Safety of Funds

Is my money safe?

There are two main types of risks that an investor must consider.

Firstly, there is market risk which is something that no investor can avoid and that’s the risk that the value of their shares may fall due to market conditions. This is something that nobody can avoid although of course it can be managed.

The second type of risk is credit (or default) risk but this can be managed or in the case of London Stone completely eliminated. And here’s how:

The easiest thing you can do to protect your portfolio is to use a firm which you know is not involved itself in speculating in the markets. If the firm does speculate then even if your money is in a ‘segregated’ account this still may not be enough. This is because most professional firms trade using leveraged products such as derivatives or currencies. In other words they are exposing their business to a greater amount of risk than simply what they have in their own accounts.

This means that if their trades go horribly wrong (which invariably does happen from time to time) and depending on how bad they get, then your funds could potentially be at risk. In recent years there have been a high profile number of cases of companies going to the wall including ING Barings, BCCI, Lehman Brothers, Northern Rock and more recently MF Global.

And of course if it hadn’t been for the timely intervention of the UK Government during the 2007/8 crash we could have easily added RBS, Barclays and Lloyds to that list and we’re sure a few more. This is why more and more investors are now understanding that to be absolutely sure that your investment are safe that even ‘segregated’ accounts are not enough. And so this is where we come in.

Why your money at London Stone is 100% safe

At London Stone Securities your money is completely safe because:

1. We don’t hold your money or assets. In other words you will never send a single payment or share certificate to us and if you look at our FCA permissions you will see that we have specifically chosen ‘NOT to hold client funds’ for this very reason.

What this means is that in the highly unlikely event that anything was to happen to the firm, your funds would be completely safe.

2. So instead we use an FCA regulated and long-established custodian to hold all of your equities/funds to give you this extra added layer of protection. Jarvis Investment Management is listed on the stock exchange and is our long standing custodian that was founded in 1984 and based in Kent. Unlike investment banks, stockbrokers and hedge funds, it is simply a holding institution. That’s to say that the money goes to Jarvis and just sits – it’s not traded or used to speculate with.

Rogue Traders

It only takes one rogue trader (Nick Leeson) or one ‘fat finger’ trade (UBS) and your portfolio could be at risk. Or it could even be a shift in Government policy. When the Swiss announced that it was unpegging itself from the euro, several large fx houses went bust including Alpari and other firms including HSBC and IG Index suffered huge losses on client accounts.

At London Stone we believe that the only risk that an investor should have to assume is market risk. That’s why we offer one of the safest and most robust settlement models anywhere in the UK today.

If you do your research or perhaps even speak to some of our clients and you will see why no longer is it the case that “Biggest is best”. In fact biggest hasn’t been best for quite some time.

Financial Services Compensation Scheme (FSCS)

The FSCS does of course also offer Government back protection to investors, but only for portfolios up to the value of £50,000. In other words if your portfolio is more than £50,000, then you are still open to risk.

However there are ways in which you can raise this minimum level of protection. Come and talk to one of our advisors today to see how we can help you.

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