Risks Are Invisible Until They Land: Individual-HIN v Pooled-HIN

Risks often stay hidden until they materialise. When they do, they define the outcome.

Consider property. Few, if any, advisers would recommend putting a client’s title deed into the name of a third-party corporation that pools it with hundreds of thousands of others. Yet that is exactly how millions of Australians hold their investments, often without realising it.

More than fifteen years ago we made a different choice. Every client would hold securities on their own individual-HIN in CHESS, never through a pooled-HIN. That decision continues to protect clients and deliver a better experience for advisers today.

Property Titles and CHESS: The Basics

For property, Torrens Title makes ownership clear. The Certificate of Title shows who legally owns the land.

For ASX-listed securities, CHESS (the Clearing House Electronic Subregister System) performs the same role. Each Holder Identification Number (HIN) uniquely identifies the legal owner of securities. CHESS is the single source of truth for listed ownership in Australia.

Individual HIN vs Pooled HIN

Think of CHESS as a safe deposit vault. Each HIN is a separate box containing the securities legally owned. Investors have two choices:

1. Individual HIN – securities are registered in the client’s own name or the name of their SMSF, trust, or company.

   
   

2. Pooled HIN – securities are registered under a HIN in the name of a custodian or platform.

   
   

The difference is legal ownership. With an individual HIN, the client is the legal owner on CHESS. With a pooled HIN, the client is only a beneficial owner. Their interests are pooled with hundreds of thousands of other investors who each must rely on the custodian’s internal ledger (a private and secondary ledger) to recognise their interests.

Why Our Decision Still Matters for Advisers

1.    Investor Protection Comes First

Counter-party Risk

The Halifax and BBY collapses exposed the weakness of pooled-HINs. Investors were left waiting for years while assets were tied up in liquidations.With individual-HINs, securities are recorded directly in the client’s name on CHESS. They cannot be frozen, sold, or tied up if a custodian or platform fails.

System or Business Disruptions

The real test comes when something goes wrong. If a pooled HIN custodian suffers an outage, a cyber-attack, or a dispute, clients lose practical control. They cannot transfer or verify holdings without that custodian’s systems working. Advisers are powerless until the custodian resolves the issue.

With an individual-HIN, ownership and transferability are verified independently through CHESS. Clients can move their holdings at any time without permission, disruption, or CGT consequences.

2.          Transparency

Every trade and corporate action is recorded in CHESS. Advisers can reconcile portfolios to the official source. Pooled-HIN clients must trust a custodian’s private ledger, leaving advisers exposed if errors or disputes arise.

3.          Portability – Always Know Your Exit

In the Rural Fire Service, one principle always stood out: always know your escape route. The same applies here. Individual-HINs allow advisers/clients to switch brokers or service providers without selling down, triggering tax or requiring third-party permissions.

4.          No Clipping of Interest

Most pooled structures clip interest from client cash because the custodian is the legal account holder. With individual-HINs, the client owns the account and keeps every dollar of interest.

5.          Direct Payments

Dividends and income flow straight to the client’s nominated bank account. No intermediaries. No pooled accounts. No delays.

The Right Decision Then. The Right Decision Now.

Fifteen years ago, we chose individual-HINs to give clients protection, transparency, and control. We built trust by telling prospects: If we stop doing a good job, you can walk away easily with all your assets intact. That honesty won business and loyalty.

Today, Managed Portfolios gives advisers the same advantage. You can run your practice without being locked into someone else’s infrastructure. And if the pooled-HIN market stumbles, you have a defendable position.

Written by Leith Thomas

CEO of Managed Portfolios – a fast-growing provider of individual-HIN (non-pooled) managed portfolio solutions for advisers and share brokers who want to deliver a unique value proposition.