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THE COMPLETE GUIDE TO TRANSFERRING SHARES FROM ONE DEMAT ACCOUNT TO ANOTHER

A Demat Account functions like a savings bank account with the obvious difference in the fact it stores stocks instead of money. To be similar to a savings account also implies that a Demat Account can be used to transfer shares from one Demat Account to another Demat or trading account.

Shares are generally transferred from one Demat Account to another for the purpose of changing depositories. However, there can also be other reasons for transferring shares such as merging the investments in different Demat Accounts in a single Demat Account.

Whatever the reason, in order to understand how to transfer shares from Demat Account, it is important to first understand what is Demat Account.

What Is Demat Account?

The most simplified way of answering what is Demat Account is to understand it as a digital platform where investors can store all their shares and other forms of investment in an electronic form. Demat is a short form for dematerialization which refers to the process of converting physical share certificates into the electronic form. A Demat Account can only be opened with the help of a Depository Participant or DP and a depository. A DP is an agent or broker who acts as an intermediary between the depository and investor. A depository is a financial institution in which investors open their Demat Account. Read more about what is Demat Account to understand it in more thorough details.

It is necessary to know about Demat Accounts before attempting other things like transferring shares, etc.

 

How To Transfer Shares From Demat Account

After the meaning of what is Demat Account is cleared, it is time to understand how to transfer shares from Demat Account to another Demat Account. There are two types of transfer:

  • Intra-depository transfer: In this type of transfer, shares are transferred from one Demat Account to another in the same depository.
  • Inter-depository transfer: In inter-depository transfer, shares are conveyed from one Demat Account to another account which is in a different depository.

The two ways in which shares can be transferred are the manual procedure or online procedure.

 

Manual Transfer Of Shares

For the manual transfer of shares, investors are required to ask for delivery instruction slip or DIS from their brokers or DPs. DIS is not just an important but also an integral part of the manual transfer of shares. It contains some mandatory fields which have to be filled to process the transfer of shares.

1.    Beneficiary Owner ID (BO ID)

Beneficiary owner ID (BO ID) refers to a 16-digit ID number of a broker. An investor has to mention in DIS the IDs of both the current broker and the broker to which the shares will be transferred.

2.    International Securities Identification Number (ISIN)

International Securities Identification Number or as it is commonly known ISIN is a unique ID number appropriated to each share of an investor which he holds in a Demat Account. In order for the transfer to take place, ISIN has to be provided to designate which particular shares are to be transferred.

3.    Inter or Intra

This is the distinctive part of DIS where an investor has to choose whether to make an intra-depository or inter-depository transfer. In the case of intra-depository transfer, the column denoted as ‘off-market transfer’ has to be selected. Whereas, in the case of inter-depository transfer, the column designated ‘inter-depository’ has to be selected. An investor should be extra careful while filling this part of DIS.

4.    Signature

Little needs to be said about this part of DIS. Just like any other important document, DIS too needs to be signed. Once an investor has signed DIS, it should be submitted to the broker.

A broker may charge a small fee for the transfer of shares. It usually takes 3-5 business days for the shares to be transferred.

 

Online Transfer of Shares

Central Depository Services Limited (CDSL) has made the online transfer of shares a very easy process. All that an investor has to do is to follow these simple steps.

  1. The ‘Register Online’ option at the CDSL website has to be selected.
  2. There would appear an option called EASIEST which then has to be selected.
  3. A form would generate which accordingly has to be filled.
  4. Once the form fill-up is complete, a print out of the same has to be taken out. This print out is to be submitted to the account holder’s Depository Participant.
  5. The DP will verify the document and once the verification process is completed, a password will be generated.

Using this password, an investor can log in and transfer shares on his own.

Thus, the two ways in which shares can be transferred from one Demat Account to another is not at all complex and can be easily achieved through both manual and online procedure. With a proper understanding of what is Demat Account and how the transfer of shares takes place, an investor can effectively send the shares to another account either on his own or through the help of a DP.

 

Finance

2021 FINTECH PREDICTIONS

2020 has been a year like no other. The way we live, work, socialise and more has completely changed as we found ourselves in a new world.  Of course the fintech industry was no exception and had a challenging year that resulted in great successes and accelerated growth. Certain elements such as mobile payments have been implemented far quicker than anticipated at the start of the year fast tracking past projections by in some cases years.

So what can we expect in 2021? With better virus management, treatments and vaccine programmes rolling out worldwide we can start to cautiously anticipate a slow return to normal but what does this mean for fintech? Björn Goß, CEO and Founder of Europe’s leading mobile wallet Stocard,  looks at what we could see in the next year from the industry

 

A change in how we pay 

The pandemic has accelerated the digital services industry as people were forced to integrate COVID-19 friendly payments.  We have thus seen an increasing amount of solutions offered by fintechs such as for trading or peer-to-peer payments. This openness for digital solutions has allowed fintechs to pass the initial phase of growth.

We fully anticipate that now people have seen the benefits of digital payments and services that there is no looking back. In 2021 investment in mobile and contactless services won’t just be limited to major players but also for smaller businesses who are expected to facilitate digital payments by consumers.

In addition we are also already starting to see indications that the upper limits of payments will increase from £40 to £100 in the UK making contactless even more appealing for organisations and consumers alike. We can also expect more focus on value added services such as mobile loyalty cards integrated into a smooth payment experience.

 

The rise of the super app 

As more of the services we use to lead our lives move over to our phones we anticipate more of the so called ‘super apps’, like we’ve seen in Asia.  Consumers search for simplicity and typically favour one app that has an intuitive and easy to use interface that allows them to do everything they need in one place. We expect that these super apps will have an accelerated growth in 2021 following the pandemic as users seek to streamline their digital services and use trusted, simplified apps.

We therefore expect a merging of shopping, payment and financial services in one wallet app. The advantage here is that the consumer can choose which elements are the most important to them based on their individual needs. It can therefore provide the user with an attractive proposition as they know they can access all key services in one place.

 

More regulation, more choice 

In 2021, Payment Service Directive 2 (PSD2) will come into play ending the decades long lock in effects of banks that has dominated the industry and allowing fintechs access to customers’ bank accounts. For years financial institutions have sought ways to work around the PSD2 regulation and lock in consumers and provide them no choice.

This mandatory change will enable consumers better access to fintech services that are more convenient and effective for individual needs. This will drive the next wave of growth and 2021 will see consumers have the power back in their hands when it comes to financial services.

As more providers enter the market to offer financial services we expect lots more debate and discussion around regulation in 2021. For example there has been talk of legislation where banks are incentivised to increase the wealth of their customers and get sanctions imposed when they sell products that are not in the best interest of the customer; through this, providers would need to focus more on offering and selling relevant, beneficial products instead of the ones that bring them the highest margin.

 

Is buy now, pay later here to stay? 

Over the last year we saw a rise in buy now, pay later (BNPL) services as consumers turned to online shopping. Recent research found a 168% increase in buy now pay later apps this year.  Many consumers saw this option of purchasing as less of a risk and will have enjoyed the convenience of it during lockdowns.

That being said: the high growth statistics are only an acceleration of this trend caused by the covid-19 pandemic, and despite its recent popularity the overall share of wallet of BNPL remains very low.

In 2021 we will see whether the shift towards this new way of payment is a short term trend or a long term change. BNPL options both instore and online will become increasingly accessible for consumers due to all the investment made by retailers and payment providers. However, at the same time there has been much discussion around regulation for these services which may slow down the growth they are currently experiencing.

 

Europe’s hidden success stories 

2021 will be a growth year for European fintech companies. Having already had a strong year the continent will build on this as it continues to innovate in the sector. Maybe surprisingly, big and really successful companies are already substantially coming from outside of the big hubs of London, Paris and Berlin.  What we can expect is greater offerings from outside of these big hubs from less expected places across Europe.

So as you can see 2021 is set to be an exciting time for fintech. More regulation leading to greater choice, a permanent change in consumer behaviour driving digital services and new hubs of innovation all combine to make fintech a very exciting industry over the next year.

 

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A GUIDE TO HMO PROPERTY INVESTMENT

Many experienced property investors are turning their attention to HMOs and achieving much higher rental yields as a result. Find out what a HMO is, why they are so popular and how to finance these properties.

 

What is an HMO?

A property is considered to be a house in multiple occupation (HMO) if at least 3 tenants live there forming more than 1 ‘household’ and share facilities with other tenants.

HMOs can have a range of tenants such as students, professionals or for social housing.

 

Why are HMOs such a popular investment?

There’s no doubt that HMO properties are very popular with landlords, the main reason for this is the fact that the rental yield is much higher than with a standard single household type let.

HMOs are let on a ‘per room’ basis i.e. the rent generally covers the use of 1 lockable bedroom and use of the shared facilities such as the kitchen and bathroom. This is in contrast to a single let whereby the rent covers the whole property.

As an HMO has scope for multiple tenants, if a tenant was to move out or to stop paying rent for any reason, there will likely be other tenants still making payments. For a landlord, this can help cash flow, especially if the property is mortgaged.

This isn’t the case with a single let, meaning there can be a greater risk of rental voids. As the demand for affordable housing grows, so does the popularity of HMO style investments to landlords.

 

Are there any drawbacks of HMO property investment?

Like most property investments, there can of course be drawbacks when investing in an HMO.

The main factor when considering investing in HMOs is the interest rate of the mortgage. As this is a more specialised area of investment you may need a special HMO mortgage product, this almost certainly means the interest rate will be higher than with a standard buy to let. As HMO rental income is higher compared to a buy to let, there is still a good profit to be made even if you are paying a higher interest rate.

As there are multiple tenants this can mean multiple tenancy agreements and a greater turnaround of people moving in and out. As such HMOs can be more time consuming to manage compared to a single let.

You must also consider the start-up costs when buying a property to let as an HMO. As each room is let individually, you must consider the fire regulations and things such as waste disposal and planning regulations.

 

What finance is available for HMO properties?

As HMO’s have become more popular the number of lenders offering HMO mortgages has increased, this means a greater choice of products. Interest rates and deposit requirements vary depending on both the property type and the applicant’s profile.

A seasoned landlord generally needs to put down a deposit of 25% whereas a first-time buyer would be expected to pay a 35% deposit. A low-value property or a property with a large number of bedrooms may require a larger deposit, even if you are an experienced landlord.

As with any mortgage, there are other factors to be taken into account such as credit history and personal earned income.

 

What should I look for in a potential property?

When considering properties, there are important factors that need to be taken into account to make sure your property investment is successful.

The location should be researched to make sure there is a good demand for HMO properties in the area, if it’s near a university, hospital or near a large town or city you would expect demand to be high, it is worth speaking to a local letting agent to confirm this.

If the area is already flooded with HMO properties the local authority may impose an Article 4 Restriction. This restriction means you cannot simply convert a property to an HMO, you must apply to the local authority for approval.

Another thing to look for is the size of the rooms, depending on the number of tenants you have, the bedrooms and shared areas have to be a certain minimum size. It is easier to buy a property that is already set up and running as an HMO although you may pay a premium for this.

 

What are the key considerations before moving forward?

HMO’s can certainly be a good investment but you should weigh up the pros and cons compared to other types of lets.

You should also compare buying the property in your personal name compared to buying through a limited company. A good accountant will be able to provide advice on the tax implications involved in each route.

Due to the work involved in running the property, it may be worth using a local letting agent to manage the property for you, they will look after the property and deal with tenants, although you will have to pay for the service.

When looking for a suitable mortgage it is worth speaking with a specialist HMO mortgage broker who fully understands the market. Again, there may be a fee to pay for the service but this will often save you money in the long run.

 

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