FSCS: Keeping your investments safe

The Financial Services Compensation Scheme (FSCS) protects up to £50,000 of your cash if your stockbroker or fund platform were to go bust and your money went missing.

"Never ask a question to which you don't know the answer," is supposedly a standard rule among successful trial lawyers (though I confess I first heard it from Rumpole of the Bailey, who, as well as having a less-than-glamorous legal career other than the unfulfilled early promise of the Penge Bungalow Murders was a fictional character and may have been making it up entirely). It's not very sound advice for either journalists or investors, but it came to mind when we decided to survey our readers last month.

After all, we figure that we're writing for a pretty sensible yet moderately adventurous crowd. So it would have been awkward to discover that your collective retirement plans were based around investing 90% of your pension into Bolivian teak plantations and sticking the balance on the 3:30 at Doncaster. Fortunately, that didn't happen. The results suggest that you are indeed a shrewd bunch who are fond of Isas, avoid excessive trading and champion the merits of investment trusts. No major surprises there (we've dotted many of these findings throughout the supplement in case you want to know more about your fellow readers' investing habits).

However, one answer came as a bit of a surprise. We asked about the Financial Services Compensation Scheme (FSCS) and the amount of compensation it would pay if a stockbroker or fund platform went bust and your investments or cash were missing (this shouldn't happen your assets are supposed to be ring-fenced from the firm's assets but sometimes things go awry). The answer is £50,000 about 15% of you said this. The largest individual group said £75,000 not right, but understandable since this is the level that applies to deposits at a bank if your bank goes bust (and it's good to see that most people are aware this has been cut from £85,000 earlier this year). But around half of all results were something entirely different, ranging from "I've never heard of the FSCS" to "Unlimited".

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So if you don't already know about how the FSCS applies to brokerage accounts, what it covers and what it doesn't, we'd recommend that you check the details at FSCS.org.uk. The FSCS is unusually comprehensive by international standards and it means that British investors shouldn't feel compelled to stick with well-known names when picking an Isa it offers you a bit of reassurance if you want to shop around for better rates or a more specialist service. Given that our survey shows that safety issues such as account security and financial stability of your broker are rightly among the top considerations when choosing an Isa, understanding what protects your account if the worst happens makes a lot of sense.

Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.