Investment club broker

[Mark Bentley]

Hi,

I had a productive conversation with AJ Bell this morning.

It appears that the principal reason that platforms are struggling to offer investment club accounts is a requirement to conduct annual anti-money laundering (AML) and politically exposed persons (PEPs) checks on club members. Whilst platforms have streamlined and automated this process for individual accounts, it currently has to be done manually for each of the members of an investment club.

We discussed a way of streamlining this process by requiring all club members to also open individual accounts with AJ Bell – the checks on each member could then be done using the automated processes AJ Bell already has in place.

Another query that AJ Bell raised is that they have to report transactions to the stock exchange and to do that for a club, each club would need to have an LEI. Do clubs currently have LEIs?

To provide a service for investment clubs, AJ Bell would have to launch a new product, requiring significant investment on their part. Whilst I emphasised the demand for such a product; other benefits accruing to AJ Bell; and we discussed the possibility of bulk transferring ii’s investment club accounts to AJ Bell, my impression is that it was somewhat doubtful whether AJ Bell will be willing to launch this new product.

However, AJ Bell suggested that Interactive Brokers (IBKR) may offer a service for investment clubs. I have been in touch with IBKR and their agent wasn’t entirely sure whether they offer such accounts. The agent said that the mechanism for opening such an account would be to request an “institutional” account and to send an accompanying message to say that the account was for an investment club. So, if anyone is willing to try this, we can find out whether IBKR will indeed offer a service.

I hope that this proves helpful and will stay on the case.

Best,

Mark

[Richard Jones]

Hi Mark,

Thank you for your feedback and for talking to AJ Bell this morning.
We don’t have an LEI. Is it possible that Interactive Investor would have done that on our behalf, having attained all the information that they would have needed from the club members?
We can try Interactive Brokers, as you suggest, and let you know how we get on.

Thanks again,

Rich

[John Calvert]

Morning Mark,

Thank you for your efforts. Our club doesn’t have an LEI, but you have set me thinking.

We created a trust some years ago and transferred cash from our other investments into it, then opened an account in the trust’s name with a stockbroker ( iDealing in our case). We did have to obtain an LEI, but the account worked exactly the same as a private one.

I’m just wondering if we could convert the Investment Club into a Discretionary Trust, for example, or a Limited Company, and open either a trust account or a company account.

Any thoughts, anyone?

John

PS When I tried Interactive Brokers I got a NO for investment club accounts, but I could try again, or maybe Rich is already on it.

[Mark Clenshaw]

Good Morning Mark et al

Firstly thanks Mark for your effort.

My club does not have an LEI nor do I recall ever being asked for one.

I did try InteractiveBrokers over the phone a few days ago and got a negative response

Re the idea of setting up either a trust or limited company, these would be separate legal entities. I just wonder how HMRC would like that; presumably that would give the opportunity to hold trading profits in the new entity and only declare distributions/dividends to members at possibly some later date. I defer to anyone’s alternate view!

Best

Mark

[Richard Jones]

In reply to reply #31941

I have written to Maria Dieguez, (mdieguez@interactivebrokers.com), a sales representative for Institutional Sales and will let you know if I receive a reply.
I have also found two other contacts within the Institutional Sales Contacts, in case anyone else wants to try:-

Joyce Blok (jblok@interactivebrokers.com) Sales Representative
Gerald Perez (gperez@interactivebrokers.com) Managing Director, Sales

Institutional Sales Contacts

Regards,

Rich

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[Mark Bentley]

Thanks Rich,

Will be most interesting to see what response you receive.

Best,

Mark

[Richard Jones]

Maria has replied as follows:-

Hello Richard,

Thanks for your email.

Please follow the link below to start an application for a proprietary trading account. This is the type of account for investment clubs. Please go to Institutions -> Business/Organization,

https://www.interactivebrokers.co.uk/Universal/servlet/formWelcome?p=100&atype=ORG&ibsrp=609

At the end of the application, you will have the option to upload the documents. We will need,

Proof of existence
Proof of principal place of business
List of partners in the investment club
Proof of address and identity for all the partners in the investment club
LEI number for the investment club

Please contact me should you have any doubt during the application.

Best,

Maria Dieguez Rodriguez
Sales Executive | Sales
+44 207 710 5634
mdieguez@interactivebrokers.co.uk

[Richard Jones]

So our stumbling block will be that we don’t, currently, have an LEI number for the Investment Club.

[John Calvert]

Richard,
Well done. Looks like you may have provided us all with a solution. An LEI is not difficult to obtain (Costs £45 per year if you buy 3 years), as long as an investment club qualifies to have one.
If you decide to go ahead do please keep us all updated, so we can follow, if it works out.
Best wishes,
John Calvert

[Mark Bentley]

Unfortunately, AJ Bell have confirmed to me that they will not be launching a product for investment clubs, as they think the market for such a product is too small to justify the investment they’d need to make.

Sorry,

Mark

[Richard Jones]

Thank you Mark for trying, your efforts are very much appreciated.
I’m afraid we have decided that this is now too much of an obstacle for our little investment club to overcome so we have agreed that it is time to throw in the towel and wind up the club. Such a shame, we have been running since 1998 and have been forced into this through no fault of our own.

[Mark Bentley]

In reply to reply #31985

Sorry to hear that, Richard.

Note that SIGnet offers an alternative to investment clubs. SIGnet groups allow for similar investment discussions to those that a club would hold, and social interaction, but without investing jointly: each group member makes their own investment decisions.

Would anyone else here like to try the IBKR route?

I am keen to make clubs forced to depart from ii aware of that alternative, if it works.

Thanks,

Mark

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[Sandy Forbes]

It is my understanding that our Banff Rotary Investment Club are consulting our members at our next month end meeting how we will proceed with the IBKR or CFM etc. I will let you know how we get on.

[Mark Bentley]

In reply to reply #31987

Thanks Sandy, I look forward to hearing how you get on.

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[Mark Clenshaw]

My club is meeting this weekend to decide way forward following the ii decision to withdraw service.
Thanks everyone who has contributed to this forum thus far.
I am just wondering if anyone has any feedback on going down either the InteractiveBroker or the limited company route? Any thoughts would be much appreciated.
Also, just wondering if anyone has sought an extension to ii’s end of October deadline?
Best, Mark

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