Brokers And Service Providers | £1 Million+ Portfolios - Thoughts?

29th Jan '21 by Philip999

46 comments 2694 reads

Evening all,

This struck me as an important topic which I wanted to raise, pros and cons of larger portfolios for a retail investor?! Particularly full time investors who manage their own money.

Do any Stockopedia readers have any management tips for larger portfolios, I'm thinking if theres a run on the banks and protection above and beyond the standard £85k. I'm not sure what constitutes high net worth these days but would you get one million plus portfolios on Hargreaves Lansdown, surely it must be a logistical mare to split monies over several accounts. Are you better going to specialist brokers or banks with higher insurance cover?

The obvious springs to mind, maxing out your ISA, spread-betting vs traditional brokers and any associated CGT.

Also, the psychology of investing. Has anyone built up there portfolio to such levels, what's your experience? Did it become too much of a burden, better to allocate it to a wealth management firm and not have to think about the day to day swings?

Any experience from fellow Stockopedia investors would be much appreciated.

Best wishes,

Phil

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intuitive6191

1st Feb '21

Having a personal CREST account is useful for some people to mitigate the risk of holding stocks. Might be worth investigating.

Berksbee

Yes - that's my understanding - shares* are safe - cash theoretically not beyond £85k.

* in terms of the holder loosing them. The caveat being if its an international Co then it may be vulnerable to Governments deciding to "nationalise" or "fine" them.

doug2500

I'd love to have a CREST account again, I think they represent the best of both worlds, quick online dealing with true ownership and rights. But where can you find a reasonably priced one? Much though it's my preferred account I decided it wasn't worth £500 / year to me.

Epitychia

Great post.

There is a lot to be said for investing once a year and then not looking until next year. But so difficult to do. Try to move from daily to every other day, then to every week. I think it is possible to eventually move to monthly. Only Buffet can manage annually.

Hi Doug2500

Yes - £500 is about right. I thought it might be interesting for somone with £1million to cover. In this case its about 0.05% of capital invested.

For this sum it could be considered a useful insurance for a small cost.

transport_tycoon

I am some way off £1mn but even so, I would like not to see the amount in my SIPP because seeing the fluctuation and the numbers makes me make bad decisions.

I look back and see the number of companies I sold 5 years ago and have gone up 4x since. Time in market vs timing...

cmpeckham

4th Feb '21

Some things I dont see mentioned:

- I use (cash / short dated bond) funds / ETFs for my "base" level of cash in a given portfolio, rather than actual cash. There are pros and cons.

- I divide everthing up in to different portfolios, for which I set different rules, each of which is with a different provider. This enforces discipline on me so that I dont do something stupid and gamble it all. I have some very specific (small) portfolios where I allow myself to go high risk and that allows me to scratch the old itch. If someone else looked at the contents of these different portfolios, they would never believe they belong to the same person. Going with mutiple providers involves more expense than is strictly needed but one advantage of a larger sums is that many of the costs can become minimal in relation to the total (and this approach also provides some safety).

- When I was younger and had less money to invest, I took more risks than I do now, so now I expect lower returns (lower losses in the bad years). This has a big impact on the type of investment and investment vehicle I hold. Even though I have more to lose, managing the money is a lot less stressful now. It's partly about being comfortable with a certain level of wealth and partly about being comfortable with what I'm doing. I doubt that I'm the wealthiest person here but I know what level of wealth I want and I know what I want to do with it. I would recommend to anyone that they have really thought through their objectives, their strategy and their expectations.

KevinS1

6th Feb '21

Hi Philip. A good couple of questions. I'll leave the debate about using different investment accounts to others - I stick 99% of the time with HL and feel pretty secure with them, but you can never say never.

Over the years I have moved between a variety of styles and management techniques. When I have been 90% invested in UT's (and similar) and taken very little notice of the results they have been OKish and to be fair I have been happy with the growth, but its only more recently that I have realised how taking a more hands-on approach has so much more potential (and risk).

However, investing directly through individual company shares does mean that you need to be much more heavily invested in time and effort if you want to get the rewards although you could simply plug your money into a bunch of companies and turn your back and see how they do, but I wouldn't advise it.

But, as someone highlights elsewhere it can be emotional - seeing big value drops (and ups), but this depends upon how much time you spend on your portfolio. I am lucky in that I spend a fair amount of time which allows me to research companies, make adjustments and generally keep a good handle on what's happening. I find the community on Stocko and some of the boards immensely helpful in providing ideas and general commentary, but you need to have a very open mind as there are always conflicting views - DYOR.

I do have a small PF with a professional outfit, and have tracked their returns over the last 8 or so years vs my own. They do not come out well and I would probably describe them as lazy and expensive..............but I am sure there are other options out there should you want to go down this route. I am sure they would say that they have been taking less risk than me and to date my risks have paid off (I don't think I take that much risk).

I haven't moved this PF as its not particularly big and it does provide me with some diversity as I tend to avoid the sectors they are in deliberately (and with hindsight obviously the best decision). They haven't lost me money so its not that drastic.

Overall, I suggest its a balance between the potential risks and rewards, your own level of experience and tolerance for the highs & lows and how much time and money you have available to you - there will be many different views and in the end it must be up to you to decide what you are comfortable with.

Martin Euebank-Smith

7th Feb '21

Really good points in your question that I have had to deal with.

On larger portfolios I have divided my savings/earnings between three different platforms. Noting the cheapest platforms are not always the best and some of them stop or delay trades above £100K (HL and Halifax share dealing). You must make sure the platforms are not connected to the same institution.

I have been married for over 15 years, so me and my wife have joint accounts, which has two advantages, meaning £85k x 2 is protected in each institution. Also capital gains from sells on joint account you can use both of your allowance totalling £26,600 (FY2021). Plus you can split the dividend tax, especially if your wife is a 20% tax payer.

Also you can use profits to invest in a SIPP depending on age and how much you earn. If you withdrawal funds from a normal account you would pay capital gains on the profits, although if you re-invest into a SIPP you get 20% tax when put the funds into the account and then you can claim another 20% back if you are a 40% tax payer. If you are over 55 you can gain access to 25% of the SIPP as a tax free lump sum? And claim the rest back gradually as earnings.

Under a joint share account, yearly you can also transfer £20k of shares directly each year into an ISA for you or your partner directly which would be free from capital gains and dividends tax.

I also have diversified some of my gains into property, although lettings are not burden free.

On the psychology, as I have been investing since I was 15, having starting on 100 of pounds in Rolls Royce shares. My losses and gains are frightening. When I broke the £1M in investments, I did not stop my job, significantly change my lifestyle or work ethic. I do not check stocks daily and I try to isolate myself from daily noise. My strategy is now for about 5-6 shares long term, that I can keep and forget about. Only twice have I cashed in my portfolio: 2009 May Banking crisis & Feb 2020 Covid.

I have tried wealth management firms (not to recommend/comment: notably Fisher Wealth and Charterhouse Consulting Wealth Management Limited). You may wish to google “Charterhouse Consulting Wealth Management Limited - Trowbridge” and I prefer self management. All will take a % of your portfolio win or loose.

To me the numbers are not real, I plan two more years in my job and become a full time investor or developer .. we will see.

GrahamF

“ Under a joint share account, yearly you can also transfer £20k of shares directly each year into an ISA for you or your partner directly which would be free from capital gains and dividends tax”

That doesn’t sound quite right. Transferring in from a trading account you would have to do a “bed and isa” I believe. Any gain on the shares at the time of that transaction would be subject to CGT.

https://www.fool.co.uk/mywallethero/share-dealing/learn/can-shares-be-transferred-into-an-isa/

There are some exceptions in the case of employee share schemes.

But perhaps I have misunderstood what you wrote.

8th Feb '21

Ok GrahamF you are correct thanks

syrio

12th Feb '21

Banks - I try to keep under the £85k limit per bank.

Brokers - I stick to the larger brokers and have accounts with both HL and II so I'm not totally dependent on one broker.

ETFs / Funds - I use the larger providers - Vanguard, iShares. I try to avoid having all my funds with one provider, although I do favour Vanguard.

Psychology - I favour having most of my money in passive global tracker funds. Only about 5% or so in a portfolio of individual shares. I may have larger short term positions on an individual share. I find this much more relaxing during periods of market turmoil compared to when I had all my money in individual shares.

Philip999

Hi Martin, I'd be intrigued how you've positioned such a concentrated portfolio? Is it 100% equity and I presume growth based? Many thanks

I've updated feedback from everyone for ease of reference below.

* Holding shares direct through your own Crest account does seem like a brilliant option, at only £500 annually this would remove the need to trade via a broker and eliminate any risk of losses should a run on the banks occur or a broker was to go bust.

* Investing via a Sipp, you can use profits to invest in a SIPP depending on age and how much you earn. If you withdrawal funds from a normal account you would pay capital gains on the profits, although if you re-invest into a SIPP you get 20% tax when put the funds into the account and then you can claim another 20% back if you are a 40% tax payer. If you are over 55 you can gain access to 25% of the SIPP as a tax free lump sum? And claim the rest back gradually as earnings.

* Investing directly via funds or holding actual certification for individual shares (preferably longer term holdings). I guess holding funds directly still really comes with the same issue, take a look at the Neil Woodford fund.

* Holding via at least two broker accounts (maybe more and note some brokers operate under the same licence so only 85k cover) just incase one was to topple and funds are tied up for an indefinite period, this would certainly spread the risk. Added benefit of stock availability between different platforms and multiple currencies if required. Flat fee brokers on an execution only basis help keep costs down although you could tie in an advisory service to help keep a check on portfolio construction and any red flags.

* Outsourcing to an investment manager really comes down to the management firm I guess, you get the good, the bad and the ugly. Perhaps a split would help, in my view I like to be challenged regarding my investment decisions. My wife barely registers if I discuss any investments! I find funds and trusts an easy way to invest, Jonathan Davis from Money Makers produces a brilliant IT handbook once a year which is really helpful and I've recently signed up to his premium blog.

* VCT, EIS investments are worth a look, I know Amati have some VCT funds that have a reasonable track record.

It would seem the phycological effect of managing a high value portfolio clearly does vary, but a UK_Investor_8888 mindset does resinate with most:

The effect is obviously ramped up the further if you have a higher risk tolerance and the opposite should you play it safer as a number of people have commented. I've personally taken steps to protect my portfolio downside after such a good run last year, I just wish I had included bitcoin as portfolio protection!

More comments certainly welcome, thanks all.

13th Feb '21

Hello Philip,

Yes you are correct it is equity based.

My opinion only.

At the moment the position is 50% with commodities, as Copper, Platinum Rio tinto.

10% -15% in US technology, although I think that is a bubble that will burst long term, after US stop providing stimulus and people loose interest in shares as Tesla.

Rest in UK housing stocks waiting for recovery.

I have similar issues with my wife, when I have to ask her to phone up the brokers, when the security question is what shares do you own ? As she's not so interested about investments either.

Regards.. & good luck

Martin

Gdawgeedawg

Is it possible to have a CREST ISA? I'd love to have a CREST account but can't give up all of the potential ISA savings (saving on dividends tax etc)

No, it the short answer.

No, ISAs have to be nominees is the long answer.

Don't know why but personally I think there's room to improve the UKs system.

shauniekent

16th Feb '21

You may not realise that if you have self custody of your own Bitcoin there is no counterparty risk and no risk of debasement/bail in in any way. You do have the risk of securing this Bitcoin properly which requires a smallish amount of time and focus. Bitcoin has outperformed central bank balance sheets for the last ten years whereas gold hasnt really, stock markets not by much - see threadby Raoul Pal here... https://twitter.com/RaoulGMI/status/1361509921624317952?s=20

Alphaflight

Bitcoin has been a brilliant investment there is no question of that.

"...there is no counterparty risk"

I'm afraid Bitcoin has plenty of counterparty risk. The Bitcoin network / miners are required for BTC to operate. The miners are required to verify the blockchain updates. Last time I checked, this network annually consumed the equivalent electricity used the Philippines (100 million people).

Most people that own Bitcoin and other cryptos just don't understand the underlying mathematics involved.

Thanks to Bitcoin's wonderful public ledger system it is the equivalent of sellotaping all of your bank statements to your forehead for all to see. The Pirate Coins such as Pirate Chain and Monero are at least anonymous and so look a little bit like fiat cash.

As for Gold, you can beat it up with a hammer, bury it for a couple of decades and it will still preserve all of its purchasing power. It has no counterparty risk, nor does silver or any of the other precious metals .

*sigh* more Bitcoin nonsense spouted amongst a handful of truth which would take me much longer to refute than it took you to write.

Keep dismissing Bitcoin to your detriment. But thats what makes a market.

£1 Million+ Portfolios - Thoughts?

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Philip999

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