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Working Lunch Tuesday, 11 February, 2003, 16:41 GMT
Brokers' clients face penalties
Schwab website
Charles Schwab - taken over by Barclays
Thousands of investors who were signed up with the stockbroking firm Charles Schwab face a choice.

They must either move their accounts to Barclays or pay penalties which could amount to hundreds of pounds.

It's because Barclays Stockbrokers has just taken Schwab over.

Charles Schwab is a household name in the United States where it has numerous share shops and huge telephone and internet sharedealing operations.

Nominee account

But the UK turned out to be a tough nut to crack and it's sold its venture here to Barclays, transferring 150,000 customers to the British bank.

Many Schwab customers allowed the broker to hold their shares for them in a nominee account.

This is a procedure which is supposed to cut costs and reduce the need for share certificates and other paperwork.

But Working Lunch viewer Ken Hetherington has found that transferring shares from one of these accounts can be a costly exercise.

Locked in

"Basically people who have shares in a nominee account are locked in," reports Ken, "because in order to get out they have to pay these huge charges."

Ken closed a Barclays share account five years ago, thinking it was expensive.

Even then, he had to pay a 250 penalty to extract his shareholdings and move them to Fidelity.

A year later Fidelity stopped its service and told customers they could move to Barclays - Ken opted to transfer to Schwab instead, without charge.

Threatened

This year Barclays wanted his business yet again, because of the Schwab takeover.

Ken was told he'd have to pay 270 in exit charges to avoid Barclays this time.

After he threatened to take his case to the Financial Ombudsman, Ken was told he would be permitted to move his account to another broker for free.

He got the right result, even if he had to kick up a stink to achieve it.

Diane Hay, ProShare
Diane Hay: "A hefty bill"
But his case is a lesson for people who use brokers' nominee accounts.

"Some of these fees range from 5 to 20 per line of stock," says Diane Hay of ProShare.

"So if you've got a diversifed portfolio - you've done the right thing and haven't put all your eggs in one basket - you could end up with quite a hefty bill.

"We understand there are administrative costs in moving people's accounts from one broker to another but really some of these charges are way out of line."

Barclays Private Clients told Working Lunch that it was "standard across the industry" to levy exit charges.

Losers

Asked about Ken's success in having the charges waived, a spokeswoman for Barclays said: "We cannot comment on individual cases".

Hundreds of jobs are expected to be lost at Charles Schwab because of the takeover, and those employees are the chief losers.

But Ken Hetherington believes that any broker which ends a service agreement should allow all customers to transfer for free to a broker of their choice.

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The BBC's Simon Gompertz
"Learn the lesson of people who make a fuss"
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