Three stockbrokers have said they are willing to take on investment club accounts, following Interactive Investor’s decision to stop hosting them from the end of October.
Investment clubs are groups of investors who meet regularly and make collective investment decisions for their combined portfolio. Interactive Investor was the last major DIY investor platform offering investment club accounts.
However, stockbrokers GHC Capital Markets, Pilling & Co and Capital Financial Markets have said they would take on the accounts following Interactive’s decision. However, stockbrokers do not always offer the same breadth of functionalities as platforms, particularly online, and can be more expensive. These brokers are also smaller than major DIY platforms.
Read more on investment clubs
GHC Capital Markets said it would charge investment clubs 0.25 per cent a year for custody (minimum £4 a month) and 1 per cent of the transaction for trading, with a minimum of £4 and a maximum of £30.
Pilling & Co’s fees, according to its website, were 0.25 per cent for custody and 1.65 per cent for trading (first £10,000).
By comparison, Interactive Investor charged £11.99 a month for its Investor plan, which included one free trade per month. Its standard trading fee was £3.99 per trade.
Shareholder association ShareSoc has been trying to help investment clubs find a solution, but it has proved tricky. The association wrote on its website: “We have been in contact with a major platform, encouraging them to provide an offering. Regrettably, they have declined to do so, due to the requirement for all club members under each account to be vetted annually against anti-money-laundering (AML) and Politically Exposed Persons (PEPs) criteria.
“Whilst automated mechanisms are in place for individual client accounts, the process would have to be undertaken manually for club members, causing excessive costs and complications for the platform,” it added.
Among DIY platforms, only Interactive Brokers said it was able to take on new club accounts. But on a ShareSoc forum, some club members reported struggles with actually opening an account. The application seemingly required a “legal entity identifier” number, which some investment clubs may need to apply for.
Interactive Brokers originally said it hosted club accounts where a charter or constitution is provided along with a tax ID. This is in the form of an unincorporated account. The platform has been contacted for further comment.
Members told Investors’ Chronicle earlier this month that they would deeply miss the social element of their investment club if they had to close it down.
GHC Capital Markets said it also hoped to offer optional educational sessions for clubs. GHC’s managing director Rachel Hardy said: “We know that investment clubs are about much more than money. They give people confidence, help them learn how markets work, and bring friends and communities together. Interactive Investor’s decision has left a big gap, and we don’t want to see clubs simply disappear as a result.”
