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Client anger over new Merchant Cap fees as group suspends shares

New Merchant Capital custodian Reyker Securities has angered clients by telling them they need to pay a fee in order to receive their delayed income payments and have it act as custodian.

Merchant Capital appointed Reyker earlier this month to handle client monies in its structured products division to replace former custodian Pritchard Stockbrokers after it was suspended by the FSA.

Non-cash assets worth approximately £350m have been transferred from Pritchard to Reyker.

Money Marketing revealed at the same time that an undisclosed number of investors were yet to receive income payments owed to them.

Reyker has now written to clients saying that in order to receive income payments and have it act as custodian they will need to pay an admin fee of £15 per investment before April 13.

If the letter of agreement is received between April 13 and April 23 the charge will increase to £20 per plan, going up to £25 per investment for clients who respond after April 23.

The letter from Reyker, sent out as part of an information pack and seen by Money Marketing, says: “Whilst Reyker is striving to be part of the solution to the problems caused by the suspension and subsequent administration of  Pritchard, we are a commercial financial institution and this means that we need to charge fees for the services we provide to cover the costs that we incur with third parties, such as exchanges, regulators and banks.”

Reyker says the admin cost covers the cost of writing to clients, any follow–ups, inputting data, the cost of taking assets into custody and providing a portfolio valuation.

Parent firm Merchant House Group temporarily suspended its shares on the Alternative Investment Market this morning pending an announcement from the company.

Adler Financial Planning director Stuart Burkin received a call from a client yesterday after she received the letter from Reyker Securities.

He says: “I imagined when I heard about this there must have been some mistake. Surely Reyker were not expecting the client to pick up the fee? But clearly they are. It is crazy.”

Lowes Financial Management managing director Ian Lowes says: “This is an unfortunate situation brought about through no real fault of Merchant. Obviously a new custodian needed to be appointed and Merchant acted quickly to do so.

“We appreciate that Reyker need to be paid but we are surprised that investors are being asked to foot the bill. Whilst we have been assured by Merchant that this was following extensive consultation with the FSA this does not make it any the more palatable.”

Merchant House Group was unavailable for comment.

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. wouldn’t it be nice for a change for reports to be accurate, the suspension of share has nothing to do with the Merchant Capital issue, and Merchant group are nothing to do with Rykers, but why let that spoil a good story

  2. Terence P.O'Halloran 29th March 2012 at 4:45 pm

    I am amazed at the feigned indignant trollop that is blurted out by the same cohort of advisers that have been trumpeting the RDR ‘pay as you go’ anthem.

    We have talked to our clients. We have written to all of those affected. They understand that the change is for their benefit and that £15 is a registration, admin fee and the agreement is similar to our client agreement.

    What is everyone’s problem.

    O’Halloran & Co clients have been paying for services for 30 years and they have the personal choice of doing so, or not.

    Reyka have offered that same choice, pay to use Reyka or do your own thing. Where is the catalyst for the angst that is poured out? Get a life (or join the FSA, they are past masters at the problem.

    Because of the total ignorance of the regulator; a statement, which appears to be the current value of these 5 year fixed term contracts, is sent each year, at the FSA ‘s insistence, causing one of our lady clients to lose £17000 on a £50000 investment when she, mistakenly, thought that her capital value was being eroded. She desperately needs the income . She panicked.

    A totally unnecessary loss in every sense of the word.

    And all you can find to do is complain about a legitimate charge for a legitimate, and necessary service to these bond holders. Grow up.

  3. We have written to all of our clients telling them to sign Reyker’s forms, send them to us and that we will pay the £15.
    We have received some very grateful responses, and for £15 per head that is great value in terms of PR and client loyalty.
    Whilst the change (and fees) are unfortunate we all have a choice as to how we use information to our advantage, and Reyker like anyone else need to make a profit.

  4. You are entirely right about the useless and misleading statements insisted upon by the regulators for structured investments. Clients are told in all the literature that they have fixed maturity dates and that cashing mid term is only an option in extreme circumstances..The figures given are not a surrnder value so what is the point except to confuse clients and cause more work.
    As for NDFA then Merchant Capital now another Company writing to OUR Clients – what are the FSA playing at ?? – Let us hope we survive this one and Reyka dont go to the wall – I for one will be paying the clients fees. Why do we always end up withe the responsibility and not the FSA ?

  5. Mr O Halloran, you seem to totally overlook the fact that pritchard was taken on by Merchant to do the admin. As such, Merchant were responsible for their recommendation on behalf of the clients.

    As such, when they go bust, it is Merchant’s reponsibility, not the client’s to arrange an alternative administrator and therefore the client should not have to pick up the bill for Merchant not selecting a solid and reputable organisation surely.

    I for one will be advising my clients to reclaim the cost from Merchants or face an Ombudsman complaint referral which would cost significantly more – maybe that’s why they too have suspended their shares for the present.

  6. Lindsay Lockett 30th March 2012 at 10:53 am

    Call me cynical, but I think Merchant should pick up the bill for this little exercise. The fact they aren’t, have had their shares suspended and Ryker are billing clients direct, leads me to think in the next few weeks we will see Merchant disappear up their own a****. Those left playing in this silly financial services world will be once more left to clean up another mess, not the FSA !

  7. Terence P.O'Halloran 30th March 2012 at 4:42 pm

    @ Dennis B – Dennis you do as you like. Stoke up the fires. You sow the wind and reap the whirlwind, and we all suffer.

    The beauty of the current situation is that Merchants HAVE found a new administrator and your clients HAVE been given choice; pay the £15 or find an alternative.

    Your attitude says little for your integrity. You will be claiming you have ‘rights’ soon. What childish nonsense.

  8. What is £15 is worth to ramble about ,if that happens to me i would be more than happy to have it done and dusted never mind the £ 15

  9. These issues merely highlight the problems with Third Party involvement in structured products.

    To many cooks spoil the broth.

    As for O’Hallorans lady client who pannicked and lost £17,000. Well well. Perhaps if she had understood the product at the outset and had a strong trusting relationship with her advisor……………………………………..!!!!

    You complete the rest.

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