real risk is the underlying bank goes bust. The account isn't in your name rather a nominee type account which is why they have different levels. This is the way I see and understand it, so pinch of salt but I think this is generally correct.

[PaulB]

Thanks for that..... I've now found this on t'Internet which is essentially the question that I'm asking (although better worded and with different numbers!) It was the FSCS £50k compensation that confused me.

This is the Q as posed.

I have two Isas, all consisting of well-known funds, one of around £110,000 with Barclays Stockbrokers and the other of around £190,000 with Bestinvest.

My concern is whether my investments would be safe in the event of these companies going bust. Would I be limited in cover to only £50,000 in each case? In which case, should I be thinking of redistributing my total Isa fund savings (around £300,000) over six different “fund supermarkets” for safety?

The answer is that basically investments are ring fenced so safe from creditors if the fund supermarket goes bust. I understand that there are some exceptions for some providers and some investments (eg HL excludes a particular cash ISA).

That said, there is some debate in the comments below the article.

http://www.telegraph.co.uk/finance/pers ... -bust.html

[spaughty]

I understand how separation of client funds protects the investor, and how the client is protected against the failure of the bank actually holding the client funds, but I do occasionally wonder what would happen if the fund supermarket's systems were hacked, and large sums of client money were transferred to some murky offshore jurisdiction?

[KingJames]

I think the lot I use require a new designated bank account to be ownership checked against the records they hold for me. So if someone hacked my account they could do buy and sell orders assuming they get all the various passwords but transferring money to themselves would be quite difficult. Suspect it would need deep hacking processes and possible an insider. All doable for the organised crime lot as Tesco bank appears to have found out. Re protections, I'm really not sure. Assume business insurance would cover some of the liability plus risk processes in place to spot anomalies such as over n changes of bank accounts or payment requests in a day.

[spaughty]

Actually, I didn't mean your account with them getting hacked, rather their payments system.
So the separately-held client funds disappear, fund supermarket owes money it can no longer access...
I know this would require a very serious hack, but I just wonder what the protection would be in that case.

[kanga]

..
I know this would require a very serious hack, ...

I'm tempted to assume that chance of serious money would attract serious miscreant effort ..

[spaughty]

I'm tempted to assume that the Central Banks of Bangladesh and Russia would agree with you
This Fortune article has some details.