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12,000 ex-Merchant Capital investors face Reyker charges

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Around 12,000 former Merchant Capital investors face hundreds of thousands of pounds in total charges by the new plan manager Reyker Securities.

Reyker, which took over as plan manager and custodian following the collapse of the structured products firm and its parent Merchant House Group, is writing to affected customers, who have invested a total of £400m into Merchant Capital structured product plans.

The company is writing to investors over the weekend and will also notify them via a secure message on the company’s online portal.

Advisers will receive a secure message via the Reyker portal this afternoon.

Merchant Capital entered administration in January owing over £1.5m to creditors. Parent company Merchant House Group followed its structured products arm into administration last week. Tenet acquired advisers who worked for advice arm Merchant House Financial Services in March.

Reyker says it is imposing the charges to cover custody and administration costs that Merchant House Group agreed to pay in relation to Merchant Capital before the parent company went into administration.

Reyker took over as custodian of Merchant Capital plans in March 2012 after former custodian Pritchard stockbrokers was suspended by the FSA.

Under terms and conditions issued to investors last year, Reyker is allowed to impose additional charges on investors in certain circumstances, such as the administration of Merchant Capital.

Charges will come into effect in July, but investors will only have to pay these when their plans mature, kick out, or are redeemed.

Reyker is effectively rolling up the ongoing admin and custodian costs which the investor will pay at the end of the product term.

Based on a £25,000 plan, customers will pay Reyker a minimum of £75 a year. Those with capital plans will pay £115 a year, while those with monthly income plans will pay £195 a year.

Reyker has capped costs for the term of capital plans at £500 and at £600 for income plans, but says these caps are not guaranteed.

Clients wanting to redeem their plans early face a withdrawal cost of £250, plus accrued custody charges.

Reyker also charges £3.50 per document posted, plus £20 for ad hoc portfolio valuations.

Reyker head of risk management and strategy Adrian Barnwell says: “People are understandably angry when unforeseen events happen. The important thing from our perspective is we have been a safety net, and when people look back on this what is apparent was we did protect consumers.

“Reyker has bent over backwards to be as helpful as possible to consumers here. The fact that we are postponing the collection of charges until the plans mature means we are having to finance it. It says quite a lot that we are prepared to do that. I hope consumers and advisers will see it in that light. It is difficult to see how we could be any more flexible than that.”

Reyker angered clients and advisers in March 2012 after it told them it would charge clients between £15 and £25 per investment to receive delayed income payments and have it act as custodian.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. They face Reyker charges but they would have paid Merchant charges. So if these guys are worse off it is hard to see by much?

  2. They have already paid Merchant charges. That’s how structured products work. Now they are paying again for the same thing. The FSCS should apply. That’s what it’s there for.

  3. By a few hundred quid, at least.

    Everyone has had their slice of the cake except for the client. They are the ones paying.

    They have already had to pay one fee last year and this one is an open cheque book, no guarantee as to what it will actually be.

    Because I always treat my client fairly I will probably offer to pay it for them. I’m not, as the Daily mail or the FCA would have you believe, a greedy, commission hungry salesman. The poor client loses out yet again whilst the directors of these companies, MHG in particular, are nothing more than conmen who’ll be raking in fortunes from the financial services industry in the not too distant future.

    Reykers were suing MHG to to pay up on the back of the guarantee it provided. MHG was put into administration by a Debenture holder linked to one of it’s directors. It all stinks!

  4. Structured products are stupid for many reasons. I’ve analyzed those reasons and I stay away from proprietary products.
    http://alfidicapitalblog.blogspot.com/2013/04/the-hidden-agenda-behind-retail.html

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