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This year I accidentally stumbled into the world of money laundering — when all I wanted was an Isa.
Asset and wealth managers are full of opinions on how best to attract millennial investors. But for all of the industry’s claims to digital prowess, the reality is one of paper utility bill checks, four-digit codes sent through the post and helpline staff who seem surprised at the idea of online banking. My attempts to navigate this mire ended with me being branded a money launderer — and my shiny new investment account frozen with my paltry savings inside.
It all began to go wrong when I decided to open a stocks and shares Isa. My impulse was to use the cheapest possible fund platform to do this — but because brokers impose charges in different ways, figuring this out took several hours.
Some charge a percentage of your invested assets, others a flat-rate fee. Some give you an all-in cost for holding a stocks and shares Isa and do not charge for trading some types of funds; others charge for all types of funds. Most charge for trading individual shares. Which broker is cheapest also depends on what kind of funds or shares you invest in, how many you choose and how often you trade.
Although Nutmeg, the digital wealth manager, markets itself at millennials with less money to invest, its stocks and shares Isa requires a minimum contribution of £100 a month. As a young investor, this seemed like a big psychological commitment — I would prefer to deposit a lump sum and then wait and see what happened. I also wanted to distribute money across a range of investment strategies and not commit myself fully to a passive portfolio selected by a single manager.
I eventually settled on a fund platform run by a large bank, but I couldn’t get its website to work. My second choice was a very dowdy stockbroker that was among the cheapest (based on my best estimates) and seemed as if it would offer good service. It was here that my woes began. For unexplained reasons, I failed the online registration process (known as “onboarding” in the wealth management industry) and was told I would need to make a phone call to open my account.
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I did. My account was opened and I transferred money into it via the phone. This was the start of my discomfort. There was no electronic paper trail and I couldn’t see where my money had gone because the broker couldn’t let me log in to its online systems until it had posted me a four-digit code. I was also told that I would need to send a photocopy of my passport, a utility bill and a bank statement.
The letters began. I never receive letters, so at first those from my new broker were a novelty. What they demanded, though — paper copies of all sorts of documents — I couldn’t provide. My utility bills come to my email address and, as I live in a shared house, I don’t recall seeing a council tax bill with my name on (I pay council tax via a housemate). I do all of my banking through my phone. My bank doesn’t have an option to ask for a paper statement on their app, so I gave up. I’ve previously had to visit a branch with proof of my identity to get them to post me a bank statement. I put it off.
Two months passed. My broker stopped writing. I’d rather given up on the whole Isa idea — although in truth I now had an Isa, it’s just that I couldn’t access it. The four digit code that the broker posted to me expired. Eventually I realised I would have to call them and tell them I didn’t have any bills and that I did all my banking online. “Oh,” said the helpful telephone operator. “That’s quite unusual.”
But the thing is it’s not unusual. Research published this year by the consultancy CACI showed that more people bank on their phones than visit branches. Less scientifically, nobody I know receives paper bank statements. The broker’s helpline, in its defence, was helpful, but explained it had to abide by money laundering regulations. This entailed working out who I was and where I lived, to prove I was a UK citizen and resident here.
Anti-money laundering procedures are here to stay. But if the investment industry is serious about encouraging younger people to save and invest, it might need to put its money where its mouth is and improve the speed and ease with which it can open new Isas.
The Wealth Management Association, the trade body for UK wealth managers, points towards a study showing that one of the things the industry is working hardest on is more sophisticated technology for onboarding new clients.
Perhaps not hard enough. A “digital passport”, which is being concocted by a large group of financial services companies, would help millennials get saving and investing faster and might be the answer to the wealth managers’ prayers.
In the meantime, the dream of appealing to millennials remains a dream. And my stocks and shares Isa — holding only cash — remains frozen until I can get my gas and electricity company to answer the phone and send me a paper bill.