Today I’m beginning the process of closing my Saxo Stocks & Shares ISA and thought it might be valuable to readers to know why. For financial services providers I like to maintain a three strikes policy before I move to close or transfer an account. Sadly Saxo has just reached its third strike.
It is illustrative to look into where and how Saxo has failed here. While a great deal of time and money is spent marketing stocks and shares ISA products to investors in the UK, it seems less effort is spent on keeping customers happy, or dare I say it, treating them fairly.
By way of context, I have worked for a broker myself and have been involved in the development of a trading platform, so know of what I speak.
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Strike One: Lack of availability of shares
Saxo’s first issue was the lack of availability of shares to trade. I have now several times encountered issues where shares have simply not been made available on the platform (“computer says no” as one trader described it recently). I could accept a smaller cap stock in another country, but more than once I found UK shares were not available to trade while colleagues had access to them on other share trading platforms.
I raised this with Saxo and was told that shares could be added, but I would need to pay a fee. The size of the fee versus the position I wanted to take made it laughably unrealistic.
Strike Two: Risk assessments of retail clients
The next issue sprang from getting access to investment trusts and Exchange Traded Funds. The fund management sector continues to scratch its head in wonderment at the lack of engagement by retail investors. Part of the issue lies with platforms like Saxo’s. To access ETFs or investment trusts, the Saxo client needs to sit a multiple choice exam. I’ve been writing about ETFs for more than a decade and some of these questions had me thinking for a while. The average retail investor is not going to pass this exam, hence they won’t be investing in ETFs either. At least, not with Saxo.
The Saxo platform will routinely categorise investment trusts and ETFs as higher risk products, versus, for example, a single share, which in many respects is fundamentally riskier than most investment trusts. Investment platforms will argue that they are simply acting in concert with the current UK regulations to protect retail customers from taking high risks or accessing high risk products. I discussed this issue with trade bodies like the Association of Investment Companies who were flabbergasted by the way investment trusts are rated by retail brokers.
Strike Three: Poor communication on corporate actions
The final issue stems from communication. As a user of financial services products in the UK, from your bank to your car insurance provider, you are now bombarded by “essential” communications. It is no longer realistic to be able to wade through each and every one, especially when most are either very routine or just marketing fluff. Saxo, for example, will mix its essential client communications in with a ‘special offers’ and other marketing communications.
I was apparently alerted to the fact that an investment trust in which I was invested had been suspended and that I could opt to shift my holding to its equivalent on another exchange. I did not read the alert until after the deadline had passed.
While Saxo will still make the transfer now, and is happy to do so, it wants to levy a EUR 200 fee for the inconvenience. A manual transfer like this is not that time consuming – I have worked for a brokerage remember. Saxo is presuming to charge me for employee time at the billing rate of a top tier lawyer in the City. This does not seem to meet the FCA’s “treating customers fairly” definition in my view. I have pointed this out to Saxo’s customer service team and have been told – very bluntly – it was my responsibility and that I should raise it with the investment trust manager directly.
Investment platforms have already been criticised in the press for not informing clients about EGMs scheduled by hedge fund Saba Capital, as it sought to take control of several UK investment trusts in the last couple of months. Indeed, Saba is relying on retail investors not responding to communications as it has selected trusts with high levels of retail ownership for its activist campaign. Saba is relying on this poor level of broker to client communication, especially in the investment trust space.
So this why I will be transferring my stocks and shares ISA account from Saxo this week. Three strikes are enough.
