A New Year’s Resolution – Managing My Investments More Efficiently

The introduction of the MiFID II Directive in 2018 is not the sole change brought about by the decade which has just ended. The local investment scene has also registered changes when it comes to new equity and bond issues. We are now seeing an increasing number of new complex issuances, in which not all intermediaries are necessarily always involved. Furthermore, the participation in new issues is sometimes restricted to preferred applicants who are immediately contacted by intermediaries managing their personal portfolios. The latter are better managed by investment advisors through the use of nominee accounts.

Valuable assets necessitate a certificate or a mere electronic confirmation of holding in order to be tradable. The stock exchange is the place where this trading takes place. Potential investors place their bid while asset holders interested in selling ‘state’ their asking price. Should these two match, the deal goes through. Locally, the two most popular ways of holding financial assets are those held directly with the Malta Stock Exchange (MSE), or under nominee with an intermediary.

By setting up a nominee account, an investor would be passing on the legal ownership of the asset to the intermediary, while beneficial ownership would remain unchanged. At no point does the intermediary have any right on these assets, and these are in fact ring-fenced and protected at all times. The local regulator, the Malta Financial Services Authority (MFSA), acts as supervisor on all local intermediaries and imposes stringent requirements to safeguard investors, and the well-being of the industry alike.

The use of nominee accounts increased exponentially in recent years, especially in instances when funds and foreign holdings are purchased. This is because by holding these assets directly, the investor would be in receipt of correspondence from the international broker, fund manager or provider himself, and could also face obstacles when trying to repatriate the assets, or in the case of a ‘causa mortis’. For these reasons, among others, the holding of direct assets is uncommon in most countries, and rarely used in others.

The first concern that investors raise is the security as their investment, which as explained is ring-fenced, investors seem not to have a problem with holding foreign securities or funds under nominee, but object to holding local securities under nominee.

The second most widespread cause for concern is that of charges. Many pose the question of why should I pay for a service which I can do without? What are the advantages of holding assets under nominee? The answers to some of these questions are simple to understand and quite straight forward, while others are slightly more complex to explain.

The benefits of nominee accounts are numerous.

First and foremost, under nominee, the process of buying and selling on a stock exchange is simplified, and can be conducted in a timely manner. In addition to this, less administration work is involved and the fact that possible future transactions are more probable to take place with the same intermediary, enables the broker to lower the charges per transaction.

From his end, the investor also benefits from the possibility of resolving any tax-related issues involving these holdings more swiftly and, following the introduction of MiFID II, the investor is at the receiving end of detailed and complete valuations on a quarterly basis. The one point of contact concept facilitates this, while also enables investors to be duly informed of all due corporate actions, to receive all correspondence and income from their investments from their intermediary of choice, and can possibly benefit from a simplified resolution of inheritance issues pertaining to their portfolio when a ‘causa mortis’ is triggered.

It is also more probable for investors who hold their assets under nominee accounts to not miss out on new investment opportunities, especially when they qualify for a preference. This is mainly due to the fact that in such cases, the intermediary contacts the investors and informs them with this straight away. Needless to say, the investment advisor then assists in the ways and means on how best to submit an application for such new issues.

The win-win situation benefits the advisor too.  A portfolio held under nominee in its entirety enables the advisor to provide a holistic advisory service, if and whenever this is required.

Regulators supervise and enforce legislation, but investors should do their due diligence and entrust a respectable intermediary with a track record of excellence with their finances. Following such decision, it is then up to the investor and investment advisor alike to build a relationship of trust aimed towards the generation of added value. Hoping that financial markets do their part in 2020, a well-managed investment portfolio and not missing out on new investment opportunities when they arise, will increase the probability of optimised returns.


David Baldacchino, MSc Wealth Management (Edinburgh), B.Com (Hons) Banking and Finance (Melit.), DipFA, is an Investment Advisor at Jesmond Mizzi Financial Advisors Limited. This article does not intend to give investment advice and the contents therein should not be construed as such. The Company is licensed to conduct investment services by the MFSA and is a Member of the Malta Stock Exchange and a member of the Atlas Group. The directors or related parties, including the company, and their clients are likely to have an interest in securities mentioned in this article. Investors should remember that past performance is no guide to future performance and that the value of investments may go down as well as up. For further information contact Jesmond Mizzi Financial Advisors Limited of 67, Level 3, South Street, Valletta, on Tel: 2122 4410, or email [email protected]