| Real Life Strategies for Building Wealth

barclaysBarclays, that pillar of British banking, are looking for a cool £5.8bn from their long-suffering shareholders to shore themselves up as it turns out they have a £12.8bn ‘shortfall’ in the capital now required.  This from the bank that,  as we wrote in September 2011, is at the epicentre of ownership of the world’s business – not just financial.  To sweeten the pill, they have promised to stuff the next round of dividend, although where they are getting that money from is another question.  Maybe they’ve got a big credit card.

They have been instructed to get this all sorted out by the Prudential Regulatory Authority that is now part of the Bank of England and eager to earn its spurs with the new Governor.  They are probably right and Barclays have taken the action of going to the market to get some of the money.  Next year Chancellor Osborne will be trying to sell off the publicly owned part of Lloyds and the Royal Mail so this is probably a pre-emptive strike by Barclays to make sure they get a slice of the money cake that is sloshing around, or so they think, before HMG get’s its snout in the trough selling the family silver.

But now I know why Barclays need the money.   You may feel sorry for them so while you slouch on the couch, stretch for the Kleenex and let me tell you a story – a story of a dream.

Some time back in the early noughties, we thought it would be a good idea to start a little investment fund and to play the stock market.

I opened a Charles Schwab ISA account (an ISA is a personal tax wrapper which means that dividend and capital gains are tax free).  We put some money in and bought some shares.  I don’t remember the exact shares at the moment but a little later I inherited some more (HBOS as it happened, before the crash) and added those to the ISA.  At one point our few thousand pounds had increased to about £6k so we were happy.  Momentarily.  Only a couple of weeks later the portfolio value had plummeted to below the amount we originally invested.  We should have sold at the top.

Share trading is very expensive for the small trader.  Firstly there is the stamp duty – a government tax here in the UK – of 0.5%. That is small though compared to the charges made by the stockbroker which are not only a fixed amount per trade but also a quarterly fee.  What on earth they need that for is anyone’s guess – all trading these days is done on an automatic platform and otherwise the trading account is just like a bank account.

It is small wonder that people turn to Exchange Traded Funds or Contracts for Difference.

By this time our Schwab account had been bought by Barclays – it was a done deal and there was nothing we could do about it.  As far as we knew the fees were the same or similar and we thought no more.  As most of the shares were going nowhere it seemed sensible to liquidate them and withdraw the cash – even though it was substantially less than we had originally invested.   We left a few penny stock in case and a some pounds to cover the quarterly ‘fees’.

On thinking a little further, why keep the account at all, so we tried to close it, only to find that Barclays wanted £50 for the privilege, on top of course of their charge for selling the few shares still in the account and their ever-present quarterly ‘fees’.  Even though the total value was worth no more, they were not prepared to budge and claimed it was in the small print – somewhere.  I certainly don’t recall it being in the Schwab conditions.

So I let the account run down.  Basically Barclays had been stealing my money for doing nothing and wanted me to pay even more to stop them stealing even more.  A financial Catch 22. I had no intention of paying them any more.

Then this February I got a letter asking for permission to change the management from Barclays Stockbrokers to Barclays itself or they could transfer the shares to another ISA scheme for me.

Here was an opportunity. I refused permission and asked them to transfer the account to my Nutmeg account which we had just opened.   By that time, the Barclays account had gone negative so they wouldn’t do that.

A few heated telephone calls ensued (I can be quite caustic on the phone – it comes from being a Scorpio), the upshot of which was that I had the deducted fees refunded.

Success! I initiated the transfer from the Nutmeg website and sat back, waiting to see just how little would actually arrive chez Nutmeg.

And waited.

And waited.

Then I got a statement that showed the refunds, the sale of the few shares in the account for the princely sum of £1.33 giving a balance of, er £1.50.  Followed by the application of a Closure Fee of – wait for it – yes, exactly £1.50 leaving a balance of £0.00! Even though the account was being closed as a result of their action.

So Barclays have managed to steal even the £1.50 left.  Nice one.  Sorry Nutmeg – you won’t be getting anything.

But then, lo and behold, I got a letter from them demanding a cheque for £73.92 by 6th August so they can ‘close your account as requested’ – or they will have to cancel my request.  What for?  Well, to transfer what was left – ie £0.00. Ha ha. And anyway, hadn’t I already been charged a Closure Fee?

I am speechless but now I know why Barclays is in such a mess that they have to sting their shareholders.

You see, it is easy.  There are two reasons:

  1. There is no more money in my account for them to steal, and
  2. They are totally and absolutely incompetent.

I leave you, dear readers, to decide which is the greater cause but needless to say, my response has been to refer their activities to the Financial Services Ombudsman to retrieve some – or even all – of the fees since I originally tried to close the account.   I will keep you informed.