Dear Partner Firm,
As you may be aware, the FCA issued a “Dear CEO” letter on 12 August 2020 regarding increased client money balances during the coronavirus pandemic. This is aimed at all firms providing non-discretionary investment services, with the exception of client money balances held within a tax-efficient wrapper (e.g. a SIPP, Offshore Bond, or an ISA) or under a collateral arrangement for margined transactions.
The FCA acknowledges that in order to mitigate any potential volatility during the coronavirus pandemic, clients may have rebalanced their portfolios. One direct result of this is the number of firms reporting an increase in their client money balances.
What does this mean for you?
The FCA has asked firms to consider whether it is appropriate to continue to hold onto client money balances which are unlikely to be reinvested, or whether it might instead be in the client’s best interests to return these funds directly to the client so they may place these balances directly with their own current or savings account providers.
Firms should seek to communicate with clients who have increased client money balances to ascertain whether these funds should be returned or whether it is appropriate to continue to hold on to them to facilitate further investment in the future. Of course, one consideration may be whether the client is able to earn interest on these balances and we can reassure you that while interest rates are low, they are still being calculated on all cash balances held within your client’s accounts on the platform.
Why are we writing to you?
Whilst we provide investment services for our clients in the form of the platform technology and perform the function of safeguarding and administration of client money and assets, we do not hold the necessary permissions to assess suitability - nor would it be appropriate for us to do so.
The ultimate relationship with the underlying investor sits with you - their adviser. You know best the needs and expectations of your clients, and remain responsible for providing all the advice and financial planning services. You will be best placed to assess whether holding onto cash for the client might be most beneficial, or whether it is in the best interests to return excess cash to the client’s nominated bank account.
In line with our Terms and Conditions, we do always require the minimum “buying power” amount (calculated via algorithm to allow for payment of future fees and, where relevant, regular withdrawals) to be held on the account and we do not believe this needs review as a result of the FCA’s letter. It is really only significant cash balances on accounts, not already earmarked for investment, that we believe the FCA is looking to firms to consider.
Please ensure that this information is disseminated to the relevant Advisers and teams within your organisation so they may action accordingly.
If you have any questions relating to any of the information outlined within this letter then please do not hesitate to contact us via Freshdesk.
Kind regards,
As you may be aware, the FCA issued a “Dear CEO” letter on 12 August 2020 regarding increased client money balances during the coronavirus pandemic. This is aimed at all firms providing non-discretionary investment services, with the exception of client money balances held within a tax-efficient wrapper (e.g. a SIPP, Offshore Bond, or an ISA) or under a collateral arrangement for margined transactions.
The FCA acknowledges that in order to mitigate any potential volatility during the coronavirus pandemic, clients may have rebalanced their portfolios. One direct result of this is the number of firms reporting an increase in their client money balances.
What does this mean for you?
The FCA has asked firms to consider whether it is appropriate to continue to hold onto client money balances which are unlikely to be reinvested, or whether it might instead be in the client’s best interests to return these funds directly to the client so they may place these balances directly with their own current or savings account providers.
Firms should seek to communicate with clients who have increased client money balances to ascertain whether these funds should be returned or whether it is appropriate to continue to hold on to them to facilitate further investment in the future. Of course, one consideration may be whether the client is able to earn interest on these balances and we can reassure you that while interest rates are low, they are still being calculated on all cash balances held within your client’s accounts on the platform.
Why are we writing to you?
Whilst we provide investment services for our clients in the form of the platform technology and perform the function of safeguarding and administration of client money and assets, we do not hold the necessary permissions to assess suitability - nor would it be appropriate for us to do so.
The ultimate relationship with the underlying investor sits with you - their adviser. You know best the needs and expectations of your clients, and remain responsible for providing all the advice and financial planning services. You will be best placed to assess whether holding onto cash for the client might be most beneficial, or whether it is in the best interests to return excess cash to the client’s nominated bank account.
In line with our Terms and Conditions, we do always require the minimum “buying power” amount (calculated via algorithm to allow for payment of future fees and, where relevant, regular withdrawals) to be held on the account and we do not believe this needs review as a result of the FCA’s letter. It is really only significant cash balances on accounts, not already earmarked for investment, that we believe the FCA is looking to firms to consider.
Please ensure that this information is disseminated to the relevant Advisers and teams within your organisation so they may action accordingly.
If you have any questions relating to any of the information outlined within this letter then please do not hesitate to contact us via Freshdesk.
Kind regards,
Douglas Boyce
Managing Director | Hubwise Securities Ltd
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