Thursday last, I was somewhat shocked to receive the following missive from one of my brokers, TD Direct (now owned by Interactive Investor):
The key paragraph is this:
To ensure we maintain our ability to appropriately diversify client money across highly rated, strongly capitalised banks, our regulator, the Financial Conduct Authority (FCA) has given us, and other similar firms, permission to deposit some of our client monies in fixed term deposits for up to 95 days. This is a change to the current maximum deposit term of 30 days.
ISTM that there is zero benefit for clients from this change and, indeed, TD goes on to say:
However, in the extremely unlikely event of default by us there may be a delay in distributing the funds
I.E. client risk is increased (albeit in unlikely circumstances). I am grateful to my ShareSoc colleague, Cliff Weight, for making the following estimate of the financial gains to TD from this change:
Suppose I have on average £10k cash in my account and they can get 2.01% on 90 day money and 1.51% on 30 day money (I googled these rates for $1m amounts). The difference is 0.5% p.a. =£50 per year.
They should split the benefit 50/50 with investors in my view.
If they have 100,000 customers, this little ploy will net them £5million extra profits a year.
So extra risk for TD’s clients, with no benefit, and a nice financial reward for TD. I find this completely unacceptable and will be writing in the strongest possible terms to TD and to the FCA, on my own behalf and on behalf of ShareSoc’s members.
Please let us have your views by commenting on this post. I will be happy to pass those views on.