At the end of last week, Reyker Securities announced it is to charge 12,000 former Merchant Capital structured product investors a minimum of £75 per year for the ongoing administration of their plans – realising the firm a minimum of close to £1m per year as a result.
Going…going…bust!
Clive Moore, managing director at Protean Investments, commented: “It is a ridiculously high amount for sending two statements a year and a bit of regulatory cost. I have never seen a charge that high for a new investment. ”
He added a more realistic figure, assuming there are no “crazy bankers” behind the product structure, would be closer to £50 as an administration fee if a custodian goes bust. The going rate, according to Moore, for a £15,000 case size with a five-year structure, is £25 “tops”.
Reyker Securities took on the management of those structured products previously managed by Merchant Capital when it went into administration in January this year. Its parent company, Merchant House Group, itself finally succumbed to administration earlier this month.
Merchant Capital had been the administrator for Keydata’s structured products since 2010, as appointed by PricewaterhouseCoopers; it had also taken on £100m of the Arc products once the ‘bad’ Lehman-backed products had been stripped out.
Ian Lowes, managing director at Lowes Financial Management, explained that at the time Merchant Capital collapsed, investors were left with no real option but to sign up to Reyker Securities’ terms and collectively pay them administration fees totalling well in excess of £250,000.
No comment
Lowes added: “Subsequently, Merchant Capital was liable to Reyker for all ongoing administration and custody fees for all plans over their investment terms of up to six years.
“I understand these fees were to be no more than £170,000 a year, decreasing each year. Following the collapse of Merchant, it seems Reyker are now seeking to charge clients what seems to be significantly more than double what they were originally going to receive from them.”
The figure has been capped at a lifetime limit of £600 for an income plan and £500 for a capital plan.
All of these costs are on top of, in the case of the former Keydata customers, a £125 switching fee, as well as a £15 initial administration fee charged when taking over all the Merchant Capital plans.
When contacted, Reyker Securities directed me to their website saying they are not able to comment directly on anything to do with, among other things, the level of charges they are making.