Derek Pain: It might cost a lot but certificates are the best option

No Pain, No Gain

Are small shareholders being squeezed out of the stock market? Never before have they felt such relentless pressure and there must be a very real danger a great many will not survive for much longer. With the European Union seemingly intent on abolishing paper share certificates there has also emerged moves within the City to increase charges by so much that investing for the little player will no longer be worthwhile.

A few weeks ago I highlighted that the EU wants to ban new share certificates by 2015 and kill off the whole paper process by 2020.

Now, to add insult to injury, one leading stockbroker has dramatically increased fees as it attempts to push clients into pooled electronic nominee accounts. It blames higher regularity costs and changes introduced by the Crest electronic dealing system. But the new charges are mind boggling, adding hundreds of pounds a year to the outlay small investors will be forced to meet if they stick with the broker concerned.

According to the magazine Investors Chronicle (IC), the higher charges include certification costs, which have risen dramatically. A new account charge of £480 has been introduced and there is a £50 transaction fee as well as a £15 dealing cost. In addition there is commission of 1.85 per cent.

One IC reader complained: "I hold my shares via certificates and deal with all the dividends myself, so an annual service charge of £480 is a charge for doing absolutely nothing."

Shareholders with a certificate are the legal owner of a share and are placed on a company's share register.

One drawback from such exposure is cold telephone calls as home details are easily obtainable. Still, the advantages are considerable compared to the situation if the shares are held in a nominee account. Then it's the nominee stockbroker who is the named holder so the investor is not eligible to attend shareholder meetings and has no say in any takeover action that may occur unless the stockbroker, out of the goodness of his heart, redirects the paperwork. In addition, dividends and perks go to the stockbroker. In many cases perks are not forwarded and sometimes dividends are accumulated and distributed only once or twice a year.

The row at hibu, the collapsed Yellow Pages publisher, highlights the fragility of small shareholders stuck in nominee accounts. Some accounts, it seems, have refused to hand on the necessary information for calling a special meeting.

Holding shares in certificated form is probably the most expensive avenue open to small investors. The stockbrokers accommodating such an allegedly old-fashioned method of trading, must, judging by their charges, make a decent return. There is little doubt that sacrificing one's rights and holding shares and trading via a nominee account is the cheaper option. But certification is, I feel, the best bet.

On a different note, small shareholders have welcomed the arrival of individual savings accounts (Isas) on Aim. In the first two months since shares qualified for Isa inclusion, the Aim share index has outperformed Footsie by 11.5 per cent and even the small-cap measurement by 5.5 per cent. Researcher Equity Development, drawing attention to the Isa impact, says the "immediacy and magnitude" of the upsurge has surprised many.

The Aim re-rating, it says, has started and points to next year's planned abolition of stamp duty on the market's stocks.

Finally an Aim share in the no-pain, no-gain portfolio. Home shopping and education group Findel has reported a 5.2 per cent six-month sales increase and is confident about the year's outcome. The shares have performed well since recruited nearly a year ago, climbing from 142p to, as I write, 243p.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Denny Miller in 1959 remake of Tarzan, the Ape Man
Arts and Entertainment
Cheryl despairs during the arena auditions
tvX Factor review: Drama as Cheryl and Simon spar over girl band

Piers Morgan tells Scots they might not have to suffer living on the same island as him if they vote ‘No’ to Scottish Independence
i100Exclusive interview with the British analyst who helped expose Bashar al-Assad's use of Sarin gas
Angel Di Maria celebrates his first goal for Manchester United against QPR
Football4-0 victory is team's first win under new manager Louis van Gaal
Arts and Entertainment
newsIn short, yes
Arts and Entertainment
Rob James-Collier, who plays under-butler Thomas Barrow, admitted to suffering sleepless nights over the Series 5 script
tv'Thomas comes right up to the abyss', says the actor
Arts and Entertainment
Calvin Harris claimed the top spot in this week's single charts
BoxingVideo: The incident happened in the very same ring as Tyson-Holyfield II 17 years ago
Groundskeeper Willie has backed Scottish independence in a new video
Arts and Entertainment
The Doctor poses the question of whether we are every truly alone in 'Listen'
tvReview: Possibly Steven Moffat's most terrifying episode to date
Life and Style
Cara Delevigne at the TopShop Unique show during London Fashion Week
The life-sized tribute to Amy Winehouse was designed by Scott Eaton and was erected at the Stables Market in Camden
peopleBut quite what the singer would have made of her new statue...
England's Andy Sullivan poses with his trophy and an astronaut after winning a trip to space
peopleThe actress has agreed to host the Met Gala Ball - but not until 2015
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

    £280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Senior BA - Insurance **URGENT**

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Training Coordinator / Resource Planner - City, London

    £35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...

    Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

    £400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

    Day In a Page

    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week
    The fall of Rome? Cash-strapped Italy accused of selling its soul to the highest bidder

    The fall of Rome?

    Italy's fears that corporate-sponsored restoration projects will lead to the Disneyfication of its cultural heritage
    Glasgow girl made good

    Glasgow girl made good

    Kelly Macdonald was a waitress when she made Trainspotting. Now she’s taking Manhattan
    Sequins ahoy as Strictly Come Dancing takes to the floor once more

    Sequins ahoy as Strictly takes to the floor once more

    Judy Murray, Frankie Bridge and co paired with dance partners
    Wearable trainers and other sporty looks

    Wearable trainers and other sporty looks

    Alexander Wang pumps it up at New York Fashion Week
    The landscape of my imagination

    The landscape of my imagination

    Author Kate Mosse on the place that taught her to tell stories