Client Money- Too Hot To Handle

You may recall that in a recent blog I mentioned an American broker MF Global has gone bust. Well it seems that their clients had another nasty surprise. Stockbrokers and some IFAs have the ability to handle client money – this is really so that they can get on with trading for clients without having to ask permission to alter a portfolio (discretionary fund management). As a result it is not simply important, but a clear rule that the FSA enforce, to ensure that the client money is clearly separated from that of the Bank/Stockbroker. A number of large firms have received the attention and fines of the FSA for failing to properly ensure that this always happens. Well, sadly for clients of MF Global, something like a further £374m has “disappeared” which was meant to be properly ring-fenced client money. This is not good. Whilst demonstrating the obvious merit in the rules, failing to keep them has left clients much worse off. This will not help restore any faith in the financial services community – which is why the FSA’s approach to tackle these issues is absolutely right.

KPMG are the appointed administrators attempting to clear up yet another sorry tale within the financial services world. So if you are asking yourself if this could happen at Solomons – the answer is no. No because when I set the firm up I did not want powers to “handle client money” which has always made client relationships more complex. Human nature being what it is, there is always a chance that anyone with such “permission” as the regulators define it, puts a very real temptation on the table. Whilst firms may appear noble and ethical, when faced with ruin, history reminds us that ethics are often disregarded. Sad, but true. Hence my stance and the reason why my firm does not and will not have the ability to handle client money. My approach is always – advise, agree and implement.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email