It is one of the most common worries for new investors: “What if my broker goes bust?” The reassuring answer is that, with a regulated European broker, your ETFs do not belong to the broker and should not disappear with it. Cash is a slightly different story.
In short
- Your ETFs are held separately from the broker’s own money and are not part of its bankruptcy.
- Compensation schemes cover missing assets: at least €20,000 in the EU and £85,000 in the UK.
- Check the legal entity, its regulator and where your uninvested cash is held.
Your ETFs are segregated from the broker’s money
Under EU (MiFID II) and UK rules, regulated brokers must keep client assets separate from their own. Your ETF shares are held in custody in your name or in a client account, not on the broker’s balance sheet. If the broker fails, creditors cannot use your investments to pay the broker’s debts. An administrator transfers client assets to another broker or returns them to you.
In practice, this process can take weeks or months, during which you may not be able to trade. That is inconvenient, but it is very different from losing your money.
When compensation schemes pay out if a broker goes bust
Problems arise when client assets are missing at the time of failure, for example because of fraud, operational errors or poor record-keeping. That is when investor compensation schemes pay out:
| Region | Investor compensation (securities) | Deposit protection (cash at a bank) |
|---|---|---|
| EU (minimum under EU rules) | At least €20,000 per investor (some countries cover 90% of the loss up to the limit) | €100,000 per depositor per bank |
| UK (FSCS) | Up to £85,000 per person per firm | Up to £120,000 per person per bank since 1 December 2025 |
Note that the UK raised its deposit limit to £120,000 in December 2025, but the limit for investment firms stayed at £85,000.
These schemes do not cover losses from falling markets. If your ETF drops 20%, nobody compensates you; that is normal investment risk.
What about the cash in your account?
Uninvested cash is treated differently depending on how your broker holds it:
- In client money accounts at partner banks: protected by segregation and, depending on the structure, possibly by deposit guarantee schemes.
- In a broker that is itself a bank: cash counts as a bank deposit, usually covered up to €100,000 (or £120,000 in the UK).
- In money market funds: some brokers sweep cash into funds, which are segregated assets rather than deposits.
If you keep large cash balances with a broker, check exactly where they are held.
What about the ETF itself?
UCITS ETFs are separate legal entities with independent custodians. If an ETF provider such as Vanguard or iShares had problems, the fund’s assets are held by a depositary bank on behalf of investors, not by the provider. Funds can close, but investors receive the value of the holdings rather than losing them.
How to check your broker in five minutes
- Find the legal entity that holds your account (it may be a subsidiary in Ireland, Germany, Cyprus or elsewhere, not the brand’s home country).
- Look it up in the regulator’s register: for example the central bank or market regulator of that country, or the FCA register in the UK.
- Identify the compensation scheme that applies and its limit.
- Read the client asset terms: who is the custodian, and is securities lending enabled on your account?
- Check where uninvested cash is held.
Should you split your investments between brokers?
For most beginners, one well-regulated broker is fine. Once your portfolio grows well above the compensation limit, splitting it across two brokers can reduce operational risk and gives you a backup if one platform has an outage. It is a matter of peace of mind rather than necessity.
If you are just starting, read how to start investing in Europe for what to look for in a broker.
Sources
This article is for educational purposes only and is not legal or financial advice. Compensation rules vary by country and firm; always check the official sources.