How Safe Is Your Money? A Breakdown of Investment Security

One of the most common questions we receive from clients is, “How safe is my money?” This is a valid concern, and it’s crucial to understand how your money is invested and the safeguards in place to protect it. At Ifamax Wealth Management, we want to break down the different components of your investments to help you feel confident in how your wealth is managed.

Our Role as Independent Financial Planners

At Ifamax Wealth Management, we are an independent financial planning firm authorised and regulated by the Financial Conduct Authority (FCA). This means that we operate under strict regulatory guidelines to ensure that we act in your best interests.

We are required to hold certain safeguards in place to ensure we can continue operating effectively. These include setting aside funds to allow us to trade and maintain personal indemnity insurance in case a claim is made against us. However, as a business, we are not regulated to hold client money directly. This means that should anything happen to our firm, the assets you have with us will be ring-fenced within your investment accounts. This ensures that your money remains safe, even if Ifamax Wealth Management faces financial difficulties.

How Does the Platform You Use Protect Your Money?

A key element of our investment approach is using a platform to manage your assets. A platform, in simple terms, is a tool that enables us to invest your money across different financial products, such as Self-Invested Personal Pensions (SIPPs) and Individual Savings Accounts (ISAs).

All the money held on these platforms is kept in trust and segregated from the platform's own funds. This is a critical safety feature. In the unlikely event that the platform itself faces financial issues, your money is protected. Creditors of the platform have no claim over the funds you have invested, and the platform cannot use your money to cover its own obligations. This separation provides an added layer of protection for your assets.

What About the Investments Themselves?

When it comes to investments, the most significant risk to your money is the potential for permanent loss of capital. While markets do fluctuate, a permanent loss means that the value of your investment falls to the point where it cannot recover. We’ve seen high-profile investment funds close, leaving clients with minimal returns. To mitigate this risk, we take a diversified approach to your investments, spreading your money across a range of strategies and asset classes. This diversification helps cushion the market volatility.

One question we often get is whether spreading your investments across multiple advisers, platforms, or products reduces risk. The short answer is: not necessarily. Since advisers do not have direct access to client funds, having more than one adviser or multiple platforms doesn’t significantly affect the safety of your money. However, working with more advisers could lead to increased complexity in managing your financial plan.

While diversifying investments across different funds makes sense, it’s also important to keep strategies straightforward. Overcomplicating things with intricate strategies can increase the risk, while a simple and clear approach reduces it.

Should You Spread Your Investments Across Multiple Advisers or Platforms?

As mentioned earlier, the risk to your money remains low when working with one financial adviser, especially since advisers are not authorised to hold your money directly. In terms of safety, it doesn’t matter if you have one or several advisers.

Similarly, since the platform does not have direct access to your money, spreading your investments across multiple platforms doesn’t necessarily reduce risk and may only add complexity to your financial planning.

It’s essential to have a clear strategy that focuses on straightforward, diversified investments. Overcomplicating your portfolio with too many platforms or advisers may not provide the added security you are looking for.

How Safe Is Your Money, Really?

In summary, the risk of your money being unsafe with a single financial planner and platform is minimal. The main risk lies in the investments themselves, but by adopting a careful, diversified strategy, this risk can be managed effectively. While we cannot protect against market fluctuations, we can take steps to reduce the chances of permanent capital loss.

Additionally, it’s important to note that the Financial Services Compensation Scheme (FSCS) provides protection for your investments up to £85,000 per institution. Should anything happen to the platform or financial institution managing your money, the FSCS will protect the first £85,000 of your investment.

At Ifamax Wealth Management, we take every possible step to ensure your money is as safe as it can be. If you have any concerns or questions about the safety of your investments, please don’t hesitate to get in touch with us.

Risk warning

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.