You put a lot of faith and trust in us as guardians of your money
We endeavour to repay that trust by making sure that investment risks are minimised and that we match your money to your personal objectives and risk tolerances.
To better understand the level of risk, it helps to know how the investment industry works.
Our role is as financial intermediaries and all investments are made directly with product providers. In the case of mainstream investments such as ISAs, pensions, shares, unit trust, bonds, and cash this will be with a platform. We use Transact who are one of the largest platforms and have the capacity to host our investment methodology.
In some cases, such as with Venture Capital Trusts (VCTs), Enterprise Initiative Schemes (EIS) and Life assurance, investments and premiums will be paid directly to third party providers.
In fact, the only real consequence of Path going bust would be that you would be left with no financial adviser and no over-arching supervision of the investment strategy. You would thus be left with your third-party product or platform provider intact and your relationship with them would remain exactly unchanged. All the funds in your portfolio would similarly be unaffected. All you would need to do in this instance would be to decide whether you wanted to appoint a new financial adviser at that point to pick up where we left off (albeit no doubt with a different investment methodology). The fee payable to Path would then be directed to your new adviser.
We take the risk of fraud and mismanagement very seriously. We only use funds that have high liquidity, that have passed the due diligence of the platform that they sit on and that Path or its employees have no financial interest in. At no time will we ever, under any circumstances physically handle your money.
To further safeguard against fraud and mismanagement Path has the following governance processes in place:
- Employees are signed up to the FCA Code of Conduct, along with similar schemes operated by the Personal Finance Society and the Chartered Institute for Securities and Investment;
- All new advisers have been subject to a criminal records check (now called a DBS – disclosure and barring service);
- Each year, advisers and those with key control functions are subject to a credit check to ensure that they are not under financial duress;
- We proactively monitor client work and take all complaints seriously;
- In the event of negligence leading to financial losses for clients, we are covered by Professional Indemnity Insurance and a copy of the current policy schedule is available on request;
- We are on the Financial Services Register on which you can view the status of our firm and the regulated individuals.
In the UK, all operators in the sector should be governed by the rules set out and monitored by the Financial Conduct Authority (FCA). They are subject to the authority of the Financial Ombudsman Service (FOS) which investigates complaints. And they should be members of the Financial Services Compensation Scheme (FSCS), which protects an investor’s money up to guaranteed limits.
Every touchpoint in the process – the financial planner, investment host, fund manager, registrar for investment products – is regulated by the same rules of conduct policed by the FCA.
This is an important safeguard when businesses hit financial difficulties.
One of the principles of consumer protection in financial services is that the rules and guarantees are broadly the
same for everyone: large institutions and small boutique firms, major investment funds and small private investors.
You may not realise it, but the largest global bank does not provide higher FOS or FSCS levels of protection than your local high-street IFA. In fact, in many instances the products offered by financial advisers have higher degrees of investor protection than banks.
It is important to understand that Path’s success or failure ultimately has no bearing on the security of your money since we never actually handle your money.
Please contact us if you would like more information on the security of your investments.
We want to ensure that everybody who invests with Path is well informed as to the security of their investments and the protections that are available.
Financial Services Compensation Scheme
FSCS and insolvency
One of the biggest concerns you may have is that having invested your money, the scheme then goes bust, and all is lost. That is why the FSCS was created in 2001. If a company you have invested in or is handling your investments becomes insolvent, your losses are protected to some degree. Check the FSCS website for specific dates and terms.
- Long-term insurance (life and PHI): 100% with no upper limit.
- Annuity (being drawn): 100% protected.
- A pension only invested in the life office’s own insured funds would have 100% protection. Where external funds are used or where a SIPP invests in a variety of assets, the position will depend on the investments used.
- Cash in bank/building society account: £85,000 per person for each separately authorised bank/building society (some banks share a license meaning only one set of £85,000).
- Investments: £85,000 per person.
- Mortgage and endowment advice: £85,000 per person.
Investments, including mutual funds, self-invested personal pensions (SIPP) and onshore bonds, all fall within the FSCS remit. In many cases, there are additional protections. Where investments are held in trust, assets are often 100% ring-fenced and protected. For example, in the case of mutual funds and SIPPs, if the fund manager becomes insolvent, a custodian is appointed whose sole purpose is to protect the investment assets, which lie beyond the reach of creditors.
The rules for products such as ISAs and pensions vary. Full details of the FSCS detailing the restrictions and financial limits that apply are available on request from the FSCS. You can contact them on 0800 678 1100 or visit fscs.org.uk.
You can also write to them at FSCS, 10th Floor, Beaufort House, 15 St Botolph Street, London EC3A 7QU.
It’s important to note that the FSCS only covers regulated investments, so if you put your money in a direct stock and the company goes bust, or an unregulated investment such as peer-to-peer lending, you might get nothing back. Path does not advise on such investments. All investment advice given by Path should be for products that are covered by the FSCS.
Financial Ombudsman Service (FOS)
The Financial Ombudsman Service exists to protect investors against bad advice. If you make a complaint to Path and are dissatisfied about the response, then you can complain to the FOS.
Summary of default compensation:
For investment ISAs, the limit is £85,000 per eligible person, per firm.
Pensions are covered by the FSCS up to 100% of the claim (with no upper limit). If your SIPP operator fails, up to £85,000 per eligible person, per firm.
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.