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; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Voices
Ed Miliband, Nick Clegg and David Cameron appeal to the audience during the Question Time special
voices
Sport
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
News
Tiger Woods and Lindsey Vonn are breaking up after nearly three years together
peopleFormer couple announce separation in posts on their websites
Sport
football
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Arts and Entertainment
Haunted looks: Matthew Macfadyen and Timothy Spall star in ‘The Enfield Haunting’
tvThe Enfield Haunting, TV review
News
The Mattehorn stands reflected in Leisee lake near Sunnegga station on June 30, 2013 near Zermatt, Switzerland
news
News
Michelle Dockery plays Lady Mary in Downton Abbey
peopleBut who comes top of the wish list?
News
Miriam Gonzalez Durantez, right, with Lib Dem candidate Jane Dodds in Newtown, Powys, as part of her tour in support of the party’s female candidates
general electionNick Clegg's wife has impressed during the campaign
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Claims Administrator

    £16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

    Recruitment Genius: Senior SEO Executive

    £24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

    Recruitment Genius: Online Customer Service Administrator

    £16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

    Recruitment Genius: Digital Marketing Executive

    £18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

    Day In a Page

    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

    Everyone is talking about The Trews

    Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living